Proposal for a COUNCIL REGULATION on the common organisation of the market in olive oil and table olives and amending Regulation (EEC) No 827/68

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. INTRODUCTION COMMON TO THE FOUR SECTORS INVOLVED

Since 1992, the common agricultural policy (CAP) has been immersed in a fundamental reform process, aimed at moving away from a policy of price and production support to a more comprehensive policy of farmer income support. The latest step in this process was the adoption by the Council on 29 September 2003 of the proposal for Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers.

As the next step in the reform process, the Commission proposes to integrate the current support schemes for cotton, olive oil and table olives, tobacco and hops in the above-mentioned. Consequently, the proposal is based on the same objectives of enhanced competitiveness, stronger market-orientation, improved environmental respect, stabilised incomes for farmers and a higher regard for the situation of producers in least favoured areas. Priority is given to producer income and not to production support, through the transfer of a significant part of the current production-linked expenditure to the single payment scheme established by the new horizontal regulation.

However, specific circumstances prevail as regards the sectors of cotton, olive and tobacco, which show a tendency to concentrate their production in regions that are notably lagging behind in their economic development. The proposal therefore takes into account the potential impact of a full de-coupling in these sectors, in particular the risk of production abandonment and a declining competitiveness of rural areas. For that reason, a part of the expenditure should continue to be sector-specific in the case of cotton and olive cultivation and the integration of raw tobacco in the single payment scheme should be carried out gradually. As far as hops is concerned, Member States may retain a percentage of the aid to allow for a coupled aid. The essential elements of the envisaged regime are described below.

2. THE NEW ARRANGEMENTS FOR COTTON

2.1. Introduction

The Commission proposes to transfer the part of the EAGGF expenditure for cotton that was destined to producer support during the 2000-2002 reference period, into the funding of two support measures, namely, the single payment and a new production aid, granted as an area payment, which would respond to the objective of supporting the production of cotton in the regions concerned as provided for in the Cotton Protocols attached to the Acts of Accession of Greece and of Spain and Portugal. The rest of the expenses for cotton will be transferred to the rural Development measures for the regions concerned.

The budget destined to cover both measures is established on the basis of the average expenditure on aid to this sector in the reference years reduced by the amounts that were received by the ginners but not necessarily transferred to the producers. These amounts correspond to two different concepts. First, account is taken of the difference between the guide price and the minimum price (EUR53,1 per tonne) multiplied by the average eligible production, which results in EUR82,1 million. To this must be added the difference between the average of the world prices on which the aid applications have been fixed and the average of the actual world price during the same period, multiplied by the concerned production, which results in a total of EUR25,4 million. This difference between average world prices is due to the existing possibility for the ginners to either prefix or postfix the world price on the basis of which the aid is calculated.

Consequently, the total amount to be deducted from the average budget spent on production aid during the reference period is EUR107,5 million. Considering that the total average budget is of EUR803 million, the total amount to be allowed to the single payment scheme and the new production aid for cotton is EUR695,8 million, distributed as follows: EUR504,4 million for Greece, EUR190,8 million for Spain and EUR0,565 million for Portugal.

2.2. Direct aid to farmers

2.2.1. Production aid per hectare of cotton

The production aid per hectare of cotton must be determined in such a way as to ensure economic conditions which, in regions which lend themselves to that crop, enable activity in the cotton sector to continue and therefore make it interesting in relation to other competing arable crops.

Given, on the one hand, the fluctuations in the margins of competing crops between producer Member States and, on the other hand, the de-coupling percentages decided upon in the context of the 2003 Common Agricultural Policy reform, it is proposed that 40% of the budget envelope for producer support be destined to the aid per hectare. On the basis of the above mentioned EUR695,8 million budget, this would correspond to EUR278,5 million, i.e. EUR202 million in Greece, EUR76,3 million in Spain and EUR0,2 million in Portugal.

For environmental and quality reasons, the areas on which cotton can be grown and the appropriate varieties that can be sown will have to be authorised by Member States. In addition, the aid per hectare of cotton will be limited to a maximum area per Member State.

In Greece, the area under cotton totalled at least 400 000 hectares over each of the five years before 2001. Since then, due to the introduction of specific measures under Article 17 of Regulation (EC) No 1051/2001, aiming in particular at environmental considerations, the areas have gradually fallen to around 370 000 ha. With a view to continue this downward trend, the maximum area for Greece should accordingly be set at 340 000 ha, i.e. 11% less than the average eligible areas for the period from 2000/01 to 2002/03.

The maximum areas for the other producing Member States must be fixed taking into account the differences in the average overshoot of the National Guaranteed Quantities (NGQ) since 1995, which is 2,2 times higher in Greece than in Spain. Accordingly, the maximum area is proposed at 85 000 ha in Spain, i.e. 5% below the average eligible area for the period 2000/01 to 2002/03. In Portugal, where there have been no overshoots of the NGQ, the maximum area can be set at 360 ha, corresponding to the average eligible area in 2000/01 to 2002/03.

The above mentioned available amounts and the maximum areas proposed per Member state result in a unit aid per hectare fixed at EUR594 in Greece, EUR898 in Spain and EUR556 in Portugal. In case the eligible area under cotton exceeded the maximum area, the aid per hectare would be reduced proportionally.

As other direct aids to producers that aid per hectare of cotton will have to comply with horizontal obligation like cross-compliance, modulation and financial discipline.

