Proposal for a COUNCIL REGULATION adapting Regulation (EC) No 1782/2003, establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, Regulation (EC) No 1786/2003 on the common organisation of the market in dried fodder, and Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) by reason of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia to the European Union

(presented by the Commission)

EXPLANATORY MEMORANDUM

cap reform and enlargement adaptation exercise

Introduction

On 29 September 2003, the Council adopted a CAP reform package which makes significant changes to the acquis on which the accession negotiations were based. In their current form the CAP reform texts take no account of the results of those negotiations or indeed of enlargement itself. There is therefore a need to adapt both the Act of Accession and the CAP reform texts before accession to ensure that the two are complete and compatible, i.e. to ensure that they can function in an enlarged community. Specifically, there is a need to:

- adapt the CAP-related annexes of the Act of Accession so that the negotiation results fit with the new acquis (this will be necessary where references in the Act of Accession are rendered obsolete or where the negotiation results are not immediately compatible with the reformed CAP);

- adapt the CAP reform texts so that they can be applied to the new Member States and so that they incorporate any negotiation results that would otherwise (in the future) be lost.

To achieve these two objectives, the Commission has prepared two legislative proposals (for a Decision and a Regulation respectively) which are in both cases based on the following guiding principles:

- the fundamental character and principles of the package agreed in Copenhagen should be maintained, and applied to any new elements. There should be no 'erosion' of the terms of accession negotiated by the acceding countries;

- where the CAP reform introduces new elements that were not covered during the accession negotiations on agriculture, the new Member States should be treated similarly to the current Member States, except where that conflicts with the overriding principle described above;

- adaptations should be limited to what is absolutely necessary;

- the new Member States should be integrated smoothly into the reformed CAP as soon as possible.

The present proposal sets out the adaptations to the regulations adopted in the context of the reform of the CAP which are necessary due to the accession of ten new Member States on 1 May 2004. Accordingly, the proposed regulation is based on Article 57 of the Act of Accession.

Single Payment Scheme (SPS)

In the horizontal Regulation of the CAP reform package, a new direct payment system is introduced for the EU-15: the Single Payment Scheme (SPS). As from 1 January 2005 this replaces most of the classical direct payment schemes with a single de-coupled payment per hectare. Under the standard version of the SPS, 'entitlements' to these payments are calculated on the basis of direct payments granted to the farmer in question during a reference period (2000-2002), so the value of the entitlement (per hectare) will differ between farmers. The number of entitlements granted to a farmer will however be equal to the average number of hectares on his or her farm that gave rights, during the reference period, to the direct payments concerned. Within the SPS Member States are given various options as to implementation, including the exclusion of some direct payments on a temporary basis, keeping some payments partially coupled, or implementing the payment per hectare on a regional basis.

The problem in relation to enlargement is how to apply the SPS to the new Member States, given that the latter do not have figures for farmers' entitlements during the historical reference period to be used. Using future reference periods, i.e. basing entitlements for the new Member States on the 'classical' direct payment schemes applied from 2004-2006 is ruled out, given that it would:

- be inconsistent with the treatment of the EU-15,

- lead to artificial shifts of production to sectors promising optimal accumulation of entitlements,

- force the new Member States to apply the 'classical' system until the end of 2006 and

- necessarily therefore prevent the introduction of the Single Area Payment Scheme (SAPS).

The current proposals instead provide for the compulsory application by the new Member States of the regional implementation option set out in the horizontal Regulation adapted as far as necessary. This means that:

- there would be uniform per-hectare entitlements within any one region;

- regional financial envelopes would be calculated by dividing the national envelope between regions (defined by new Member States) according to objective criteria, for example statistics on regional arable crops production, the size of the beef herd in different regions, payments during the 2004-2006 period (see above), or the existence of pre-accession national direct support in particular regions;

- individual farm entitlements would be calculated by dividing the regional envelope(s) by the regional utilised agricultural area (minus permanent crops area and forests);

- sector specific issues could be addressed by granting additional entitlements from the national reserve;

- the national reserve should be set at 3% of the national ceiling, as for the current Member States;

- data on pre-accession, EU-like direct payments could be accepted as "objective criteria" both for (i) distributing the national envelope between regions and (ii) distributing the reserve;

- the 10% option referred to in Article 69 of the horizontal Regulation would also be available to the new Member States, allowing additional resources to be channelled to farmers in specific sectors such as organic farming;

- in the event that a new Member State wished to apply partial decoupling, the determination of entitlements would follow the same rules as for the EU-15 under the regional option.

Cross-compliance

Various acceding countries negotiated transition periods on certain directives (e.g. the habitats directive), which under the CAP reform regulations become part of the cross-compliance requirements. Care is taken in the current proposals to ensure that these transition periods remain valid and that cross compliance with these particular directives will not apply to farmers in the new Member States concerned during the transition period in question.

