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

(presented by the Commission)

EXPLANATORY MEMORANDUM

A LONG-TERM POLICY PERSPECTIVE FOR SUSTAINABLE AGRICULTURE

1. TOWARDS SUSTAINABLE AGRICULTURE

In 1999 the European Council in Berlin agreed the Agenda 2000 reform of the common agricultural policy (CAP), a new and important step in the agricultural reform process. Agenda 2000 gives concrete form to a European Model of Agriculture with the aim of preserving the diversity of farming systems spread throughout Europe, including regions with specific problems, in the years ahead. Its objectives involve more market orientation and increased competitiveness, food safety and quality, stabilisation of agricultural incomes, integration of environmental concerns into agricultural policy, developing the vitality of rural areas, simplification and strengthened decentralisation.

These objectives are in line with the Sustainable Development Strategy agreed by the European Council in Göteborg in 2001, which requires that economic, social and environmental effects of all policies are examined in a co-ordinated way and taken into account in decision-making.

The Commission adopted the Communication on the Mid-Term Review: Towards Sustainable Farming [1] in July 2002. The Communication provided an assessment of the evolution of the CAP reform process since 1992. It concluded that much has been achieved. Market balances have improved and agricultural incomes have developed favourably. A sound basis for enlargement and the current WTO negotiations has been established. Yet in many areas, gaps remain between the objectives set for the CAP, and its capacity to deliver the outcomes expected by society. The Commission has therefore proposed a number of adjustments to the CAP.

[1] COM(2002) 394 final.

In bringing forward its legislative proposals the Commission has taken account of the conclusions of the Brussels European Council in October 2002, and of the intense debate that has followed the publication of the Communication in July 2002 within the Council, the European Parliament, the European Economic and Social Committee, the Committee of Regions and other Consultative Committees, as well as civil society. The debate has been enriched by contacts in the member states with farmers' representatives, industry, consumers, environmental groups and NGOs. These have revealed a broad consensus about the direction of further CAP reform. But have also highlighted concerns and uncertainties. In bringing forward its proposals the Commission has sought to take into account these concerns and uncertainties, as well as the impact analyses and the new budgetary constraints arising from the Brussels Agreement.

The agreement between the Heads of State and Government in Brussels to endorse the Commission's proposals on the introduction of direct aids in the new member states marked a major step forward in the process of enlargement. This paved the way for the successful conclusions of negotiations with ten candidate countries in Copenhagen in December 2002. This agreement set a ceiling for market and direct aids expenditure in an enlarged EU, which will rise more slowly than the rate of inflation. It also recalled the importance of less-favoured regions and the multifunctional nature of agriculture, confirming the importance of the second pillar.

In addition to the request by the European Council in Berlin to carry out a mid-term review of the CAP, further steps are needed to meet the new tasks and challenges established in Göteborg and Brussels. The new long-term framework for agricultural expenditure in the form of the ceiling calls for a clear perspective for the future development of the Common Agricultural Policy. Without such certainty, the sector cannot plan for the future. A further reform step is therefore necessary as indicated in the Communication on the Mid-Term Review:

- To enhance the competitiveness of EU agriculture by setting intervention as a real safety net measure, allowing EU producers to respond to market signals while protecting them from extreme price fluctuations.

- To promote a more market oriented, sustainable agriculture by completing the shift from product to producer support with the introduction of a decoupled single farm payment, based on historical references and subject to compliance with environmental, food safety and animal welfare requirements. This will improve the efficiency of income payments to farmers.

- To provide a better balance of support and strengthen rural development by transferring funds from the first to the second pillar of the CAP via the introduction of an EU-wide system of modulation and expanding the scope of currently available instruments for rural development to promote food quality, meet higher standards and foster animal welfare.

Providing a clear policy perspective for the CAP

Further reform needs will in all likelihood lead to additional expenditure, since farmers' income will need to be stabilised in an appropriate manner. Following the budgetary decisions in the Brussels Summit, this can only be achieved by increasing the resources available through savings elsewhere in the first pillar. Additional reform efforts will therefore require savings from existing direct payments and market expenditure.

There is a real risk, that if budget savings are not generated in a fair, transparent and predictable manner, the EU could face stalemate on further agricultural decisions. It would be necessary to negotiate reductions and reallocations of expenditure at the same time on a case-by-case basis. It would be almost impossible to ensure the balance and fairness of the contribution of individual farmers. This would make it very difficult for farmers to plan, since in addition to further reform efforts, they would not be able to anticipate how such efforts would be financed.

But the absence of certainty would not only be damaging for farmers' interests, it could also undermine decisions to move the CAP more into line with society's expectations. Indeed, a piecemeal approach in the CAP reform process could exacerbate many existing problems, bringing real risks to sustainable agriculture. The Commission has therefore proposed a mechanism for generating savings, which ensures that new financial needs can be met in a balanced manner across the farming sector.

Enhancing the competitiveness of EU agriculture

The impact analysis undertaken supports the necessity of making adjustments proposed by the Commission in July 2002. Following the broad debate on the options for the dairy quota system, it is the Commission's view that the Agenda 2000 reform should be extended to better reflect price realities and the need to further differentiate the levels of support for butter and skimmed milk powder. It is also proposed to modify the quality premia for durum wheat in order to encourage further quality production in a simpler manner.

Promoting a more market oriented, sustainable agriculture

The debate on the introduction of the decoupled single farm payment has highlighted a number of concerns that the Commission has addressed in its proposals.

- In order to avoid land abandonment as a result of decoupling, the Commission has clarified that farmers will have to meet stringent land management obligations as part of the new cross-compliance requirements. By providing greater farming flexibility, decoupling will improve the income situation of many farmers in marginal areas.

- In order to ensure that the interests of tenant farmers and landowners are balanced, the proposals establish a system of transfers of payment entitlements. Payments will only be made to farmers actively producing or maintaining land in good agronomic condition, maintaining the link to land. Specific arrangements are established for livestock production taking place without a corresponding land basis.

As regards WTO aspects, the new single farm payment will be green box compatible. Decoupling will allow the European Union to maximise its negotiating capital in order to achieve its WTO objectives such as non-trade concerns. Hence the proposals for decoupling could be crucial in getting the best deal for the European Model of Agriculture.