2.2.2. Direct income aid

In the light of the total budget available for direct product support for cotton, and taking into account the 40% share allocated to production aid, the balance of the budget available for direct income aid is EUR302,4 million in Greece, EUR114,5 million in Spain and EUR0,365 million in Portugal, i.e. a total of EUR417,3 million.

The entitlements per producer will have to be calculated on the basis of the eligible areas under cotton in the marketing years 2000/01 to 2002/03. On average, these total 469 816 ha, i.e. 380 436 ha in Greece, 89 023 ha in Spain and 357 ha in Portugal.

Consequently, the direct income aid to producers in respect of eligible areas under cotton in 2000/01 to 2002/03 shall be calculated on the basis of EUR795 per hectare in Greece, EUR1 286 per hectare in Spain and EUR1 022 per hectare in Portugal.

The inclusion in the single payment scheme obviously implies that cotton will be subject to the same horizontal rules - in particular in terms of environmental requirements - as those applicable to the other crops covered by the de-coupled payments.

2.3. Inter-branch organisations

In order to allow producers and ginners to enhance the quality of the cotton produced, it is proposed to encourage the establishment of inter-branch organisations made up by cotton producers and at least one ginner. These inter-branch organisations could establish rules on certain aspects of the contracts between the grower and the ginner with a view to obtaining a quality which is adapted to local economic and environmental conditions and for which there is market demand, taking commercial ginning requirements into account.

The inter-branch organisations shall be authorised to lay down a scale for differentiating at the maximum half of the amount of the crop specific aid for their members, within the frame of common criteria, and respecting the same budgetary envelope. This could result in some producers getting an amount of production aid per hectare higher that the unit amount fixed in the basic Regulation due to their production of high quality cotton, while other less performing producers could receive a lower amount of aid per hectare.

The inter-branch organisations and their aid differentiation scales will need to be approved by the Member State concerned. These organisations are to be financed by its members, but as an encouragement to the sector the Community should contribute to their activities via an increase of EUR10 in the production aid per eligible hectare. The total budget for the Community for this purpose would thus be EUR4,3 million.

The Member State will have to verify the results of the application of the scale in relation to the results achieved by the producers in question in order to grant the final amount payable per hectare concerned.

A grower not belonging to any inter-branch organisation would receive the unit amount of aid.

2.4. Restructuring envelope

The proposed reform might require some adapting efforts from the sector or even a certain degree of restructuring. With this in mind, it is conceived that a financial transfer for rural development measures in the cotton production areas should be made. This could benefit new recipients, be spent on new actions or serve to increase the rate of co-financing.

The budget corresponds to the amount not necessarily transferred to producers in the current system as described in point 2.1, reduced by the amount provided for the encouragement of the setting-up of inter-branch organisations. This results in EUR102,9 million, to be shared out between the Member States on the basis of the average area eligible for aid in the reference period, i.e. EUR82,68 million in Greece, EUR20,13 million in Spain and EUR0,12 million in Portugal.

The amounts thus available to the Member States and regions concerned are to be switched from Heading 1(a) to Heading 1(b) of the Financial Perspectives. The amounts would be an integral part of the second pillar of the CAP used as currently provided for in Council Regulation (EC) No 1257/1999.

2.5. Application

The new arrangements should be applicable as from 1 September 2005 and would thus already concern the crop sown in the spring of 2005. The current arrangements would remain applicable until the end of the 2004/05 marketing year.

3. THE ARRANGEMENTS FOR OLIVE GROVES

3.1. Direct aid to growers

3.1.1. Integration into the single payment scheme

Income support will be integrated into the new single payment scheme. It will be equal to a percentage of the average production aid for olive oil and table olives granted during the reference period. The surface area to be taken into consideration (henceforth expressed as "olive GIS-ha") will be established by the Member States on the basis of the data in a geographical information system (GIS) for olive cultivation, incorporated in the Integrated Administration and Control System (IACS) and constantly kept up to date. The method of calculating the number of olive GIS-ha will be established by the Commission for the entire Community in such a way as to take account of the number of olive trees and their position on the ground.

The percentage of aid allocated to the single payment scheme must be as high as possible in order to maximise the benefits it brings, while permitting the existence of national envelopes of a sufficient amount to guarantee the preservation of olive groves with an environmental and social value, and to finance the activities of olive oil operators' organisations. The Commission considers that it would be appropriate to transfer 60% of the existing aid for olive oil to the single payment scheme. However, for reasons of simplification, this percentage should not be applied to holdings of less than 0,3 olive GIS-ha, since the entire amount of the payments received by them during the reference period will be allocated to the single payment.

In order to ensure that the new aid system cannot alter the fragile balance currently prevailing on the olive oil market, access to the single payment scheme must be limited to olive-growing areas existing prior to 1 May 1998 and to new plantings provided for under the programmes approved by the Commission.

3.1.2. Additional aid to olive growing

Each Member State will have a national envelope equal to 40% of the direct aid paid to olive-growing holdings of more than 0,3 olive GIS-ha. The aid will be granted according to procedures to be specified by the Commission and will follow the principles set out below:

(a) the aid will depend on the surface area of the olive grove, expressed as a number of olive GIS-ha;

(b) a record of the existence of the olive grove prior to 1 May 1998 must appear in the geographical information system for olive cultivation. However, replacement olive trees and plantings carried out after this date under a programme approved by the Community will also be eligible;

(c) in accordance with a framework to be established by the Commission, Member States are to define up to five categories of olive groves which are eligible for aid on the basis of their environmental and social value. Within the limits of the national envelope, Member States will set the amount of aid corresponding to each category, which should not exceed maintenance costs excluding harvesting costs;

(d) granting of the aid in the years following its introduction will be conditional upon the number of olive trees remaining the same as at 1 January 2005, subject to a variation of no more than 10%, and upon the characteristics of the particular category of olive grove for which the aid was requested being preserved;

(e) for reasons of simplification, only applications for amounts of over EUR50 will be accepted.