The CAP reform introduces cross-compliance as a compulsory instrument. However, as regards SAPS, it seems appropriate to maintain the concept of facultative application of cross-compliance as it results from the relevant arrangements in the Act of Accession (see Article 1b in conjunction with Article 3 of Council Regulation (EC) No 1259/1999). Moreover, it is clear that imposing compulsory cross-compliance would complicate SAPS considerably, which should be avoided. The proposal therefore maintains the existing cross-compliance arrangement as a baseline, but makes the implementation of the new rules optional under SAPS from 2005 onwards.

Farm advisory system

Under the CAP reform package there is provision for a farm audit system. As this system only has to be in place by 2007, and as the farmers' participation will remain voluntary, no adaptation is necessary and the relevant sections of the horizontal Regulation can apply in full.

Modulation and financial discipline

In the final compromise on CAP reform a Commission declaration is included stating that: "The Commission commits itself to propose that the mechanism of financial discipline as well as modulation shall not apply in the new Member States until the phasing-in of direct payments reaches the EU level." The proposed text reflects this declaration. Since it cannot be precisely predicted when modulation will become applicable in the new Member States it is not possible at this stage to determine the ceilings referred to in Article 12(2). This should be done by the Commission according to the management procedure.

Rye compensation

Under the CAP reform, rye intervention has been abolished. To soften the effects of this decision, the following mechanism has been granted:

"In view of the structural adjustment pressures resulting from the abolition of rye intervention, the following transitional measure shall apply: If in a Member State the proportion of rye as a part of its total cereal production exceeded 5% on average during the 3 years 2000-2002 and its proportion of the total Community production of rye exceeded 50% during the same period, the amounts of modulation money generated in this Member State will be re-allocated at a level of at least 90% to the Member State concerned, until the end of the next financial perspective. In such cases, at least 10% of the modulation money has to be spent in rye producing regions. [1]"

[1] Article 10(4) of the Regulation (EC) No 1782/2003.

The above arrangement is in fact a non-issue for the new Member States as they will not be subject to modulation. It is also possible for significant rye producers amongst the new Member States to use their (significant) rural development allocation to target rye-producing regions or rye producers, with a view to encouraging diversification.

Quotas and ceilings

The CAP Reform proposals mention a series of national or Community ceilings, quota's and maximum guaranteed quantities. The proposal therefore includes adjustments in some cases to take into account the candidate countries. The various points concerned are as follows:

Article 74 of the horizontal Regulation and Annex X: durum wheat (national base areas)

Cyprus and Hungary are added to the list of beneficiary countries and in Annex X the traditional production zones in Cyprus and Hungary are included. The figures in question have already been fixed in the accession negotiations and so the adaptation in this case is straightforward.

Article 78 of the horizontal Regulation: protein crops (maximum guaranteed area)

The MGA for the EU-15 is 1 400 000 ha. This is increased proportionally for the 10 new Member States, on the basis of the statistics used in the accession negotiations for the arable crop scheme. This implies an increase of 200 000 ha.

Articles 80 and 81 of the horizontal Regulation: rice (aid and national base area)

In Article 80, slight variations in the national base areas of the current MS have been introduced. For the new MS, only Hungary is concerned and there appears no reason to modify the negotiated base area (i.e. 3 222 ha). The proposals therefore make no changes in this area.

In Article 80, the aid for Hungary is fixed on the basis of the reference yield agreed in the accession negotiations, meaning at 548,7 EUR/ha for the marketing year 2004/05 and at 232,5 EUR/ha from the marketing year 2005/06.

Article 84 of the horizontal Regulation: nuts (MGA and NGA)

The MGA of 800 000 ha is divided into national guaranteed areas (NGA). The proposals therefore set NGAs for the new MS and increase the MGA accordingly to take into account their production. The same 20% reduction has been applied as was used for the current Member States.

Article 89 of the horizontal Regulation: Energy crops (maximum guaranteed area)

A MGA of 1 500 000 ha was established by the CAP reform proposals, based on approximate data, largely covering the areas currently sown in energy crops. Originally the purpose of this aid was to compensate for the abolition of non-food set-aside. However, as the non-food set-aside has been re-introduced in the final CAP reform texts, the attractiveness of this scheme decreases and an overshooting of the MGA becomes unlikely. The current proposals therefore maintain the MGA as agreed in the CAP reform.

Article 56(3) of the horizontal Regulation: Non-food set-aside (forecast quantities covered by contracts)

A limit of 1 million metric tonnes expressed in soya bean meal equivalents has been set for quantities of by-products for feed or food uses as a result of the cultivation of oilseeds on land set-aside. This limit is subject to the Blair House agreement, meaning that any change would need to be negotiated with the US. For this reason the agreed limit is maintained in the proposals rather than adjusted.

Other adaptations

From Article 95 of the horizontal Regulation onwards (existing direct payments), all the tables with ceilings, global amounts or NGA are adapted in these proposals to include the negotiating results achieved by the new Member States.

