Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 2262/84 laying down special measures in respect of olive oil

(presented by the Commission)

EXPLANATORY MEMORANDUM

The application of the Community regulations on olive oil required the setting-up of inspection agencies responsible for overseeing compliance with regulatory obligations in the Member States producing olive oil.

Council Regulation (EEC) No 2262/84, as last amended by Regulation (EC) No 150/1999, provides that 50% of the actual expenditure of the agencies is to be covered by the general budget of the Communities up to and including the 2001/02 marketing year, that before 1 October 2001 the Commission is to consider the need to maintain the Community contribution to the agencies' expenditure and, where appropriate, is to present a proposal to the Council, and that before 1 January 2002 the Council is to decide, in accordance with Article 37 of the Treaty, on the financing of the expenditure in question after the 2001/02 marketing year.

By means of Regulation (EC) No .../2001 of ... amending Regulations No 136/66/CEE and (EC) No 1638/98 as regards the extension of the period of validity of the aid scheme and the quality strategy for olive oil, the Council has decided that a new aid scheme will be introduced from 1 November 2004. The current aid scheme therefore remains in force up to and including the 2003/04 marketing year. Under these circumstances, provision should be made to continue the Community contribution to the expenditure incurred by the agencies carrying out certain checks in connection with the olive oil production aid scheme up to and including the 2003/04 marketing year; provision should also be made to continue this contribution to the expenditure incurred by the agencies during the 2004/05 marketing year in order to allow them to carry out the necessary complementary verifications relating to the previous marketing year and also to guarantee the continuity of the system of controls provided for in Article 1(2) of Regulation (EEC) No 2262/84.

The financial impact on the Community budget is estimated at EUR 43.5 million in total, spread over the 2002, 2003, 2004 and 2005 financial years.

Before 1 October 2004 the Commission will consider the need to continue the Community contribution to the expenditure of the agencies after the 2004/05 marketing year.

2001/0181 (CNS)

Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 2262/84 laying down special measures in respect of olive oil

THE COUNCIL OF THE EUROPEAN UNION,

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

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

[1] OJ C , ..., p. .

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

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

Whereas:

(1) In accordance with the last subparagraph of Article 1(5) of Council Regulation (EEC) No 2262/84 [3], the Council, on a proposal from the Commission, is to decide before 1 January 2002 on any financing of the expenditure of the agencies after the 2001/02 marketing year.

[3] OJ L 208, 3.8.1984, p. 12. Regulation last amended by Regulation (EC) No 150/1999 (OJ L 18, 23.10.1999, p. 7).

(2) By means of Council Regulation (EC) No .../2001 of ...amending Regulations No 136/66/EEC and (EC) No 1638/98 as regards the extension of the period of validity of the aid scheme and the quality strategy for olive oil [4], the Council has decided that a new aid scheme will be introduced from 1 November 2004. The current aid scheme remains in force up to and including the 2003/04 marketing year. Under these circumstances, provision should be made to continue the Community contribution to the expenditure incurred by the agencies carrying out certain checks in connection with the olive oil production aid scheme up to and including the 2003/04 marketing year. Provision should also be made to continue this contribution to the expenditure incurred by the agencies during the 2004/05 marketing year in order to allow them to carry out the necessary complementary verifications relating to the previous marketing year and also to guarantee the continuity of the system of controls provided for under Article 1(2) of Regulation (EEC) No 2262/84. Before 1 October 2004 the Commission will consider the need to continue the Community contribution to the expenditure of the agencies after the 2004/05 marketing year.

[4] OJ L

(3) In view of amendments to the text of the Treaty establishing the European Community, it is necessary to replace the reference to Article 43(2) of the Treaty,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EEC) No 2262/84 is amended as follows:

1. In the penultimate subparagraph of Article 1(5), "three years" is replaced by "six years".

2. In the last subparagraph of Article 1(5):

(a) "2001" is replaced by "2004" and "2002" is replaced by "2005";

(b) "Article 43(2)" is replaced by "Article 37(2)".