In order to maximise the benefits, particularly in administrative terms, the single farm payment will cover the widest possible range of sectors: all products included in the COP regime as well as grain legumes, seeds, starch potatoes, beef and sheep; the revised payments for rice, durum wheat and dried fodder; the milk sector on implementation of dairy payments. Proposals for other sectors scheduled for reform (sugar, olive oil, tobacco, cotton and possibly fruit and vegetables, and wine) will follow in the course of 2003.

Strengthening rural development

The proposals to extend the scope of currently available instruments for rural development to promote food quality, meet higher standards and foster animal welfare have been universally welcomed.

The Commission has taken careful note of the repeated calls of Member States for a simplification of Community rural development policy under the second pillar. The Commission agrees with Member States on the importance of efficient management of the second pillar. It has already demonstrated its willingness to engage actively and constructively with Member States in such a simplification exercise and is fully committed to achieving concrete results. The Commission tabled at the end of December 2002 important proposals to facilitate management of rural development programming at the level of the Commission implementing rules. Simplification gains additional importance in the context of the current proposals to expand the scope and coverage of rural development.

A better balance of support

The fixing of a ceiling for agricultural market expenditure in Brussels implies that the mechanism for shifting between budget headings cannot be implemented before the start of the next financial perspective. The Commission therefore proposes introducing a system of modulation from the start of the next financial perspective to improve the balance of support between market expenditure and rural development.

The Commission stresses, particularly in the light of the conclusions of the Brussels European Council, the necessity to further strengthen the second pillar. In this respect, the transfer from the first to the second pillar should be seen as a first step in the necessary reinforcement of rural development, without prejudice to future discussions.

This shift to the second pillar as well as new financing needs arising from new market reforms will be achieved through a new system of degression. This system introduces the principle of progressive contributions according to the overall amount of direct payments received by a farm in order to ensure that reductions in direct payments are balanced and simple to apply.

2. THE IMPACT OF THE PROPOSED REFORMS

The proposed adjustments in CAP policy measures allow maximum flexibility in production decisions and significantly simplify the manner by which support is provided to producers while guaranteeing their income stability. Their implementation would remove a large part of the environmentally negative incentives within the current system of support, improve implementation of legislation and provide encouragement for more sustainable farming practices. They also promote a substantial simplification in the CAP, facilitate the enlargement process and help to better defend the CAP in the WTO.

The adjustments proposed will complement the EU's international objective of ensuring that developing countries fully benefit from the expansion of world trade, while maintaining food security. As the impact analysis show, by reorienting support towards more extensive agricultural practices and less trade-distorting domestic support, the proposals are expected to reduce export availability, thereby contributing to stronger world market prices, which is in the interest of the agricultural sector in developing countries.

These adjustments are necessary to ensure that the EU is able to provide a sustainable and predictable policy framework for the European Model of Agriculture over the coming years. Such changes are made even more urgent by the new budgetary framework. This will enable the EU to preserve a stable farm policy for the future, to ensure a transparent and more equitable distribution of income support for farmers, and to better respond to what our consumers and taxpayers want.

2.1. The economic impact

The Commission has published an in-depth impact analysis of the adjustments proposed in the Mid-Term Review [2]. The broad conclusions of this analysis are that in spite of modest changes in the total level of support, the MTR proposals would entail an improved allocation of resources between commodities and greater income transfer efficiency.

[2] Further details are available at http://europa.eu.int/comm/agriculture/ publi/reports/mtrimpact/index_en.htm.

EU cereal production is foreseen to slightly decline in all analyses owing mainly to the implementation of the decoupling of direct payments, the carbon credit proposal and the cut in support price level. These developments would mainly result from lower cereal area as average yields are expected to increase in most analyses. Wheat would appear to be less affected than coarse grains as it should benefit from better world market price prospects than most coarse grains.

The effects of the MTR proposals on oilseed production are more mixed although most analyses would tend to show a small decline in "food" oilseed production. According to Commission analysis, the carbon credit payments would lead to an increase in the production of energy crops, particularly of oilseeds, mainly at the expense of cereal production.

The implementation of the decoupling of direct payments in the livestock sector would entail some decline in beef and sheep production as it would favour the extensification of production systems, generating an increase in market prices, with positive income effects for the livestock farms concerned.

The effects of the MTR proposals on agricultural income are generally found to be rather limited for the EU agricultural sector as a whole, with nevertheless potentially diverging impacts across the various commodity sectors and regions.

While the implementation of the decoupling of direct payments would entail an income increase in the livestock sector (through higher market prices), this increase would be broadly offset at the sector level by the negative income impact of the decline in coarse grains market prices due to the abolition of rye intervention.

2.2. The budgetary impact

For EU-15, the proposed measures involve a saving which is estimated at 337 Mio EUR for the financial year 2006 and of about 186 Mio EUR as from 2010. This impact results from the fact that the savings under the proposals for market measures are greater than the effect of the proposals concerning direct aids estimated at + 729 Mio EUR in 2006 and around + 1 610 Mio EUR as from 2010.

However, for the new accession countries, the financial impact in 2010 is for an additional expenditure of around 88 Mio EUR which increases annually to reach 241 Mio EUR in 2013, as a result of the increasing share of direct aids in their total expenditures.

In order that total expenditures remain within the new ceiling decided at Brussels for the financing of market measures and direct aids for an enlarged Europe of 25 Member States, a reduction in the direct aids for EU-15 is proposed, as from the financial year 2007. This is presented in the following table:

EU-25: Expenditure forecasts for heading 1a - Reform proposals

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3. MID-TERM-REVIEW AND ACCEDING STATES

In accordance with the Internal arrangements to implement the information and consultation procedure for the adoption of certain decisions and other measures to be taken during the period preceding accession the Commission will transmit the attached proposals on the Mid-Term-Review to the acceding states after their transmission to the Council. Each acceding state may request a discussion on these proposals according to the terms of the above arrangements. [3]

[3] THE INTERNAL ARRANGEMENTS TO IMPLEMENT THE INFORMATION AND CONSULTATION PROCEDURE FOR THE ADOPTION OF CERTAIN DECISIONS AND OTHER MEASURES TO BE TAKEN DURING THE PERIOD PRECEDING ACCESSION HAVE NOT YET BEEN ADOPTED BY THE COMMISSION.