Additional direct payment in dairy sector

Slovenia and Poland have obtained a transitional period of 1 year for the allocation of individual milk quotas. This raises the question of what to use in those countries as the basis for granting the new-coupled dairy payments in 2004. The answer for Poland is straightforward: as Poland has announced its intention to apply SAPS, the dairy payments will already be included in the national SAPS envelope. For Slovenia, which is likely to opt for the 'classical' direct payments system, the Commission proposes that payments be granted on the basis of the provisionally allocated quotas or on the basis of the milk delivered.

Rural development

In view of the short programming period the Act of Accession introduced the possibility to integrate a "LEADER+ type measure" in the mainstream programmes, instead of having a separate LEADER+ programming. Therefore the measure "management of integrated rural development strategies by local partnerships" introduced by the CAP reform is not needed for the new Member States as it is covered by the LEADER+ type measure.

Proposal for a COUNCIL REGULATION adapting Regulation (EC) No 1782/2003, establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, Regulation (EC) No 1786/2003 on the common organisation of the market in dried fodder, and Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) by reason of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia to the European Union

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to the Treaty of Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia, and in particular Article 2(3) thereof,

Having regard to the Act of Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia and in particular Article 57(2) thereof,

Having regard to the proposal from the Commission [2],

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

Whereas:

(1) Council Regulation (EC) No 1782/2003 [3] introduced common rules for direct support schemes under the common agricultural policy and established certain support schemes for farmers.

[3] OJ L 270, 21.10.2003, p. 1.

(2) The said common rules and support schemes should be amended to allow their implementation in the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia (hereinafter "the new Member States").

(3) With a view to the introduction of modulation in the new Member States the Commission should establish national ceilings for the additional amount of aid for the new Member States.

(4) The farmers in the new Member States will receive direct payments, following a phasing-in mechanism. In order to achieve the proper balance between policy tools designed to promote sustainable agriculture and those designed to promote rural development, the system of modulation should not be applied in the new Member States until the level of direct payments applicable in the new Member States is at least equal to the level applicable in the Community as constituted on 30 April 2004.

(5) Taking into account the levels of direct payments for farmers in the new Member States as a result of phasing-in, the instrument of financial discipline should not apply in the new Member States until the level of direct payments applicable in the new Member States is at least equal to the level applicable in the Community as constituted on 30 April 2004.

(6) Direct payments under the single payment scheme are based on reference amounts of direct payments that were received in the past or on regionalised per hectare payments. Farmers in the new Member States did not receive Community direct payments and have no historical references for the calendar years 2000, 2001 and 2002. Therefore, the single payment scheme in the new Member States should be based on regionalised per hectare payments, subdivided between regions according to objective criteria and divided by the farmers whose holdings are located in the region concerned and that meet the eligibility criteria.

(7) The amount of direct payments, described in national ceilings, under the single payment scheme for the new Member States should be based on the quota, ceilings and quantities that were agreed in the accession negotiations multiplied by the relevant aid amounts per hectare, head or tonne.

(8) As of 1 April 2005 the market measure benefiting the production of dried fodder, as provided for in Council Regulation (EC) No 1786/2003 [4], is amended. From that date the market support is partially turned into a direct payment which will benefit farmers. In order to avoid a decrease in overall support in 2005 for the new Member States, it is appropriate to derogate from the general principle of phasing-in of direct payments. Therefore, the dried fodder related component in the single payment scheme national ceiling should be calculated at the 100% aid level instead of at the phasing-in aid level.

[4] OJ L 270, 21.10.2003, p. 114.

(9) Under the regionalised option for the single payment scheme the new Member States should have the possibility to adjust the premium per hectare on the basis of objective criteria in order to ensure equal treatment between farmers and to avoid market distortions.

(10) The new Member States should have the possibility to partially implement and/or to exclude certain sectors from the single payment scheme.

(11) The sectoral ceilings for partial implementation and/or the exclusion of certain sectors of the single payment scheme should be based on the quota, ceilings and quantities that were agreed in the accession negotiations.

(12) The transition from the single area payment scheme to the single payment scheme and other aid schemes may give rise to difficulties of adaptation which are not dealt with in this Regulation. In order to deal with that eventuality, a general provision should be included in Regulation (EC) No 1782/2003 enabling the Commission to adopt the transitional measures necessary for a certain period.

(13) In view of the short programming period the Act of Accession introduced the possibility to integrate a "LEADER+ type measure" in the mainstream programmes, instead of having a separate LEADER+ programming. Therefore the measure "management of integrated rural development strategies by local partnerships" introduced in Council Regulation (EC) No 1257/1999 [5] is not needed for the new Member States as it is covered by the LEADER+ type measure.

[5] OJ L 160, 26.6.1999, p. 80. Regulation as last amended by Regulation (EC) No 1783/2003 (OJ L 270, 21.10.2003, p. 70).

(14) Regulations (EC) No 1782/2003, (EC) No 1786/2003 and (EC) No 1257/1999 should therefore be amended accordingly,

HAS ADOPTED THIS REGULATION:

Article 1

Council Regulation (EC) No 1782/2003 is adapted as follows:

1. In Article 5(2) the following sentence is added at the end of the first subparagraph:

"The new Member States shall ensure that land which was under permanent pasture on 30 June 2003 is maintained under permanent pasture."