The inspection agencies must ensure payment of production aid for the 2003/04 marketing year, and part-financing of their operating costs, which is to continue until 31 October 2005, is therefore justified. The Commission considers, however, that checks on aid for olive cultivation beyond this date will be the same as those on other CAP aid and financing of the agencies will no longer be necessary.

3.2. The Regulation on the common organisation of the market in olive oil

Although the CAP measures relating to oilseeds come under the general provisions on arable crops, Regulation No 136/66/EEC on the establishment of a common organisation of the market in oils and fats covers not only olive oil and table olives but also oilseeds, oil cakes and other vegetable oils. Since the aid scheme under Regulation No 136/66/EEC is due to expire on 1 November 2004, this instrument must be repealed and replaced by a Council Regulation on the common organisation of the market in olive oil and table olives.

The new market organisation must comprise:

- an internal market and trade scheme which allows market forces to operate, while controlling imports under the common market organisation rules and providing for crisis-management instruments; and

- a scheme to enhance quality in the broad sense of the term, based on observance of marketing standards and the work of operators' organisations in the olive sector.

3.2.1. The internal market and trade scheme

The marketing year currently begins on 1 November for olive oil and 1 September for table olives. However, these dates are inappropriate in the case of certain varieties of olive which are harvested early. The Commission proposes that, by way of exception, the 2004/05 marketing year should last for a period of eight months ending on 30 June 2005. Subsequent marketing years will begin on 1 July and last for twelve months.

Although the olive oil market is still in balance in terms of aggregate figures over a number of years, variations in production and the impact of new plantings could result in periods of low prices in future. The existing aid scheme for private storage must therefore be retained. However, it is important that this mechanism should not distort market-led production. Consequently, aid should continue to be triggered by the Commission on a non-automatic basis and in accordance with the market situation.

Community canned foods preserved in olive oil are at present highly rated by consumers, who are coming to appreciate foodstuffs in olive oil to a growing extent. Aid for the use of olive oil - usually of medium quality - in canning has ceased to be justified by the new marketing approaches, which set out to highlight the attributes of olive oil rather than affect selling prices. The Commission proposes that this refund should be abolished.

Where trade with third countries is concerned, the fragile balance of the Community market requires import controls and customs protection in the context of the agreements reached within the World Trade Organisation. However, the development of our Euro-Mediterranean policy will entail a circumspect opening-up of the Community market to respond to the opportunities offered by increases in production and consumption. In addition, the inward-processing regime must continue to allow import requirements to be controlled in accordance with the cyclical situations on the world market. Provision must, however, be made for the possibility of restricting the regime where necessary by means of a Commission decision taken in accordance with the management committee procedure.

As regards Community olive oil exports, experience since 1998 has shown that refunds are unnecessary since the Community price is used as a reference in international trade and the fact that this price is high in relation to prices of other vegetable oils is not decisive in influencing consumer choices. The Commission therefore proposes that this instrument should be abolished.

3.2.2. The quality enhancement scheme

Given that production could exceed current consumption, the future of the Community olive-growing sector depends to a large extent on the entire industry committing itself to a comprehensive quality-oriented approach. Following the Council Decision of 2001, the operators' organisations in the olive sector are already developing activities in this field. Although little experience has been acquired to date, there appears to be a need to reinforce the existing mechanism in several respects:

- establish commitments spread over three years and promote activities with a multinational dimension;

- reinforce the contribution of operators in the olive sector towards effective quality monitoring and control of the genuineness of olive oils released for consumption;

- step up activities which target quality, publicising this work and the results achieved;

- reinforce the arrangements for appraisal and audit by the Member States.

The total Community financing for these programmes is to be set by the Member State concerned, but may not exceed 10% of the national envelope, which is greater than the maximum amounts which may be deducted from production aid at present.

This mechanism would replace the deductions currently made in order to finance measures aimed at improving the quality of olive production, which will become redundant. The existing support for producer organisations and associations thereof will no longer be justified on the ground that they manage production aid since such aid will be abolished. However, the producer organisations will have to manage and check aid applications for the 2003/04 marketing year.

4. THE NEW ARRANGEMENTS FOR TOBACCO

4.1. Direct aid to farmers

With the reshaping of the CAP, some of the objectives formerly assigned to the common market organisation in raw tobacco are no longer pertinent. Some instruments are not suited to the new context, whilst others have under-performed and so failed to achieve their goals, even if these remain valid. Moreover, like the common market organisations in other product sectors, the CMO for raw tobacco had to redefine its objectives in line with the new economic context and the expectations of consumers and taxpayers.

Apart from the general objectives of the horizontal scheme for direct aid to farmers, to be achieved by an integration of the tobacco sector in this scheme, there is also the objective of an increased coherence between the main policies of the European Union, in particular the public health policy.

At the Göteborg European Council, the Commission presented a communication on the European Union's strategy for sustainable development [1] (May 2001) which specifically referred to the tobacco sector. Though the Council withheld from adopting any specific conclusions on tobacco, it was evident from the discussions, and the context in which they took place, that certain reservations existed about the sustainability of the tobacco sector.