Article2

This Regulation shall enter into force on the seventh 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

LEGISLATIVE FINANCIAL STATEMENT

Policy areas: Agriculture and Rural Development

Activities: Ancillary expenditure

Title of action:

Council Regulation amending Regulation (EEC) No 2262/84 laying down special measures in respect of olive oil

1. BUDGET LINE(S) + HEADING(S): B2-511

2. OVERALL FIGURES

2.1. Total allocation for action (Part B): EUR million for commitment: EUR 43.5 million

2.2. Period of application

Period covered: 2002/03, 2003/04 and 2004/05 marketing years commencing 1 November 2002 and ending 31 October 2005.

2.3. Overall multiannual estimate of expenditure

(a) Schedule of commitment appropriations/payment appropriations (financial intervention) (see point 6.1.1)

(EUR million to three decimal places)

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2.4. Compatibility with financial programming and financial perspective

[X] Proposal is compatible with existing financial programming.

2.5. Financial impact on revenue

[X] Proposal has no financial implications (involves technical aspects regarding implementation of a measure).

3. BUDGET CHARACTERISTICS

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4. LEGAL BASIS

Article 37 of the Treaty.

Article 1(5) of Council Regulation (EEC) No 2262/84.

5. DESCRIPTION AND GROUNDS

5.1. Need for Community intervention

5.1.1. Objectives pursued

General objective

To extend for three years the duration of the financial contribution from the general budget of the European Union to actual expenditure of the four inspection agencies.

Grounds for the operation

Financing of the agencies is justified by the need to protect the Community's financial interests and also to meet the requirements of the Member States concerned, for whom a system of specific controls constitutes a high, additional budget burden.

Choices of ways and means:

- Advantages over possible alternatives (comparative advantages).

- The Community financial assistance provides support for the agencies and also gives them some independence vis-à-vis the various national inspection authorities.

- Explanatory reference to similar Community or national operations. The system of agencies co-financed by the Community and the Member State is peculiar to the olive oil industry; the operation involves the application of a system of controls which is not comparable with other operations administered nationally.

- Spin-off and multiplier effects expected.

The Community financial contribution represents substantially less than 1% of the aid paid to the olive oil industry but allows an effective system of controls to function with its indisputable deterrent effect. The part-financing of the agencies is therefore fully worthwhile, in view of the fact in particular that the administrative structures of the producer Member States are not capable to carrying out the controls provided for by the Community regulations.

In addition, the controls conducted by the agencies have pointed to many irregularities and at times even to fraud.

- Main factors of uncertainty which could affect the specific results of the operation.

The main factors of uncertainty are related to the technical difficulties which the Member States may encounter in complying with the regulations.

5.1.2. Measures taken in connection with ex ante evaluation

(a) Situation obtaining prior to the setting-up of the agencies:

Criticism from Parliament and the Court of Auditors regarding serious shortcomings in regulations in the olive oil sector, mainly as regards controls relating to olive oil production aid in Italy.

(b) The ex ante evaluation justified the setting-up of the inspection agencies in the olive oil sector on the grounds that:

(i) the administrative structure of the producer Member States is not sufficiently adapted to conducting the controls laid down by the Community regulations and it was therefore vital for those Member States to be able to call on administratively autonomous bodies to carry out these tasks;

(ii) inspections have to cover a very high number of parties;

(iii) the beneficiaries of the aid fell into two distinct categories (large and small producers);

(iv) there was a lack of inspection instruments (register of olive cultivation, computer files, etc.).

5.1.3. Measures taken following ex post evaluation

Inspection structures were therefore set up pursuant to Council Regulation (EEC) No 2262/84, with provision for 100% Community financing for the first few years.

As the regulations gradually evolved, the Commission shifted the focus of agencies' inspections to particular areas (consumption aid, buying-in, storage and sale of olive oil by intervention agencies, investigations of the use made of olive oil and olive-pomace oil, regional yields, stepping-up of inspections at mills, etc.) with a view to ensuring that Community payments were justified. To do this, it has continued to provide 50% of the agencies' financing until the 2001/02 marketing year.