2. In Article 12 the following paragraph (5) is added:

"5. For the new Member States the ceilings referred to in paragraph 2 shall be fixed by the Commission in accordance with the procedure referred to in Article 144(2)."

3. After Article 12 the following Article 12a is inserted:

"Article 12a Application to new Member States

The provisions of this Chapter shall apply to the new Member States as from the calendar year in respect of which the level of direct payments applicable in the new Member States in accordance with Article 143a is at least equal to the then applicable level of such payments in the Community as constituted on 30 April 2004."

4. In Article 54(2) the following sentence is added at the end of the first subparagraph:

"For the new Member States, the reference to the date provided for the area aid applications for 2003 shall be construed as a reference to 30 June 2003."

5. In Title III the following Chapter 6 is added:

"Chapter 6

Implementation in the new Member States

Article 71a

1. Save as otherwise provided for in this Chapter the provisions of this Title shall apply to the new Member States.

Articles 33, 34, 37, 38, 39, 40(1), (2), (3) and (5), 41, 42, 43, 47 to 50, 53 and 58 to 63 shall not apply.

2. Any new Member State applying the single area payment scheme shall take the decisions referred to in Article 64(1), 71(1) and (2) by 1 August of the year preceding that in respect of which it will apply the single area payment scheme for the first time.

Article 71b Application for support

1. Farmers shall apply for support under the single payment scheme by a date, to be fixed by the new Member States, but not later than 15 May.

2. Except in case of force majeure and exceptional circumstances within the meaning of Article 40(4), no entitlements shall be allocated to farmers, if they do not apply for the single payment scheme by 15 May of the first year of application of the single payment scheme.

3. The amounts corresponding to entitlements not allocated shall revert to the national reserve referred to in Article 71d and shall be available for reallocation.

Article 71c Ceiling

The national ceilings of the new Member States shall be those listed in Annex VIIIa.

Article 71d National reserve

1. Each new Member State shall proceed to a linear percentage reduction of its national ceiling in order to constitute a national reserve. This reduction shall not be higher than 3%, without prejudice to the application of Article 71b(3).

2. The new Member States shall use the national reserve for the purpose of allocating, according to objective criteria and in such a way as to ensure equal treatment between farmers and to avoid market and competition distortions, payment entitlements to farmers finding themselves in a special situation, to be defined by the Commission in accordance with the procedure referred to in Article 144(2).

3. During the first year of application of the Single payment scheme, the new Member States may use the national reserve for the purpose of allocating payment entitlements, according to objective criteria and in such a way as to ensure equal treatment between farmers and to avoid market and competition distortions, to farmers in specific sectors, finding themselves in a special situation as a result of the transition to the single payment scheme. Such payment entitlements shall be distributed according to rules to be defined by the Commission in accordance with the procedure referred to in Article 144(2).

4. The new Member States shall proceed to linear reductions of the entitlements in case their national reserve is not sufficient to cover the cases referred to in paragraphs 2 and 3.

5. Except in case of transfer by actual or anticipated inheritance and by way of derogation from Article 46, the entitlements established using the national reserve shall not be transferred for a period of five years starting from their allocation.

By way of derogation from Article 45(1), any entitlement which has not been used during each year of the five-year period shall revert immediately to the national reserve.

Article 71e Regional allocation of the ceiling referred to in Article 71c

1. The new Member States shall apply the single payment scheme at regional level.

2. The new Member States shall define the regions according to objective criteria.

New Member States with less than three million eligible hectares may be considered as one single region.

3. Each new Member State shall subdivide its national ceiling referred to in Article 71c after any reduction under Article 71d between the regions according to objective criteria.

Article 71f Regionalisation of the single payment scheme

1. All farmers whose holdings are located in a given region shall receive entitlements, whose unit value is calculated by dividing the regional ceiling established under Article 71e by the number of eligible hectares within the meaning of Article 44(2), established at regional level.

2. The number of entitlements per farmer shall be equal to the number of hectares he declares in accordance with Article 44(2) the first year of application of the single payment scheme, except in case of force majeure or exceptional circumstances within the meaning of Article 40(4).

Article 71 g Use of the land

1. Farmers may, by way of derogation from Article 51 and in accordance with the provisions of this Article, also use the parcels declared according to Article 44(3) for the production of products referred to in Article 1(2) of Council Regulation (EC) No 2200/96 [6], in Article 1(2) of Council Regulation (EC) No 2201/96 [7] and potatoes other than those intended for the manufacture of potato starch for which aid is granted under Article 93 of this Regulation, except permanent crops.

[6] OJ L 297, 21.11.1996, p. 1.

[7] OJ L 297, 21.11.1996, p. 29.