4. DESCRIPTION OF PROPOSALS

4.1. Stabilising markets and improving common market organisations

Arable sector

Cereals

A final 5% reduction (of the 20% proposed in Agenda 2000) is proposed to bring the cereals intervention price down to EUR 95.35/t from 2004/05 to ensure that intervention is a real safety net. To avoid a further accumulation of intervention stocks, rye shall be excluded from the intervention system.

With the diminishing role of intervention, a seasonal correction for intervention price will no longer be justified. It is therefore proposed to abolish the monthly increment system. Production refunds for starches and certain derived products will no longer be applied.

As a consequence of the cut in cereal intervention price, area payments for cereals and other relevant arable crops will be increased from EUR 63 to EUR 66/t. These will be included in the single farm payment.

Protein crops

The current supplement for protein crops (EUR 9.5/t) will be maintained and converted into a crop specific area payment of EUR 55.57/ha. It will be paid within the limits of a new Maximum Guaranteed Area set at 1.4 million ha.

Durum wheat

The supplement for durum wheat in traditional production zones will be brought from EUR 344.5/ha to EUR 250/ha and included in the single farm payment. The specific aid for other regions where durum wheat is supported, currently set at EUR 139.5/ha, will be phased out. The cuts will be implemented over three years, starting in 2004.

A new premium will be introduced to improve the quality of durum wheat with regard to uses for semolina and pasta production. The premium will be paid in traditional production zones to farmers who are using a certain quantity of certified seeds of selected varieties. Varieties will be selected to meet quality requirements for semolina and pasta production. The premium amounts to EUR 40/ha and is paid within the limits of Maximum Guaranteed Areas that are currently applying in traditional production zones.

Starch potatoes

Regulation (EEC) No 1766/92 provides for a direct payment for producers of starch potatoes. Its amount was fixed at EUR 110.54 per tonne of starch in the framework of Agenda 2000. 50% of this payment will be included into the single farm payment, on the basis of the historical deliveries to the industry. The remainder will be maintained as crop specific payment for starch potatoes. The minimum price is abolished.

Dried fodder

Support in the dried fodder will be redistributed between growers and the processing industry. Direct support to growers will be integrated into the single farm payment, based on their historical deliveries to the industry. National ceilings will apply to take into account current National Guaranteed Quantities.

During a transitional period of 4 years, a simplified single support scheme for the dehydrated and sun-dried fodder industry will apply with a degressive aid, starting from EUR 33/t in 2004/05. The respective National Guaranteed Quantities will be merged.

Seeds

Regulation (EC) No 2358/71 established an aid for the production of selected seed species. The aid, currently paid per tonne of produced seeds, will be integrated into the single farm payment. It will be calculated by multiplying the number of aided tons by the amount established in application of Article 3 of the above-mentioned Regulation.

Rice

In order to stabilise market balances due notably to the impact of the Everything but Arms (EBA) initiative, the Commission proposes a one step reduction of the intervention price by 50% to an effective support price of EUR 150/t in line with world prices. To stabilise producers' revenues, the current direct aid will be increased from EUR 52/t to EUR 177/t, a rate equivalent to the total cereals compensation over the 1992 and Agenda 2000 reforms. Of this, EUR 102/t will become part of the single farm payment and paid on the basis of historical rights limited by the current maximum guaranteed area (MGA). The remaining EUR 75/t multiplied by the 1995 reform yield will be paid as a crop specific aid. The MGA will be set at the 1999-2001 average or the current MGA, whichever is lower. A private storage scheme will be introduced to be triggered when the market price falls below the effective support price. In addition, special measures will be triggered when market prices fall below EUR 120/t.

Nuts

The current system will be replaced by an annual flat rate payment of EUR 100/ha granted for a maximum guaranteed area of 800 000 ha divided into national guaranteed areas. This can be topped up by an annual maximum amount of EUR 109 per hectare by Member States.

Dairy

In order to provide a stable perspective for dairy farmers, the Commission proposes the prolongation of a reformed dairy quota system until the 2014/15 campaign.

In Berlin in March 1999 the European Council decided to delay the entry into force of reform in the dairy sector due to budgetary considerations. Since unanticipated budgetary resources have become available in the current financial perspective, the Commission strongly believes the dairy reform agreed in Berlin should be advanced by one year in order to achieve the objectives and benefits of the reform at the earliest possible date. Furthermore, it is necessary to reduce the support price for milk with a corresponding quota increase of 1% per year in 2007 and 2008 based on reference quantities after the full implementation of Agenda 2000.

The foreseen uniform reduction of 5% per year will be replaced by asymmetric intervention price cuts of 3.5%/year for skimmed milk powder and 7% per year for butter over the five year period. On the whole this 35% reduction in butter prices and 17.5% reduction in skimmed milk powder prices correspond to a global reduction of 28% for EU milk target prices over 5 years. Intervention purchases of butter will be suspended above a limit of 30 000 tonnes per year. Above that limit, it is proposed that purchases may be carried out under a tender procedure.

Additional compensation in 2007 and 2008 through direct payments will be made, using the same method of calculation as in Agenda 2000. All dairy payments will be integrated into the single farm payment.

4.2. Decoupling of direct aids - establishment of a single farm payment

A single farm payment will replace most of the premia under different Common Market Organisations. Farmers will receive a single farm payment based on a reference amount covering payments for arable crops, beef and veal (including POSEI and Aegean Islands), milk and dairy, sheep and goats, starch potatoes, grain legumes, rice, seeds, dried fodder in a reference period of 2000 to 2002.

This single farm payment will be broken down into payment entitlements in order to facilitate their transfer. Each entitlement will be calculated by dividing the reference amount by the number of hectares, which gave rise to this amount (including forage area) in the reference years.

A claim for payment under entitlement must be accompanied by an eligible hectare defined as any agricultural area of the holding. Eligible hectares will not include area under permanent crops, forests and area used for non-agricultural purposes on 31 December 2002. For livestock production without an equivalent land base or where the entitlement is above EUR 10 000 a special payment entitlement will apply with corresponding conditions. National ceilings for the single farm payment and the special payment will be established. 1% of this amount at member state level will be reserved for hardship cases.