In the wake of the adoption of Regulation (EC) No 2366/98, as last amended by Regulation (EC) No 647/2001, compulsory mill inspections were stepped up and each marketing year the agencies inspect around 5 500 of the approximately 11 500 mills operating in the producer Member States. Regulation (EC) No 1273/1999 makes provision inter alia for an obligation to determine regional yields. These two points have abundantly compensated for the abolition of consumption aid. In addition, the above Regulations introduce inspections and checks covering new planting, the quality of oil produced, oil in private storage, table olives, etc.

5.2. Actions envisaged and budget intervention arrangements

- Inspections are to cover a total of approximately 11 500 mills, 370 producer associations and 2 300 000 producers.

- The target for inspections performed each marketing year is to cover at least 30% of mills and to crosscheck a maximum possible number of mills' declarations and producers' cultivation declarations, and the uses made of the oil produced and of the olive pomace. Determining regional yields takes up more than 20% of the agencies' resources.

- Within the framework of the work programme, the Commission shifts the focus of inspections in line with the evolving regulations.

- The agencies report irregularities observed to the Member State, which must apply the penalties laid down. On the basis of such notifications, the Commission is able to monitor the situation to some extent and make financial corrections in the framework of the clearance of accounts where the Member States fails to take action.

The budget covers 50% of the actual expenditure of the agencies. The Community contribution is provided on the basis of a work programme and a forecast budget, which the agencies submit to the Commission each year.

5.3. Methods of implementation

Commission and Agriculture Ministry officials in the Member States monitor the work of the agencies through on-the-spot checks, quarterly meetings, exchanges of correspondence and the procedure for the annual recognition of expenditure declared.

6. FINANCIAL IMPACT

6.1. Total financial impact on Part B - (over the entire programming period)

Method of calculating total cost of operation (EUR million): drawn up on the basis of previous utilisation: Italy 21.8, Spain 9.3, Greece 8.0, Portugal 4.4.

6.1.1. Financial intervention

Commitments (EUR million to three decimal places)

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6.1.2. Technical and administrative assistance, support expenditure and IT expenditure (commitment appropriations) - NO

6.2. Calculation of costs by measure envisaged in Part B (over the entire programming period) - NO

7. IMPACT ON STAFF AND ADMINISTRATIVE EXPENDITURE - NO

8. FOLLOW-UP AND EVALUATION

8.1. Follow-up arrangements

Performance indicators selected

With a view to ensuring the proper application in particular of Community aid for olive oil, the agencies conduct checks entrusted to them in accordance with the Community regulations, record irregularities observed following such checks and inform the Commission and the competent authorities of the Member State concerned thereof.

While it is indisputable that in the first few years the agencies have encountered difficulties of all sorts, their work has gradually had a significant effect on national control systems. Nowadays, it can be claimed that the four agencies have competent staff, experienced in monitoring the various measures connected with olive oil.

It is to be noted, moreover, that the results of the agencies' work cannot be evaluated solely in terms of figures (checks conducted, proposed penalties, aid recovered, fines collected, etc.). It is reasonable to think that by virtue of the very existence of the agencies, beneficiaries are less open to the temptation or less likely to be in a position to carry out irregular operations, a dissuasive effect which is very difficult to gauge.

8.2. Arrangements and schedule for evaluation

Details and frequency of planned evaluations

The agencies' activities have been monitored very closely by the Commission, which regularly assesses the performance of the agencies and includes the results of their work in the EAGGF report each year. The present measure extends the Community contribution to the agencies by three years starting from the 2002/03 marketing year. An assessment of the situation will be made during 2004.

Assessment of the results obtained

In view of the difficulties peculiar to the sector, the agencies appear to play an indispensable part in controls. Checks carried out are used by both the Commission and the various national authorities. For these reasons the method of financing them should be extended for the 2002/03, 2003/04 and 2004/05 marketing years.

9. ANTI-FRAUD MEASURES

The agencies regularly submit work programmes. In addition, financial statements give rise to regular monitoring by the Commission; the financial situation at the end of the year is considered by the Commission, which takes a decision on the amount representing actual expenditure of the agencies to be granted to the Member States concerned.