2. The new Member States shall establish the number of hectares that may be used according to paragraph 1 by subdividing, according to objective criteria, the average of the number of hectares that were used for the production of the products referred to in paragraph 1 at national level during the three-year period 2000-2002 amongst the regions defined pursuant to Article 71e(2). The average number of hectares at national level and the number of hectares at regional level shall be fixed by the Commission in accordance with the procedure referred to in Article 144(2) on the basis of the data communicated by the new Member State.

3. Within the limit established according to paragraph 2 for the region concerned, a farmer shall be allowed to make use of the option referred to in paragraph 1 :

(a) within the limit of the number of hectares that he used for the production of the products referred to in paragraph 1 in 2003;

(b) by way of derogation from Article 71a(2), in case of application, mutatis mutandis, of Articles 40 and 42(4), within the limit of a number of hectares to be established according to objective criteria and in such a way as to ensure equal treatment between farmers and to avoid market and competition distortions.

4. Within the limit of the number of hectares that remain available after application of paragraph 3, farmers shall be allowed to produce the products referred to in paragraph 1 on a number of hectares other than the number of hectares falling under paragraph 3 within the limit of a number of hectares used for the production of the products referred to in paragraph 1 in 2004 and/or 2005, whereby priority shall be given to the farmers who produced the products already in 2004 within the limit of the number of hectares used in 2004.

In case of application of Article 71 or Article 143b, 2004 and 2005 shall be replaced by, respectively, the year previous to the year of application of the single payment scheme and the year of application itself.

5. In order to establish the individual limits referred to in paragraphs 3 and 4, new Members States shall use the farmer's individual data, where available, or any other evidence at their satisfaction provided by the farmer.

6. The number of hectares for which the authorisation has been established according to paragraphs 3 and 4 shall in no case exceed the number of eligible hectares as defined in Article 44(2) declared in the first year of application of the single payment scheme.

7. The authorisation shall be used, within the region concerned, with the corresponding payment entitlement.

8. The report referred to in Article 60 shall also relate to the new Member States.

Article 71h Grassland

The new Member States may also, according to objective criteria, fix, within the regional ceiling or part of it, different per unit values of entitlements to be allocated to farmers referred to in Article 71f(1), for hectares under grassland as identified on 30 June 2003 and for any other eligible hectare or alternatively for hectares under permanent pasture as identified on 30 June 2003 and for any other eligible hectare.

Article 71i Dairy premium and additional payments

Starting from 2007 and by way of derogation from Articles 44 and 71f, the amounts resulting from dairy premium and additional payments, provided for in Articles 95 and 96 and to be granted in 2007 shall be included in the single payment scheme.

However, new Member States may decide that the amounts resulting from dairy premiums and additional payments, provided for in Articles 95 and 96, shall be included, in part or in full, in the single payment scheme starting from 2005. Entitlements established under this paragraph shall be modified accordingly.

The amount used for the establishment of entitlements in respect of those payments shall be equal to the amounts to be granted according to Articles 95 and 96 calculated on the basis of the individual reference quantity for milk available on the holding on 31 March of the year of inclusion, in part or in full, of those payments in the single payment scheme.

By way of derogation from Article 71a(1), Articles 48, 49 and 50 shall apply mutatis mutandis.

Article 71j Set-aside entitlements

1. Farmers shall receive part of their payment entitlements in the form of set-aside entitlements.

2. The number of set-aside entitlements shall be established by multiplying the farmer's eligible land within the meaning of Article 54(2) declared in the first year of application of the single payment scheme with the applicable set-aside rate.

The set-aside rate shall be calculated by multiplying the basic rate of compulsory set-aside of 10% by the proportion, in the region concerned, between the regional base area or areas referred to in Article 101, third paragraph, and the eligible land within the meaning of Article 54(2).

3. The value of the set-aside entitlements shall be the regional value for payment entitlements as established according to Article 71f(1).

4. Paragraphs 1 to 3 shall not apply to farmers who declare less than a number of hectares within the meaning of Article 54(2) which would be needed to produce a number of tons equal to 92 tons of cereals as defined in Annex IX on the basis of the reference yield referred to in Annex XIb applicable to the new Member State where the holding is located, divided by the proportion referred to in the second subparagraph of paragraph 2.

Article 71k Conditions for the entitlements

1. By way of derogation from Article 46(1), entitlements established under this Chapter may only be transferred within the same region or between regions where the entitlements per hectare are the same.

2. New Member States may also decide, by 1 August of the year preceding the first year of application of the single payment scheme at the latest, and acting in compliance with the general principle of Community law, that entitlements established under this Chapter shall be subject to progressive modifications according to pre-established steps and objective criteria.

Article 71l Optional implementation

1. Sections 2, 3 and 4 of Chapter 5 shall apply to the new Member States under the conditions laid down in this Article. However, Section 4 shall not apply to new Member States applying the single area payment scheme referred to in Article 143b.

2. Any reference in Sections 2 and 3 of Chapter 5 to Article 41, in particular with regard to the national ceiling(s), shall be construed as a reference to Article 71c.