Entitlements may be transferred, with or without land, between farmers within the same Member State. A Member State may define regions within which transfers are limited. Moreover, it will be open to Member States to adjust entitlements with respect to regional averages.

Farmers may use this land for any agricultural activity except permanent crops. Any entitlement which has not been used in a period of a maximum of 5 years, apart from force majeure and exceptional circumstances shall be allocated to a national reserve.

Reinforcement of environmental, food safety, animal health and welfare and occupational safety standards

Compulsory cross-compliance will apply to statutory European standards in the field of environment, food safety, animal health and welfare and occupational safety related to the farm level. As a necessary complement to decoupling in order to avoid land abandonment and subsequent environmental problems, beneficiaries of direct payments will also be obliged to maintain all agricultural land in good agricultural condition.

This will be applied as a whole-farm approach, and sanctions will be applicable to any case of non-compliance on a beneficiary's farm. It will apply to all sectors and apply to used as well as unused agricultural land.

Farmers receiving the single farm payment or other direct payments under the CAP who do not comply with these statutory standards will be subject to a system of sanctions. The penalty will take the form of a partial or full reduction of the aid (depending on the severity of the case).

Farm Advisory System

The farm advisory system will be mandatory as a part of cross-compliance requirements. Its introduction, in the first instance, will be limited to producers receiving more than EUR 15 000 per year in direct payments or with a turnover of more than EUR 100 000 per year. Other farmers will be able to enter the system on a voluntary basis. This service will provide advice through feedback to farmers on how standards and good practices are applied in the production process. Farm audits will involve structured and regular stocktaking and accounting of material flows and processes at enterprise level defined as relevant for a certain target issue (environment, food safety, and animal welfare). Support for farm audits will be available under rural development.

Long-term environmental set-aside

Producers currently subject to the set-aside obligation will be obliged to continue set-aside on an area equivalent to 10% of their current COP area as a condition for receipt of the single farm payment. Organic farming will not be subject to this obligation for the area concerned. Set-aside will be non-rotational and should not be used for agricultural purposes nor produce crops for commercial purposes. However, member states will be able to allow rotational set-aside where this was necessary for environmental reasons. In the case of transfers of land, it shall continue to be set-aside.

Support for energy crops - a carbon credit

The Commission proposes an aid of EUR 45/ha for energy crops. This will apply for an EU MGA of 1 500 000 ha. The aid will only be granted in respect of areas whose production is covered by a contract between the farmer and the processing industry except where the processing is undertaken by the farmer on the holding. Within five years of the application of the energy crops scheme, the Commission will submit a report to the Council on its implementation, with proposals if appropriate.

Integrated administration and control system (I.A.C.S.)

The integrated administration and control system will have to be adapted on the basis of the new provisions relating to direct aids. In particular, the introduction of the single farm payment will lead to a simplification of a key component of the present IACS, since the identification of COP and livestock production will no longer condition the new single farm payment, except for those products continuing to benefit from a crop-specific payment such as rice or durum wheat. The current monitoring and control system for payments will be used to facilitate cross checks between payment entitlements and the surfaces needed to activate them. The system for identifying agricultural parcels therefore remains fundamental to the new IACS.

Aid applications will need to be subject to administrative controls relating to the eligibility of surfaces and the existence of the corresponding payment entitlements. These administrative controls will have to be complemented by on-the-spot checks, made on a sample basis, which could employ teledetection methods to control surfaces. Together these controls and checks, which will have to be co-ordinated by a designated competent authority, will give rise to aid reductions or exclusions where it is found that the eligibility conditions have not been met.

It should be noted that controls relating to cross compliance will also be covered by the new IACS, which therefore will not be limited to eligibility conditions. In this way, the proposal represents a fully integrated administration and control system. It is foreseen in this respect that the control systems already existing in the Member States to verify respect of statutory management requirements and good agricultural conditions may be used in the framework of IACS, with which they will also have to be compatible. This concerns inter alia the identification and registration system for animals pursuant to Directive 92/102/EEC and Regulation (EC) No 1760/2000. The system for administering and controlling those aid schemes laid down in Annex IV of the proposal for the horizontal Regulation will also have to be compatible with IACS.

4.3. Degression

In order to ensure a better balance of support and to provide a predictable and transparent framework to meet future financing needs, a system of degression is proposed for the period 2006-2012.

The payments granted to a farmer in a given year will be reduced in the following manner:

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Within the system outlined above the modulation part resulting from degression, starting at 1% in 2006 rising to 6% in 2011, shall be made available to the Member States as additional Community support for measures to be included in the their rural development programming. These amounts will be allocated between member states according to criteria of agricultural area, agricultural employment and GDP per capita in purchasing power. The remaining amounts will be available for additional financing needs for new market reforms. Degression and modulation would not apply in the new Member States until the phasing-in of direct payments reaches the normal EU level.

4.4. Consolidating and strengthening Rural Development

The Commission proposes to widen the scope of Community rural development support by introducing new measures, without prejudice to the upcoming debate on the reshaping of rural development policy.. These additions will be made to the 'menu' of measures available under the second pillar without changing the basic framework under which rural development support is implemented, which the Commission considers would be counter-productive at this mid-way stage in the current 2000-2006 programming period.

The new measures proposed are all accompanying measures and will be financed by the EAGGF-Guarantee Section throughout the EU territory. They are all targeted primarily at farmer beneficiaries. It will be for Member States and regions to decide if they wish to take up these measures within their rural development programmes. The new measures will comprise:

First, introduction of a new Chapter in Regulation (EC) No 1257/1999 entitled 'Food Quality' comprising two measures:

- Incentive payments will be permitted for farmers who on a voluntary basis participate in Community or recognised national schemes designed to improve the quality of agricultural products and the production process used, and give assurances to consumers on these issues. Such support will be payable annually for a maximum 5-year period, and up to a maximum of EUR 1 500 per holding in a given year.

- Support for producer groups for activities intended to inform consumers about and promote the products produced under quality schemes supported under the above measure. Public support will be permitted up to a maximum of 70% of eligible project costs.