[1] Communication from the Commission: A Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development (COM(2001) 264 final of 15.5.2001)

The Commission's response at the time was to strengthen its commitment to finding a sustainable policy-approach for the tobacco regime, based on an assessment of the economic, social and environmental aspects of the sector. Thus, in May 2002, in its Legislative and Work Programme for 2003, the Commission decided to subject its policy reflections on the tobacco sector to an Extended Impact Assessment [2], in accordance with its 'Sustainable and inclusive economy priority'.

[2] SEC(2003) 1023 of 23.9.2003 presenting the Extended Impact Assessment of the Tobacco Sector.

The Commission's principal conclusion from the Extended Impact Assessment for the tobacco sector was that, to avoid a disruptive effect on production, where at present about one third of the tobacco premium is needed to cover the variable production costs, the decoupling and integration in the single payment scheme should be carried out gradually. This approach, accompanied by a phasing out of the Community Tobacco Fund and the setting up, in the framework of rural development, of a financial envelope for restructuring concerned areas, is considered as providing the most sustainable policy for the future.

The proposed reform should begin with the transfer of all or part of the current tobacco premium payment into entitlements for the single payment. While this transfer will be complete for a farmer's first 3,5 tonnes of production, for the following part exceeding 3,5 tonnes up to 10 tonnes, only 75% of the current tobacco premium will be incorporated in the single payment. For the part above 10 tonnes, 1/6 in the first year, 1/3 in the second year and 45% from the third year onwards of the corresponding tobacco premium payment shall be converted into single payment entitlements. 2/3 of the tobacco premium payment corresponding to the part above 10 tonnes will thus remain coupled to production in the first year. In the second year, 1/3 of the tobacco premium payment corresponding to the part above 10 tonnes will remain coupled to production. In each case, the remaining percentage is transferred to the restructuring envelope, i.e. 1/6 in the first year, 1/3 in the second year and 55% from the third year onwards.

The following table illustrates the gradual integration of the current tobacco premium into the single payment scheme:

>TABLE POSITION>

The percentage of the global aid for tobacco that will be transferred to the restructuring envelope stays just above 20% as was foreseen in the Communication accomplishing a sustainable agricultural model for Europe through the reformed CAP - the tobacco, olive oil, cotton and sugar sectors adopted by the Commission on 23 September 2003 (COM(2003) 554 final - see paragraph 3 on page 15).

4.2. Restructuring envelope

The gradual de-coupling of the current aid scheme for raw tobacco should be accompanied by the setting up, in the framework of rural development, of a financial envelope for restructuring concerned areas. The restructuring envelope will be the difference between a total envelope of EUR955 million and the proposed coupled and de-coupled aid as well as payments made under the tobacco quota buy-back scheme. The envelope of EUR955 million corresponds to the historical average expenditure in the tobacco sector during the reference period 2000 to 2002. Each Member State should receive an amount corresponding to the difference between its historical expenditure and the proposed coupled and de-coupled aid, to be used in favour of tobacco producing regions. The amounts thus available to the Member States and regions concerned are to be switched from Heading 1(a) to Heading 1(b) of the Financial Perspectives. The amounts would be an integral part of the second pillar of the CAP used as currently provided for in Council Regulation (EC) No 1257/1999.

5. THE NEW ARRANGEMENTS FOR HOPS

The support scheme for hops is to be integrated fully in Council Regulation (EC) No 1782/2003.

The report submitted by the Commission to the Council on the evaluation of the common market organisation for Hops under the terms of Article 18 of Regulation (EEC) No 1696/71 describes in detail the development of the operation of the hops market. This market is primarily marked by a continuous search for balance between the offer of hops and the requirements of the beer industry. Two remarkable phenomena characterised the market trend during the last decade. On the one hand, the consumer's preference developed towards less hopped beers and therefore the demand for hops fell. On the other hand, conversion towards varieties with a high alpha acid content resulted in a too high an offer of hops on the market. This situation caused the need to reduce the areas under hop.

This permanent adaptation was realised within the framework of the common market organisation where the production aid level proved to be satisfactory for the survival of the crop and the special measures which allowed for the conjunctural (temporary resting) and structural adjustments (reduction of areas) of hop production.

The present situation which shows a sector fully directed towards the requirements of the market and which tends to answer in a satisfactorily manner leads to envisage that the integration of the hop production aid scheme in the de-coupled single payment scheme should allow the safeguarding of hop production in the Community.

That being so, this proposal envisages the possibility for the Member States to maintain a coupled aid in order to take into account special production conditions or specific circumstances in the production regions.

2003/0279 (CNS)

Proposal for a COUNCIL REGULATION on the common organisation of the market in olive oil and table olives and amending Regulation (EEC) No 827/68

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 36 and the third subparagraph of Article 37(2),

Having regard to the proposal of the Commission,

Having regard to the opinion of the European Parliament,

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

Having regard to the opinion of the Committee of the Regions,

Whereas:

(1) The common agricultural policy pursues the objectives set out in Article 33 of the Treaty. In order to stabilise markets and ensure a fair standard of living for the agricultural community in the sector of olive oil and table olives, it is necessary to provide for an income support to farmers maintaining olive groves, for internal market measures to maintain the prices and supply conditions in a reasonable frame, and for activities aiming at influencing market demand by improving the quality of products as well as the way of presenting quality to consumers.

(2) Income support to farmers maintaining olive groves is provided for in Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers [3] through the single farm payments as well as an aid for maintenance of olive groves.

[3] OJ L 270, 21.10.2003, p. 1. Regulation as amended by Regulation (EC) No .../2003 (OJ L...).