3. The report referred to in Article 64(3) shall include the options laid down in this Chapter."

6. Article 74(1) is replaced by the following:

"1. The aid shall be granted for national base areas in the traditional production zones listed in Annex X.

The base area shall be as follows:

Greece // 617 000 ha

Spain // 594 000 ha

France // 208 000 ha

Italy // 1 646 000 ha

Cyprus // 6 183 ha

Hungary // 2 500 ha

Austria // 7 000 ha

Portugal // 118 000 ha."

7. Article 78(1) is replaced by the following:

"1. A maximum guaranteed area of 1 600 000 ha for which the aid may be granted is hereby established."

8. Article 80(2) is replaced by the following:

"2. The aid shall be as follows, according to the yields in the Member States concerned:

>TABLE POSITION>

9. Article 81 is replaced by the following:

"Article 81 Areas

A national base area for each producing Member State is hereby established. However, for France two base areas are established. The base areas shall be as follows:

Greece // 20 333 ha

Spain // 104 973 ha

France: -- metropolitan territory -- French Guyana // 19 050 ha 4 190 ha

Italy // 219 588 ha

Hungary // 3 222 ha

Portugal // 24 667 ha.

A Member State may subdivide its base area or areas into sub-base areas in accordance with objective criteria."

10. Article 84 is replaced by the following:

"Article 84 Areas

1. A Member State shall grant the Community aid within the limit of a ceiling calculated by multiplying the number of hectares of its NGA as fixed in paragraph 3 by the average amount of EUR 120,75.

2. A maximum guaranteed area of 810 400 ha is hereby established.

3. The maximum guaranteed area referred to in paragraph 2 shall be divided into the following NGA:

National Guaranteed Areas (NGA)

Belgium // 100 ha

Germany // 1 500 ha

Greece // 41 100 ha

Spain // 568 200 ha

France // 17 300 ha

Italy // 130 100 ha

Cyprus // 3 100 ha

Luxembourg // 100 ha

Hungary // 2 900 ha

Netherlands // 100 ha

Austria // 100 ha

Poland // 1 000 ha

Portugal // 41 300 ha

Slovenia // 300 ha

Slovakia // 3 100 ha

United Kingdom // 100 ha

4. A Member State may subdivide its NGA into sub-areas in accordance with objective criteria, in particular at regional level or in relation to the production."

11. Article 90 is replaced by the following:

"Article 90 Conditions for eligibility

The aid shall be granted only in respect of areas whose production is covered by a contract between the farmer and the processing industry, except in case of processing undertaken by the farmer himself on the holding.

Areas which have been subject to an application for energy crops scheme may not be counted as being set aside for the purposes of the set-aside requirement indicated in Article 6(1) of Regulation (EC) No 1251/1999 and in Articles 54(2), 63(2), 71j and 107(1) of this Regulation."

12. Article 94 is replaced by the following:

"Article 94 Conditions

The aid shall be paid only in respect of the quantity of potatoes covered by a cultivation contract between the potato producer and the starch manufacturer within the limit of the quota allocated to such undertaking, as referred to in Article 2(2) or 2(4) of Regulation (EC) No 1868/94."

13. Article 99(3) is replaced by the following:

"3. The amount of aid claimed shall not exceed a ceiling, fixed by the Commission in accordance with Article 64(2), corresponding to the component of seed aids for the species concerned in the national ceiling referred to in Article 41. However, for the new Member States this ceiling shall correspond with the amounts mentioned in Annex XIa.

When the total amount of aid claimed exceeds the fixed ceiling, the aid per farmer shall be reduced proportionately in that year."

14. In Article 101, the following paragraph is added after the second paragraph:

"However, the regional base area or areas in the new Member States shall be fixed by the Commission in accordance with the procedure referred to in Article 144(2) and within the limits of the national base areas listed in Annex XIb."

15. In Article 103, the following paragraph is added after the first paragraph:

"Alternatively, for any new Member State applying the single area payment scheme referred to in Article 143b in 2004 and opting for the application of Article 66, the regionalisation plan shall be established, according to objective criteria, not later than 1 August of the last year of application of the single area payment scheme. Where this is done, the combined regional base areas and the weighted average reference yield in the regions shall respect the limits of the national base area and reference yield as listed in Annex XIb."

16. Article 105 is replaced by the following:

"Article 105 Durum wheat supplement

1. A supplement to the area payment of

- EUR 291/ha for the marketing year 2005/06

- EUR 285/ha for the marketing year 2006/07 and onwards

shall be paid for the area down to durum wheat in the traditional production zones listed in Annex X, subject to the following limits:

// (hectares)

Greece // 617 000

Spain // 594 000

France // 208 000

Italy // 1 646 000

Cyprus // 6 183

Hungary // 2 500

Austria // 7 000

Portugal // 118 000

2. Should the total of the areas for which a supplement to the area payment is claimed be greater than the limit referred to above during the course of a marketing year, the area per farmer for which the supplement may be paid shall be reduced proportionately.