Secondly, introduction of a new Chapter entitled 'Meeting Standards', comprising two measures:

- Possibility for Member States to offer temporary and degressive support to help their farmers to adapt to the introduction of demanding standards based on Community legislation concerning the environment, public, animal and plant health, animal welfare and occupational safety. Aid levels must be modulated to take account of the level of additional obligations and operating costs for farmers associated with the introduction of a particular standard. Aid will be payable on a flat-rate basis, and degressive for a maximum period of 5 years. Aid will be subject to a ceiling of maximum EUR 10 000 per holding in a given year. In no case will aid be payable where the non-application of standards is due to the non-respect by an individual farmer of standards already included in national legislation.

- Support for farmers to help them with the costs of using farm advisory services. Farmers may benefit from public support of up to a maximum of 95% of the cost of such services the first time they are used, subject to a ceiling of EUR 1 500.

Thirdly, introduction within the current agri-environment Chapter of Regulation (EC) No 1257/1999 the possibility to pay support for farmers who enter into commitments for at least 5 years to improve the welfare of their farm animals and which go beyond usual good animal husbandry practice. Support will be payable annually on the basis of the additional costs and income foregone arising from such commitments, with annual payment levels of maximum EUR 500 per livestock unit.

In addition to a further series of technical modifications arising from the introduction of new measures, the Commission proposes to use the opportunity of the amendment of Regulation (CE) No 1257/1999 in the context of the current proposals to also simplify and clarify certain provisions at the level of the Council regulation. These amendments concern a clarification of the scope of the Forestry and Training Chapters and the adding within the Chapter on the adaptation and development of rural areas (the so-called Article 33 measures) a new indent to cover the management costs associated with local partnership groups.

In 2004, the Commission shall review the extent to which rural development is contributing to these objectives of sustainable development in particular in relation to bio-diversity and the implementation of Directive 92/43/EC (i.e. the Habitats Directive). Moreover, the same review will consider the possibility of extending the support provided to farmers to meet newly enacted Community food quality standards also to small, traditional food producers. If necessary, the Commission will make proposals to enhance the contribution of the Common Agriculture Policy to these objectives.

2003/0009 (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 the third subparagraph of 37(2) thereof,

Having regard to the proposal from the Commission [4],

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

Having regard to the opinion of the European Parliament [5],

[5] OJ C ..., ..., p. ...

Having regard to the opinion of the European Economic and Social Committee [6],

[6] OJ C ..., ..., p. ...

Having regard to the opinion of the Committee of the regions [7],

[7] 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) Council Regulation (EC) No 3072/95 of 22 December 1995 on the common organisation of the market in rice has been substantially amended several times. Since further amendments are to be made, in the interests of clarity that Regulation should be replaced. Regulation (EC) No 3072/95 should accordingly be repealed.

(3) The European rice market is in serious unbalance. The volume of rice stored in public intervention is very large, equivalent to about a quarter of Community output, and is likely to increase in the long run. 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. The present imbalance is to be exacerbated even further and probably to reach an unsustainable level, in the course of the years to come as a result of increasing imports from third countries due to the implementation of the EBA Agreement.

(4) 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.

(5) It appears that the most suitable solution is to discontinue the existing arrangements, to create a private storage mechanism and a safety net mechanism to deal adequately with price situations, to create, as a compensation an income payment per farm and a crop specific aid reflecting the role of rice production in traditional production areas. The latter two instruments are incorporated in Council Regulation (EC) No [...]/2003 of [...] 2003 on [...] [8].

[8] See p. ... of this Official Journal.

(6) The establishment of an effective support price is necessary in order to stabilise the rice market. A system of private storage is a suitable and flexible way to deal with price fluctuations and serves therefore as an instrument to overcome such problems.

(7) A safety mechanism is, however, required for cases where the instrument of private storage fails to underpin sufficiently the effective support price.

(8) The useful utilisation of private storage and the safety mechanism require the periodical transmission of information by the Member States to the Commission.

(9) 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 complementing the private storage system and including import duties applying the rates of the Common Customs Tariff 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 trade negotiations.

(10) In order to monitor the volume of trade in rice with third countries, 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.

(11) For the most part, the customs duties applicable to agricultural products under the World Trade Organisation (WTO) agreements are laid down in the common customs tariff. However, for some rice products, the introduction of additional mechanisms makes it necessary to adopt derogations.

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

(13) It is appropriate, under certain conditions, 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.

(14) 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 [9], should serve to safeguard Community participation in international trade in rice. Such export refunds should be subject to limits in terms of quantity and value.

[9] OJ L 336, 23.12.1994, p. 22.

(15) Compliance with the limits in terms of value should be ensured at the time when export 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 export refunds, while allowing the possibility, in the case of differentiated export refunds, of changing the specified destination within a geographical area to which a single export refund rate applies. In the case of a change of destination, the export refund applicable to the actual destination should be paid, with a ceiling of the amount applicable to the destination fixed in advance.

(16) Ensuring compliance with the quantity limits requires the introduction of a reliable and effective system of monitoring. To that end, the granting of export refunds should be made subject to an export licence. Export 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 volume limits do not apply, and in the case of food-aid operations which are exempt from any limitation. Provision should be made for derogating from strict compliance with management rules where exports benefiting from export refunds are not likely to exceed the quantity ceilings laid down.

(17) 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.

(18) The customs duty system makes it possible to dispense with all other protective measures at the external frontiers of the Community. The internal market and duty mechanism could, in exceptional circumstances, prove deficient. In such cases, in order 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 should comply with the obligations arising from the WTO agreements.

(19) Taking into account the influence of the world market price on the internal price, there should be provision for appropriate measures to be taken in order to stabilise the internal market.

(20) The proper working of a single market based on common prices would be jeopardised by the granting of national aid. Therefore, the provisions of the Treaty governing State aid should apply to the products covered by this common market organisation.

(21) As the common market in rice is in continuous development, the Member States and the Commission should keep each other supplied with information relevant to these developments.

(22) The measures necessary for the implementation of this Regulation should be adopted in accordance with 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.

(23) In view of the necessity to solve practical and specific problems, the Commission should be authorised to adopt necessary measures in cases of emergency.