(3) Council Regulation No 136/66/EEC of 22 September 1966 on the establishment of a common organisation of the market in oils and fats [4] should therefore be repealed and replaced by a new regulation. On this occasion, a number of Council regulations of the olive oil sector should also be repealed, namely Regulations (EEC) No 154/75 [5], (EEC) No 2754/78 [6], (EEC) No 3519/83 [7], (EEC) No 2261/84 [8], (EEC) 2262/84 [9], (EEC) No 3067/85 [10], (EEC) No 1332/92 [11], (EEC) No 2159/92 [12], (EEC) No 3815/92 [13], (EC) No 1255/96 [14], (EC) No 1414/97 [15], (EC) No 1638/98 [16] and (EC) No 1873/2002 [17].

[4] OJ 172, 30.9.1966, p. 3025/66. Regulation as last amended by Regulation (EC) No 1513/2001 (OJ L 201, 26.7.2001, p. 4).

[5] Regulation (EEC) No 154/75 of the Council of 21 January 1975 on the establishment of a register of olive cultivation in the Member States producing olive oil (OJ L 19, 24.1.1975, p. 1).Regulation as last amended by Regulation (EEC) No 3788/85 (OJ L 367, 31.12.1985, p. 1).

[6] Council Regulation (EEC) No 2754/78 of 23 November 1978 on intervention in the olive oil sector (OJ L 331, 28.11.1978, p. 13). Regulation as amended by Regulation (EEC) No 2203/90 (O J L 201, 31.7.1990, p. 5).

[7] Council Regulation (EEC) No 3519/83 of 12 December 1983 laying down certain measures for acid oils from refining of by-products of olive oil or olive-residue oil (OJ L 352, 15.12.1983, p. 2).

[8] Council Regulation (EEC) No 2261/84 of 17 July 1984 laying down general rules on the granting of aid for the production of olive oil and of aid to olive oil producer organizations (OJ L 208, 3.8.1984, p. 3). Regulation as last amended by Commission Regulation (EC) No 2366/98 (OJ L 293, 31.10.1998, p. 50).

[9] Council Regulation (EEC) No 2262/84 of 17 July 1984 laying down special measures in respect of olive oil (OJ L 208, 3.8.1984, p. 11). Regulation as last amended by Regulation (EC) No 2292/2001 (OJ L 308 , 27.11.2001, p. 1).

[10] Council Regulation (EEC) No 3067/85 of 29 October 1985 setting criteria for mobilization on the Community market for vegetable oils for supply as food aid (OJ L 290, 1.11.1985, p. 96).

[11] Council Regulation (EEC) No 1332/92 of 18 May 1992 introducing specific measures for table olives (OJ L 145, 27.5.1992, p. 1). Regulation as amended by Regulation (EC) No 2826/2000 (OJ L 328, 23.12.2000, p. 2).

[12] Council Regulation (EEC) No 2159/92 of 23 July 1992 on the financing of expenditure for the establishment and updating of the register of olive cultivation (OJ L 217, 31.7.1992, p. 8).

[13] Council Regulation (EEC) No 3815/92 of 28 December 1992 on application of the common intervention price for olive oil in Spain (OJ L 387, 31.12.1992, p. 9).

[14] Council Regulation (EC) No 1255/96 of 27 June 1996 temporarily suspending the autonomous Common Customs Tariff duties on certain industrial and agricultural products (OJ L 158, 29.6.1996, p. 1). Regulation as last amended by Regulation (EC) No 1048/2003 (O J L 161, 30.6.2003, p. 1).

[15] Council Regulation (EC) No 1414/97 of 22 July 1997 fixing, for the 1997/98 marketing year, the prices, aids and percentages of aid to be retained in the olive oil sector, together with the maximum guarantee quantity (OJ L 196, 24.7.1997, p. 4).

[16] Council Regulation (EC) No 1638/98 of 20 July 1998 amending Regulation No 136/66/EEC on the establishment of a common organisation of the market in oils and fats (OJ L 210, 28.7.1998, p. 32). Regulation as amended by Regulation by EC) No 1513/2001 (O J L 201, 26.7.2001, p. 4).

[17] Council Regulation (EC) No 1873/2002 of 14 October 2002 setting the limits to the Community financing of work programmes drawn up by approved operators' organisations in the olive sector provided for in Regulation (EC) No 1638/98 and derogating from Regulation No 136/66/EEC (OJ L 284, 22.10.2002, p. 1).

(4) It is necessary that the marketing year is adapted to the production cycle of all olive varieties and, for harmonisation simplicity purposes, it should be realigned with the marketing year for other agricultural products.

(5) The descriptions and definitions of olive oil and so the denomination are an essential element of the market order by setting quality standards and providing consumers with an adequate information on the product.

(6) The characteristics of the olive oil justify an interest of the consumers in spite of the high price of that oil as compared with other oils and fats. To avoid abuses on the quality and on authenticity of the products presented to the consumers and the important disturbances on the market they may involve, special measures are needed to develop and protect the quality of olives and olive oils.

(7) The authenticity of the allegations labelled should be guaranteed by up-to-date methods of analysis and other measures to determine the characteristics of each olive oil standard.

(8) Taking into account the influence of variation in the level of the productions and the world market supply available, there should be provision for appropriate measures to be taken in order to stabilise the internal market.

(9) The system of aid for private storage contracts is deemed to be an efficient instrument to regulate the supply of olive oil, acting as a safety net mechanism when there is serious disturbance of the market.