However, subject to the limits per Member State laid down in paragraph 1, Member States may distribute the areas indicated in that paragraph among the production zones as defined in Annex X, or, for the Member States of the Community as constituted on 30 April 2004, if necessary, the production regions of the regionalisation plan, according to the extent of the production of durum wheat during the period 1993 to 1997. Where this is done, should the total of the areas within a region for which a supplement to the area payment is requested be greater than the corresponding regional limit during the course of a marketing year, the area per farmer in that production region for which the supplement may be paid shall be reduced proportionately. The reduction shall be made when, within a Member State the areas in regions, which have not reached their regional limits, have been distributed to regions in which those limits have been exceeded.

3. In regions where the production of durum wheat is well established, other than those referred to in Annex X, special aid amounting to EUR 46/ha for the marketing year 2005/06 shall be granted up to a limit of the following number of hectares:

// (hectares)

Germany // 10 000

Spain // 4 000

France // 50 000

Italy // 4 000

Hungary // 4 305

Slovakia // 4 717

United Kingdom // 5 000"

//

17. Article 108 is replaced by the following:

"Article 108 Eligible land

Applications for payments may not be made in respect of land which, at the date provided for the area aid applications for 2003, was under permanent pasture, permanent crops or trees or was used for non-agricultural purposes.

For the new Member States, applications for payments may not be made in respect of land which, on 30 June 2003, was under permanent pasture, permanent crops or trees or was used for non-agricultural purposes.

Member States may, on terms to be determined in accordance with the procedure referred to in Article 144(2), derogate from the first or second subparagraph of this Article provided that they take action to prevent any significant increase in the total eligible agricultural area."

18. Article 116(2) is replaced by the following:

"2. Member States shall take the necessary measures to ensure that the sum of premium rights on their territory does not exceed the national ceilings set out in paragraph 4 of this Article and that the national reserves referred to in Article 118 may be maintained. The new Member States shall allocate individual ceilings to producers and shall set up the national reserves from the overall number of rights to the premium reserved for each of these new Member States as set out in paragraph 4, no later than one year after the date of accession."

19. Article 116(4) is replaced by the following:

"4. The following ceilings shall apply:

Member State // Rights (x 1 000)

Belgium // 70

Czech Republic // 66,733

Denmark // 104

Germany // 2 432

Estonia // 48

Greece // 11 023

Spain // 19 580

France // 7 842

Ireland // 4 956

Italy // 9 575

Cyprus // 472,401

Latvia // 18,437

Lithuania // 17,304

Luxembourg // 4

Hungary // 1 146

Malta // 8,485

Netherlands // 930

Austria // 206

Poland // 335,88

Portugal* // 2 690

Slovenia // 84,909

Slovakia // 305,756

Finland // 80

Sweden // 180

United Kingdom // 19 492

Total // 81 667,905

* To be adjusted at the expiry of Regulation (EEC) No 1017/94."

20. Article 119(3) is replaced by the following:

"3. The following global amounts shall apply:

(thousands EUR)

Belgium // 64

Czech Republic // 71

Denmark // 79

Germany // 1 793

Estonia // 51

Greece // 8 767

Spain // 18 827

France // 7 083

Ireland // 4 875

Italy // 6 920

Cyprus // 441

Latvia // 19

Lithuania // 18

Luxembourg // 4

Hungary // 1 212

Malta // 9

Netherlands // 743

Austria // 185

Poland // 355

Portugal // 2 275

Slovenia // 86

Slovakia // 323

Finland // 61

Sweden // 162

United Kingdom // 20 162"

21. In Article 119, the following paragraph (4) is added:

"4. In the new Member States, the global amounts shall be applied in accordance with the schedule of increments as set out in Article 143a."

22. Article 123(8) is replaced by the following:

"8. The following regional ceilings shall apply:

Belgium // 235 149

Czech Republic // 244 349

Denmark // 277 110

Germany // 1 782 700

Estonia // 18 800

Greece // 143 134

Spain // 713 999*

France // 1 754 732**

Ireland // 1 077 458

Italy // 598 746

Cyprus // 12 000

Latvia // 70 200

Lithuania // 150 000

Luxembourg // 18 962

Hungary // 94 620

Malta // 3 201

Netherlands // 157 932

Austria // 373 400

Poland // 926 000

Portugal // 175 075*** ****

Slovenia // 92 276

Slovakia // 78 348

Finland // 250 000

Sweden // 250 000

United Kingdom // 1 419 811*****

* Without prejudice to the specific rules laid down in Regulation (EC) No 1454/2001.

** Without prejudice to the specific rules laid down in Regulation (EC) No 1452/2001.

*** Without prejudice to the specific rules laid down in Regulation (EC) No 1453/2001.

**** To be adjusted at the expiry of Regulation (EEC) No 1017/94.

***** This ceiling shall be temporarily increased by 100 000 to 1 519 811 until such time as live animals under six months of age may be exported."

23. Article 126(1) is replaced by the following:

"1. An aid shall be granted to each farmer of suckler cow within the limit of the individual ceilings established in application of Article 7 of Regulation (EC) No 1254/1999 or of the second sub-paragraph of paragraph 2."