(24) Expenditure incurred by the Member States as a result of the obligations arising from 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.

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

(26) The change from the arrangements under Council Regulations (EC) No 3072/95 of 22 December 1995 on the common organisation of the market in rice and (EC) No 3073/95 of 22 December 1995 determining the standard quality of rice [12] to those provided for in this Regulation could give rise to difficulties, which are not dealt with in this Regulation. In order to deal with such difficulties, the Commission should be enabled to adopt transitional measures.

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

(27) In order to prevent a serious disturbance of the market in paddy rice in the last months of the marketing year 2003/04, it is necessary to limit the intake by the intervention agencies to a certain quantity fixed in advance.

(28) Provision should be made for the application of the new common market organisation. However, in order to prepare for the operation of the arrangements for private storage and for the safety mechanism, the obligation to communicate information on regional market prices to the Commission should apply from an earlier stage,

HAS ADOPTED THIS REGULATION:

CHAPTER I INTRODUCTIVE PROVISIONS

Article 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 (brown) rice

1006 30 // Semi-milled or wholly milled rice, whether or not polished or glazed

(b) 1006 40 00 // Broken rice

(c) 1102 30 00 // Rice flour

1103 19 50 // Rice groats and meal

1103 20 50 // Pellets of rice

1104 19 91 // Flaked grains of rice

1104 19 99 // Rolled grains of rice

1108 19 10 // Rice starch

Article 2

1. 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 Annex I.

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

2. The Commission, acting in accordance with the procedure referred to in Article 25(2):

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

(b) may change the definitions referred to in paragraph 1.

Article 3

The marketing year for the products listed in Article 1 shall begin on 1 September and end on 31 August of the following year.

Article 4

This Regulation shall apply without prejudice to the measures provided for by Council Regulation (EC) No.../2003 of... 2003 ..., [establishing common rules for direct support schemes under the common agricultural policy and support schemes for producers of certain crops.]

CHAPTER II INTERNAL MARKET

Article 5

1. A subsidy may be fixed for consignments to the French overseas department of Réunion, which are 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 referred to in Article 25(2).

The amount of the subsidy shall be fixed according to procedure referred to in Article 25(2).

Article 6

1. The effective support price for paddy rice in the Community shall be EUR 150/t.

2. In order to stabilise the market price for paddy rice in a region of the Community, the Commission shall, in accordance with the procedure referred to in Article 25(2), authorise the Member State concerned to conclude private storage contracts, if the average market price in that region is for a consecutive period of two weeks less than the support price and is, without support measures, likely to remain less than the support price.

3. Paddy rice harvested in the Community shall be eligible for private storage. The aid for private storage shall be fixed in accordance with the procedure referred to in Article 25(2). The amount of the aid as well as the eligible quantities may be determined on the basis of tenders.

4. Detailed rules for the application of this Article shall be adopted in accordance with the procedure referred to in Article 25(2).

Article 7

1. A special measure shall apply where the average market price for paddy rice in a region of the Community for a consecutive period of two weeks shall be lower than EUR 120/t and is likely to remain less than that price.

2. Agencies designated by the Member States shall buy in the paddy rice harvested in the Community which is offered to them, provided that the offers comply with conditions established in accordance with the procedure referred to in Article 25(2), in particular in respect of quantity and quality.

3. The buying-in prices and the eligible quantities may be determined on the basis of tenders. If the quality of the paddy rice offered is lower than the standard quality for which the buying-in price has been fixed, the latter price shall be reduced.

4. The standard quality of paddy rice shall be defined in Annex III.

5. In accordance with the procedure referred to in Article 25(2), the Commission shall decide on the opening and the closing of the measure referred to in paragraph 1. In particular, it shall decide to close the measure if the market price for paddy rice in the region concerned is for a period of at least one week in excess of a price level of EUR 120/t.

6. Under conditions to be determined in accordance with the procedure referred to in Article 25(2), the paddy rice bought-in under the measure referred to in paragraph 1 shall be offered for sale, for export to third countries or for supply to the internal market.

7. Detailed rules for the application of this Article shall be adopted in accordance with the procedure referred to in Article 25(2).

Article 8

The Member States shall communicate to the Commission on a periodical basis the information necessary for the application of Articles 6 and 7.

The Member States shall provide the Commission, 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 shall be based on a system providing for compulsory declarations by producers and processors set up, administered and monitored by the Member State.

Detailed rules for the application of this Article and in particular a system of communication of prices shall be adopted in accordance with the procedure referred to in Article 25(2).

CHAPTER III TRADE WITH THIRD COUNTRIES

Article 9

1. Imports into the Community, or exports therefrom, of any of the products listed in Article 1 shall be subject to presentation of an import or export 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 Articles 12 to 15.

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 forfeited in whole or in part if import or export is not carried out, or is carried out only partially, within that period.

2. The term of validity of licences and other detailed rules for the application of this Article shall be adopted in accordance with the procedure referred to in Article 25(2).

Section I Provisions applicable to imports

Article 10

1. Unless this Regulation provides otherwise, the import duty on the products listed in Article 1 shall be that set out in the Common Customs Tariff.

2. Notwithstanding paragraph 1, the import duty on

(a) husked rice falling within code 1006 20 shall be equal to the effective support price, increased by:

(i) 80% in the case of husked rice falling within CN code 1006 20 17 and 1006 20 98;

(ii) 88% in the case of husked rice falling within CN codes other than 1006 20 17 or 1006 20 98, minus the import price; and

(b) milled rice falling within CN code 1006 30 shall be equal to the effective support price, plus a percentage to be calculated and minus the import price.

However, the import duty calculated in accordance with this paragraph shall not exceed the rate of duty in the Common Customs Tariff.

The percentage referred to in point (b) shall be calculated by adjusting the appropriate percentage referred to in point (a) by reference to the conversion rate, processing costs and the value of by-products, and subsequently adding an amount for the protection of the industry.

3. Notwithstanding paragraph 1, no customs duty shall be levied on imports into the French overseas department of Reunion, intended for consumption there products falling within CN code 1006 10, 1006 20 and 1006 40 00;

4. Detailed rules for the application of this Article shall be adopted in accordance with the procedure referred to in Article 25(2).