(10) The contribution of olive oil and table olive operators to improve and guaranty the quality of the products in question and so to develop the consumers interests and keep the balance in the market should be encouraged and organised by a Community scheme.

(11) Community finance, consisting of the percentage of direct aid that Member States are allowed to withhold in accordance with Article 143i(4) of Regulation (EC) No 1782/2003, is required to encourage approved operators' organisations to draw up work programmes for the purpose of improving the production quality of olive oil and table olives. Community support should be allocated according to the priorities given to the activities undertaken within the work programmes in question.

(12) In order to monitor the volume of olive oil trade with third countries while aiming at a simplification of administrative procedures, provision should be made for an import license scheme with the lodging of a security to ensure that the transactions for which such licenses are requested are effected. If market developments made necessary a closer follow-up of exports of olive oil from the Community, the Commission should be authorised to introduce a system of export licenses.

(13) The Community market for olive oil and table olives involves a trading system at the borders of the Community, including import duties. The trading system should be based on the undertakings accepted under international agreements.

(14) 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, the Commission should be able to suspend partially or fully these duties in order to ensure an adequate supply of the internal market in olive oil.

(15) To the extent necessary for its proper working, provision should be made for regulating or, when the situation on the market so requires, prohibiting in an harmonised way the use of inward and outward processing arrangements.

(16) The customs duty system makes it possible to dispense with all other protective measures at the external frontier 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.

(17) 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.

(18) As the common market in olive oil and table olives is in continuous development, the Member States and the Commission should keep each other informed of these developments.

(19) 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 [18].

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

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

(21) 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 [19].

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

(22) The products included in the common market organisation established by Regulation No 136/66/EEC which are not covered by the common market organisation in olive oil and table olives, or by any other common market organisation, should be included in Council Regulation (EEC) No 827/68 of 28 June 1968 on the common market organisation of the market in certain products listed in Annex II [20],

[20] OJ L 151, 30.6.1968, p. 16. Regulation as last amended by Commission Regulation (EC) No 1272/2002 (OJ L 184, 13.7.2002, p. 7).

HAS ADOPTED THIS REGULATION:

Chapter I Introductory provisions and quality requirements

Article 1

The common organisation of the market in olive oil and table olives shall cover the following products:

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Article 2

The marketing year for the products listed in Article 1 shall begin on 1 July and end on 30 June of the following year. However, the 2004/05 marketing year shall begin on 1 November 2004.

Article 3

This Regulation shall apply without prejudice to the measures provided for by Regulation (CE) No 1782/2003.

Article 4

1. The use of the descriptions and definitions of olive oils and olive-pomace oils set out in Annex I shall be compulsory as regards the marketing of the products concerned within each Member State, in intra-Community trade and trade with third countries.

2. Only oils referred to in points 1(a) and (b), 3 and 6 of Annex I may be marketed at the retail stage.

Chapter II Internal market

Section 1 marketing standards

Article 5

1. Marketing standards covering in particular quality grading, packaging and presentation may be laid down in respect of the products referred in Article 1(a) taking into account technical production and marketing requirements and changes in the methods used for determining the physical, chemical and organoleptic characteristics of these products.

Where such standards are laid down, the products to which they apply may be marketed in the Community only in accordance with those standards.

2. Member States shall, in case of products which are the subject of marketing standards, check whether those products conform to the said standards and apply penalties as appropriate. They shall notify the Commission of the arrangements they have taken for the purpose of applying this paragraph.

3. The marketing standards, as well as detailed rules for the application of this Article and, where applicable, the methods of analysis to be used, shall be adopted in accordance with the procedure referred to in Article 18(2).

Section 2 disturbance of the market

Article 6

1. In the event of serious disturbance of the market in certain regions of the Community, in order to regularise the market, it may be decided in accordance with the procedure referred to in Article 18(2) to authorise bodies offering sufficient guarantees, and approved by the Member States, to conclude contracts for the storage of olive oil that they market.

The measures referred to in the first subparagraph may be implemented inter alia when the average price recorded on the market during a representative period is less than:

- EUR 1779/tonne for extra virgin olive oil, or

- EUR 1710/tonne for virgin olive oil, or

- EUR 1487/tonne for lampante olive oil having 3 degree of free acidity, this amount being reduced by EUR 36,70/tonne for each additional degree of acidity.

2. An aid for the performance of the contracts referred to in paragraph 1 may be granted by means of tenders.

3. The amount of the aid referred to in paragraph 2 and the detailed rules for implementing this Article, in particular the quantities, qualities and duration of storage of the oils concerned shall be established by the procedure referred to in Article 18(2) in such a way as to ensure a significant impact on the market.

Section 3 Operators' Organisations

Article 7

1. For the purposes of this Regulation, operators' organisations shall comprise approved producers' organisations, approved interbranch organisations or approved organisations of other operators in the olive oil sector or their associations.

2. For the purposes of this Section, 'approved interbranch organisations' shall mean legal entities which:

- are made up of representatives of economic activities linked to the production of and/or trade in and/or processing of the products referred to in Article 1;

- are established at the initiative of all or some of the organisations or associations which constitute them;

- have been recognised by the Member State in which they operate.

Article 8

1. The amounts withheld by Member States in accordance with Article 143i(4) of Regulation (EC) No 1782/2003 shall ensure the Community financing of three-year work programmes to be drawn up by operators' organisations in one or more of the following areas:

(a) the market follow-up and administrative management in the olive oil and table olives sector;

(b) the improvement of the environmental impacts of the olive cultivation;

(c) the improvement of the production quality of olive oil and table olives;

(d) the traceability system, the certification and protection of olive oil and table olives quality, in particular the monitoring of the quality of olive oils sold to final consumers, under the authority of the national administrations;

(e) the dissemination of information on the activities carried out by operator organisations with the aim of improving olive oil quality.

2. The maximum Community funding for the work programmes referred to in paragraph 1 shall be equal to the part of the aids withheld by the Member States. This funding concerns the eligible cost with a maximum of:

- 100% for the activities in areas referred to in points (a) and (b) of paragraph 1,

- 100% for the fixed assets investments and 75% for the other activities in the area referred to in point (c) of paragraph 1,

- 75% for the work programmes carried out in at least three non producing Member States or third countries by approved operator organisations from at least two producer Member States in areas referred to in points (d) and (e) of paragraph 1, and 50% for the other activities in these areas.

Complementary financing shall be ensured by the Member State up to 50% of the costs not covered by the Community funding.

3. Member States shall verify that the conditions for granting Community funding are met. To that end, they shall carry out an audit of work programmes and a control plan involving a sample determined on the basis of a risk analysis and comprising at least 30% of producer organisations and all the other operator's organisations in receipt of Community funding under this Article.

Article 9

In accordance with the procedure referred to in Article 18(2), detailed rules shall be adopted concerning:

(a) the conditions for the approval of operators' organisations and their associations;

(b) the types of activities eligible under programmes in the five areas referred to in Article 8(1);

(c) the procedures for the approval of programmes by the Member States;

(d) the measures concerning the control and sanctions as well as the audit of work programmes;

(e) any other detailed measure that might be necessary for the implementation of this Section.

Chapter III Trade with third countries

Article 10

1. Imports to the Community of any of the products falling within CN codes 1509, 1510 00, 0709 90 39, 0711 20 90, 2306 90 19, 1522 00 31, 1522 00 39 shall be subject to presentation of an import licence.

Import licences shall be issued by the Member States to any applicant, irrespective of his place of establishment in the Community.

2. Import 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 during the period of validity of the licence. Except in cases of force majeure, the security shall be forfeited in whole or in part if import is not carried out, or is only carried out partially, within that period.

3. Where necessary for the purposes of following market developments, it may be decided, in accordance with the procedure referred to in Article 18(2), to make exports from the Community of any of the products listed in Article 1(a) subject to presentation of an export licence.

4. 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 18(2).

Article 11

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

2. By way of derogation from paragraph 1, should the market price for olive oil in the Community exceed 1,6 times the average prices laid down in the second subparagraph of Article 6(1), during a period of at least three months, to ensure the Community market is adequately supplied with olive oil through imports from non-member countries, it may be decided, in accordance with the procedure referred to in Article 18(2):

- to partially or fully suspend the application of common customs duties to olive oil, and establish the detailed arrangements for any such suspension,

- to open an import quota for olive oil at a reduced rate of the common customs duties and establish the detailed arrangements for managing such quota.

These measures shall apply for the minimum necessary period, which in any event shall not exceed the end of the marketing year in question.

Article 12

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 shall be incorporated into 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 measures having equivalent effect.

Article 13

To the extent necessary for the proper functioning of the common organisation of the markets in the olive oil and table olive sector, the use of inward-processing arrangements for the products listed in Article 1(a) and (b) may be fully or partially prohibited in accordance with the procedure referred to in Article 18(2).

Article 14

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 it 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-members of the World Trade Organisation 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 on 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 annul the measure in question within one month following 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 15

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

Article 16

Measures taken by Member States to increase the price for other vegetable oils in relation to that for olive oil so as to ensure an outlet for nationally produced olive oil shall be incompatible with the application of this Regulation.

Article 17

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 olive oil and table olives.

Detailed rules to determine which information is necessary as well for its communication and distribution shall be adopted in accordance with the procedure referred to in Article 18(2).

Article 18

1. The Commission shall be assisted by the Management Committee for Olive Oil and Table olives, 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 set at one month.

3. The Committee shall adopt its rules for procedure.

Article 19

Measures that 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 18.

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 20

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.

Chapter V Transitional and final rules

Article 21

1. Regulations (EEC) No 136/66/EEC, (EEC) No 154/75, (EEC) No 2754/78, (EEC) No 3519/83, (EEC) No 2261/84, (EEC) 2262/84, (EEC) No 3067/85, (EEC) No 1332/92, (EEC) No 2159/92, (EEC) No 3815/92, (EC) No 1255/96, (EC) No 1414/97, (EC) No 1638/98 and (EC) No 1873/2002 are repealed.

However, the provisions necessary for the management and control of the production aid shall remain applicable for the purposes of managing and controlling production aid related to the marketing years up to the marketing year 2003/04.

2. Transitional measures may be adopted in accordance with the procedure referred to in Article 18(2).

Article 22

The Annex to Regulation (EEC) No 827/68 is amended in accordance with Annex II to this Regulation.

Article 23

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

It shall apply from the 2004/05 marketing year.

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 DESCRIPTIONS AND DEFINITIONS OF OLIVE OIL AND OLIVE-POMACE OILS REFERRED TO IN ARTICLE 4

1. VIRGIN OLIVE OILS

Oils obtained from the fruit of the olive tree solely by mechanical or other physical means under conditions that do not lead to alterations in the oil, which have not undergone any treatment other than washing, decantation, centrifugation or filtration, to the exclusion of oils obtained using solvents or using adjuvants having a chemical or biochemical action, or by re-esterification process and any mixture with oils of other kinds.