Article 11

1. Without prejudice to Article 10(2), in order to prevent or counteract 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 10 shall be subject to the payment of an additional import duty if the conditions to be determined by the Commission pursuant to paragraph 3, are fulfilled, unless the imports are unlikely to disturb the Community market, or where the effects would be disproportionate to the intended objective.

2. Imports made at a price below the level notified by the Community to the World Trade Organisation ('the trigger price') may be subject to an additional import duty. If the volume of imports in any year in which the adverse effects referred to in paragraph 1 arise or are likely to arise exceeds a level based on market access opportunities defined as imports as a percentage of the corresponding domestic consumption during the three previous years ('the trigger volume'), an additional import duty may be imposed. The import prices to be taken into consideration for imposing an additional import duty pursuant to the first subparagraph of paragraph 2, 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.

3. Detailed rules for the application of this Article shall be adopted in accordance with the procedure referred to in Article 25(2). Such detailed rules shall specify in particular the products to which additional import duties may be applied.

Article 12

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 under detailed rules adopted in accordance with the procedure referred to in Article 25(2).

2 Tariff q quotas shall, be administered by applying one of the following methods or a combination of them:

(a) a method based on the chronological order of the lodgement of applications ("first come, first served principle"),

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

(c) a method based on taking traditional trade patterns into account (using the "traditional/new arrival method").

Other appropriate methods may be adopted. They must avoid any unjustified discrimination between the operators concerned.

3. The method of administration adopted shall, where appropriate, give due weight to the supply requirements of the Community market and the need to safeguard the equilibrium of that market.

4. The detailed rules referred to in paragraph 1 shall provide for the annual tariff quotas, if necessary suitably phased over the year, shall determine the administrative method to be used and, where appropriate, shall include:(a) guarantees covering the nature, provenance and origin of the product,

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

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

Section II Provisions applicable to exports

Article 13

1. To the extent necessary to enable the following products to be exported 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:

(a) the products listed in Article 1 to be exported without further processing;

(b) the products listed in Article 1 to be exported in the form of goods listed in Annex IV.

Export refunds on the products referred to in point (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 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. Export 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 in accordance with the procedure referred to in Article 25(2). Refunds may be fixed:

(a) at regular intervals;

(b) by invitation to tender for products in respect of which provision was made for that procedure in the past.Export refunds fixed at regular intervals, may, if necessary, be amended in the interval by the Commission at the request of either a Member State or on its own initiative.4. The following shall be taken into account when refunds are being fixed:

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

(i) prices and availability of rice and broken rice on the Community market,

(ii) 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;

(f) the most favourable prices in third countries of destination for third-country imports, as far as products listed in Article 1(1)(a) and (b) are concerned.

Article 14

1. Export refunds on products listed in Article 1 exported without further processing shall only be granted on application and on presentation of an export licence.

2. The refund applicable to products listed in Article 1 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

or, where appropriate,

(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 any abuse of the flexibility provided for in this paragraph.

3. The scope of paragraphs 1 and 2 may be extended to apply to products listed in Article 1 that are exported in the form of goods listed in Annex IV in accordance with the procedure laid down in Article 16 of Council Regulation (EC) No 3448/93 [13]. Detailed implementing rules shall be adopted in accordance with that procedure.

[13] OJ L 318, 20.12.1993, p. 18. Regulation last amended by Regulation (EC) No 2580/2000 (OJ L 298, 25.11.2000, p. 15).

4. Derogations from paragraphs 1 and 2 may be granted in the case of products on which export refunds are paid under food-aid operations, in accordance with the procedure referred to in Article 25(2).

Article 15

1. A corrective amount applicable to the export refunds may be set in accordance with the procedure referred to in Article 25(2). However, where necessary, the Commission may, amend the corrective amounts.

2. The first subparagraph may be applied to products listed in Article 1 that are exported in the form of goods listed in Annex IV.

Article 16

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

(a) the products were wholly obtained in the Community within the meaning of Article 23 of Council Regulation (EEC) No 2913/92 [14], except where paragraph 6 applies;

[14] OJ L 302, 19.10.1992, p. 1.

(b) the products have been exported from the Community;

(c) 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 referred to in Article 25(2), provided that conditions are laid down which offer equivalent guarantees.

Additional provisions may be adopted in accordance with the procedure referred to in Article 25(2).

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

(a) the product to be exported and the product previously imported are one and the same; and

(b) the duties 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 those duties are lower than the refund applicable. Where the duties collected on importation are higher than the refund applicable, those duties shall apply.

Article 17

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 WTO Agreement on Agriculture, the ending of a reference period shall not affect the validity of export licences.

Article 18

Detailed rules for the application of this Section, including provisions on the redistribution of exportable quantities which have not been allocated or utilised, shall be adopted in accordance with the procedure referred to in Article 25(2). Such detailed rules may include provisions governing the quality of the products eligible for an export refund.

Annex IV shall be amended in accordance with the procedure referred to in Article 25(2).

Section III Common provisions

Article 19

1. To the extent necessary for the proper working of the common organisation of the market in rice, the Council, acting on a proposal from the Commission in accordance with the voting procedure laid down in Article 37(2) of the Treaty may prohibit in whole or in part the use of inward or outward processing arrangements in respect of products listed in Article 1.

2. 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 in accordance with the procedure referred to in Article 25(2). 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 from the date 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 acted within three months from the date on which the decision was referred to him, the Commission's decision shall be deemed to have been repealed.

Article 20

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 Annex I, 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:

(a) the levying of any charge having equivalent effect to a customs duty;

(b) the application of any quantitative restriction or measure having equivalent effect.

Article 21

1. When the quotations or prices on the world market of one or more of the products listed in Article 1 reaches a level that disrupts or threatens to disrupt the supply of the Community market and this situation is liable to persist and deteriorate, appropriate measures may be taken. Such measures may be taken as a safeguard measure in case of extreme emergency.

2. Detailed rules for the application of this Article shall be adopted in accordance with the procedure referred to in Article 25(2).

Article 22

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 non-WTO members until such disturbance or threat of disturbance has ceased.