Virgin olive oils are exclusively classified and described as follows:

(a) Extra virgin olive oil

Virgin olive oil having a maximum free acidity, in terms of oleic acid, of 0,8 g per 100 g, the other characteristics of which comply with those laid down for this category.

(b) Virgin olive oil

Virgin olive oil having a maximum free acidity, in terms of oleic acid, of 2 g per 100 g, the other characteristics of which comply with those laid down for this category.

(c) Lampante olive oil

Virgin olive oil having a free acidity, in terms of oleic acid, of more than 2 g per 100 g, and/or the other characteristics of which comply with those laid down for this category.

2. REFINED OLIVE OIL

Olive oil obtained by refining virgin olive oil, having a free acidity content expressed as oleic acid, of not more than 0,3 g per 100 g, and the other characteristics of which comply with those laid down for this category.

3. OLIVE OIL - COMPOSED OF REFINED OLIVE OILS AND VIRGIN OLIVE OILS

Olive oil obtained by blending refined olive oil and virgin olive oil other than lampante olive oil, having a free acidity content expressed as oleic acid, of not more than 1 g per 100 g, and the other characteristics of which comply with those laid down for this category.

4. CRUDE OLIVE-POMACE OIL

Oil obtained from olive pomace by treatment with solvents or by physical means or oil corresponding to lampante olive oil, except for certain specified characteristics, excluding oil obtained by means of re-esterification and mixtures with other types of oils, and the other characteristics of which comply with those laid down for this category.

5. REFINED OLIVE-POMACE OIL

Oil obtained by refining crude olive-pomace oil, having free acidity content expressed as oleic acid, of not more than 0,3 g per 100 g, and the other characteristics of which comply with those laid down for this category.

6. OLIVE-POMACE OIL

Oil obtained by blending refined olive-pomace oil and virgin olive oil other than lampante olive oil, having a free acidity content expressed as oleic acid, of not more than 1 g per 100 g, and the other characteristics of which comply with those laid down for this category.

ANNEX II

The Annex to Regulation (EEC) No 827/68 is amended as follows:

(1) After the description of the goods under CN code 1108 20 00 ("- Inulin"), the following is inserted:

"1202 10 90 // Ground-nuts, not roasted or otherwise cooked, in shell, other than for sowing

1202 20 00 // Ground-nuts, not roasted or otherwise cooked, shelled, whether or not broken

1203 00 00 // Copra

1206 00 91 ex 1206 00 99 // Sunflower seeds, whether or not broken, other than for sowing

1207 10 90 // Palm nuts and kernels, whether or not broken, other than for sowing

1207 20 90 // Cotton seeds, whether or not broken, other than for sowing

1207 30 90 // Castor oil seeds, whether or not broken, other than for sowing

1207 40 90 // Sesamum seeds, whether or not broken, other than for sowing

1207 50 90 // Mustard seeds, whether or not broken, other than for sowing

1207 60 90 // Safflower seeds, whether or not broken, other than for sowing

1207 91 90 // Poppy seeds, whether or not broken, other than for sowing

ex 1207 92 98 // Shea nuts (Karite nuts), whether or not broken, other than for sowing

1207 99 91 // Hemp seeds, whether or not broken, other than for sowing

ex 1207 99 98 // Other oilseeds and oleaginous fruits, whether or not broken, other than for sowing

1208 // Flours and meals of oil seeds or oleaginous fruits, other than those of mustard"

(2) After the description of the goods under CN code 1503 00 ("Lard stearin, lard oil, oleostearin, oleo-oil and tallow oil, not emulsified or mixed or otherwise prepared"), the following is inserted:

"15 04 // Fats and oils and their fractions, of fish or marine mammals, whether or not refined, but not chemically modified

15 07 // Soya-bean oil and its fractions, whether or not refined, but not chemically modified

15 08 // Ground-nut oil and its fractions, whether or not refined, but not chemically modified

15 11 // Palm oil and its fractions, whether or not refined, but not chemically modified

15 12 // Sunflower seed, safflower or cotton-seed oil and their fractions, whether or not refined, but not chemically modified

15 13 // Coconut (copra), palm kernel or babassu oil and fractions thereof, whether or not refined, but not chemically modified

15 14 // Rape, colza or mustard oil and fractions thereof, whether or not refined, but not chemically modified

ex 1515 // Other fixed vegetable fats and oils (excluding jojoba oil: 1515 90 15) and their fractions, whether or not refined, but not chemically modified

ex 1516 // Animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, reesterified or elaidinised, whether or not refined, but not further prepared, (excluding hydrogenated castor oil, so called 'opalwax': 1516 20 10)

ex 1517 // Margarine, edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, other than edible fats or oils or their fractions of heading No 1516, excluding subheadings 1517 10 10, 1517 90 10 and 1517 90 93

1518 00 31

1518 00 39 // Fixed vegetable oils, fluid, mixed for technical or industrial uses other than the manufacture of foodstuffs for human consumption

1522 00 91 // Oil foots and dregs; soapstocks, resulting from the treatment of fatty substances or animal or vegetable waxes, excluding those containing oil having the characteristics of olive oil

1522 00 99 // Other residues resulting from the treatment of fatty substances or animal or vegetable waxes, excluding those containing oil having the characteristics of olive oil"

(3) After the description of the goods under CN code 2302 50 00 ("- of leguminous plants"), the following is inserted:

"2304 00 00 // Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya-bean oil

2305 00 00 // Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of ground-not oil"

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