2. If the situation referred to 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 Member States shall be notified of such measures which 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 from the date 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.

CHAPTER IV GENERAL PROVISIONS

Article 23

Unless this Regulation provides otherwise, Articles 87, 88 and 89 of the Treaty shall apply to production of and trade in the products listed in Article 1.

Article 24

1. Member States and the Commission shall send each other any information necessary for the application of this Regulation and for complying with the international obligations concerning rice.

2. Detailed rules to determine which information is necessary as well as for its communication and distribution shall be adopted in accordance with the procedure referred to in Article 25(2)

Article 25

1. The Commission shall be assisted by the Management Committee for Cereals, instituted by Article 24 of Regulation (EC) No .../2003 on the common organisation of the market in cereals, hereinafter referred to as 'the Committee'.

2. Where reference is made to this paragraph, Articles 4 and 7 of Decision 1999/468/EC shall apply.

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

3. The Committee shall adopt its rules of procedure.

Article 26

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 27

Measures which are both necessary and justifiable, in an emergency, in order to resolve practical and specific problems shall be adopted in accordance with the procedure referred to in Article 25(2).

Such measures may derogate from certain parts of this Regulation, but only to the extent that, and for such a period, as is strictly necessary.

Article 28

Regulation (EC) No 1258/1999 and the provisions adopted in implementation thereof shall apply to the expenditure incurred by the Member States in carrying out obligations under this Regulation.

Article 29

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.

CHAPTER V TRANSITIONAL AND FINAL RULES

Article 30

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

References to the repealed Regulations shall be construed as references to this Regulation and shall be read in accordance with the correlation table in Annex V.

2. Transitional measures may be adopted in accordance with the procedure referred to in Article 25(2).Article 31

1. In the period from1 April 2004 to 31 July 2004, the quantities that shall be bought in by the intervention agencies pursuant to Article 4 of Regulation (EC) No 3072/95 shall be limited to 100 000 tonnes.

2. The Commission, on the basis of a balance sheet reflecting the situation of the market, may amend the quantity referred to in paragraph 1. The procedure referred to in Article 25(2) shall apply.

3. Detailed rules for the implementation of this Article shall be adopted in accordance with the procedure referred to in Article 25(2).

Article 32

1. This Regulation shall enter into force on the [seventh] day following that of its publication in the Official Journal of the European Communities.

2. It shall apply from the 2004/2005 marketing year.

However, Articles 8 and 31 shall apply from 1 April 2004.

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

I. DEFINITIONS as referred to in Article 2

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

(b) Husked rice: means 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: means 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: means 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: means 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: means 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: means

(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: means 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: means grain fragments the length of which does not exceed three quarters of the average length of the whole grain.

ANNEX 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 III

Definition of standard quality of paddy rice

Paddy rice of standard quality shall :

(a) be of a sound and fair marketable quality, free of odour;

(b) contain a moisture content of maximum 13%;

(c) have a yield of wholly milled rice 63% by weight in whole grains (with a tolerance of 3% of clipped grains) of which a percentage by weight of wholly milled rice grains which are not of unimpaired quality:

- chalky grains of paddy rice under CN codes 1006 10 27 and CN 1006 10 98: // 1.5%

- chalky grains of paddy rice under CN codes other than CN 1006 10 27 and CN 1006 10 98: // 2.0%

- grains striated with red: // 1.0%

- spotted grains: // 0.50%

- stained grains: // 0.25%

- yellow grains: // 0.02%

- amber grains: // 0.05%.

ANNEX IV

CN code // Description

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

0403 10 // - Yoghurt:

0403 10 51 to 0403 10 99 // - - Flavoured or containing added fruit, nuts or cocoa

0403 90 // - Other:

0403 90 71 to 0403 90 99 // - - Flavoured or containing added fruit, nuts 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 goods of subheadings 1806 10, 1806 20 70, 1806 90 60, 1806 90 70 and 1806 90 90

ex 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 goods of 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:

1901 10 00 // - Preparations for infant use, put up for retail sale

1901 20 00 // - Mixes and doughs for the preparation of bakers' wares of heading No 1905.

1901 90 // - Other:

1901 90 11 to 1901 90 19 // - - Malt extract

// - - Other:

1901 90 99 // - - - Other:

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:

// - Potatoes:

// - - Other:

2004 10 91 // - - - 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:

// - Potatoes:

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

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 with a basis of coffee:

2101 12 98 // - - - Other

2101 20 // - Extracts, essences and concentrates, of tea or maté, and preparations with a basis of these extracts, essences or concentrates, or with a basis of tea or maté:

2101 20 98 // - - - Other

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

2106 // Food preparations not elsewhere specified or included:

// - Other:

2106 90 10 // - - Cheese fondues

// - - Other:

2106 90 92 // - - - Containing no milk fats, sucrose, isoglucose, glucose or starch or containing, by weight, less than 1,5 % milk fat, 5 % sucrose or isoglucose, 5% glucose or starch

2106 90 98 // - - - Other

ex 3505 // Dextrins and other modified starches (for example, pregelatinised starches); glues based on starches, or on dextrins or other modified starches, except starches of No 3505 10 50

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:

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

ANNEX V

CORRELATION TABLE

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

Article 1 // Article 1 and 2

Article 2 // Article 3

Article 3 // Article 6

Article 4 // Article 6

Article 5 // --

Article 6 // --

-- // Article 4

-- // Article 7

Article 7 // --

Article 8 // --

Article 9 // Article 9

Article 10 // Article 5

-- // Article 8

Article 11 // Article 10

Article 12 // Article 11

Article 13 // Articles 13,14, 15, 16, 17 and 18

Article 14 // Article 19

Article 15 // Article 20

Article 16 // Article 21

Article 17 // Article 22

Article 18 // --

Article 19 // Article 23

-- // --

Article 21 // Article 24

Article 22 // Article 25

Article 23 // Article 26

-- // Article 27

Article 24 // Article 29

Article 25 // Article 30

Article 26 // Article 28

-- // Article 31

Article 27 // Article 32

Annex A // Annex I

-- // Annex II

Annex B // Annex IV

Annex C // Annex V

Regulation (EC) No 3073/95 // This Regulation

Article 1 // Annex III