24. Article 126(2) is replaced by the following:

"2. Member States shall take the necessary steps to ensure that the sum of premium rights on their territory does not exceed the national ceilings set out in paragraph 5 and that the national reserves referred to in Article 128 may be maintained.

The new Member States shall allocate individual ceilings to producers and shall set up the national reserves from the overall number of rights to the premium reserved for each of these Member States as set out in paragraph 5, no later than one year after the date of accession."

25. Article 126(5) is replaced by the following:

"5. The following national ceilings shall apply:

Belgium // 394 253

Czech Republic * // 90 300

Denmark // 112 932

Germany // 639 535

Estonia * // 13 416

Greece // 138 005

Spain** // 1 441 539

France*** // 3 779 866

Ireland // 1 102 620

Italy // 621 611

Cyprus * // 500

Latvia * // 19 368

Lithuania * // 47 232

Luxembourg // 18 537

Hungary* // 117 000

Malta* // 454

Netherlands // 63 236

Austria // 375 000

Poland * // 325 581

Portugal**** ***** // 416 539

Slovenia * // 86 384

Slovakia * // 28 080

Finland // 55 000

Sweden // 155 000

United Kingdom // 1 699 511

* Applicable from the date of accession

** Without prejudice to the specific rules laid down in Regulation (EC) No 1454/2001.

*** Without prejudice to the specific rules laid down in Regulation (EC) No 1452/2001.

**** Without prejudice to the specific rules laid down in Regulation (EC) No 1453/2001.

***** To be increased at the expiry of Regulation (EEC) No 1017/94 by the premiums resulting from the application of that Regulation in 2003 and 2004."

26. In Article 130(3) the following subparagraph is added:

"For the new Member States the national ceilings shall be those contained in the following table.

>TABLE POSITION>

27. Article 133(3) is replaced by the following:

"3. The following global amounts shall apply:

(million EUR)

Belgium // 39,4

Czech Republic // 8,776017

Denmark // 11,8

Germany // 88,4

Estonia // 1,13451

Greece // 3,8

Spain // 33,1

France // 93,4

Ireland // 31,4

Italy // 65,6

Cyprus // 0,308945

Latvia // 1,33068

Lithuania // 4,942267

Luxembourg // 3,4

Hungary // 2,936076

Malta // 0,0637

Netherlands // 25,3

Austria // 12,0

Poland // 27,3

Portugal // 6,2

Slovenia // 2,964780

Slovakia // 4,500535

Finland // 6,2

Sweden // 9,2

United Kingdom // 63,8 "

28. In Article 135(1) the following indent is added to the first subparagraph:

" for the new Member States: equal to the ceilings set out in Article 123(8) or equal to the average number of slaughterings of male bovine animals during the years 2001, 2002 and 2003 deriving from Eurostat statistics for these years or any other published official statistical information for these years accepted by the Commission."

29. In Article 135(4), the following sentence is added:

"For the new Member States the reference years shall be 2001, 2002 and 2003."

30. In Article 136(2), the following sentence is added to the second sub-paragraph:

"For the new Member States the reference years shall be 1999, 2000 and 2001."

31. After Article 136, the following new Article 136a is inserted:

"Article 136a Conditions of application in the new Member States

In the new Member States, the global amounts referred to in Article 133(3) and the maximum area payment per hectare at EUR 350 referred to in Article 136(3) shall be applied in accordance with the schedule of increments as set out in Article 143a."

32. In Article 139, the following sentence is added at the first subparagraph:

"However, for the new Member States, the ceiling fixed by the Commission in accordance with Article 64(2) shall correspond to the component of each of the direct payments concerned in the ceiling referred to in Article 71c."

33. Article 143 is replaced by the following:

"Article 143 Ceiling

The sum of the aid claimed shall not be higher than a ceiling, fixed by the Commission in accordance with Article 64(2), corresponding to the component of grain legumes area payments referred to in Annex VI in the national ceiling referred to in Article 41. However, for the new Member States the ceiling fixed by the Commission in accordance with Article 64(2) shall correspond to the component of grain legumes area payments referred to in Annex VI in the national ceiling referred to in Article 71c.

When the total amount of aid claimed exceeds the fixed ceiling, the aid per farmer shall be reduced proportionately in that year."

34. In Article 145, point (d) is replaced by the following:

"(d) with regard to the single payment scheme, detailed rules relating in particular to the establishment of national reserve, the transfer of entitlements, the definition of permanent crops, permanent pastures and grassland, the options provided for in Chapters 5 and 6 of Title III and the list of crops allowed on the set-aside land as well as detailed rules relating to compliance with the Memorandum of Understanding on certain oil seeds between the European Economic Community and the United States of America within the framework of the GATT approved by Decision 93/355/EEC.*

* OJ L 147, 18.6.1993, p. 25."

35. In Article 145, point (i) is replaced by the following:

"(i) such amendments to Annexes II, VI, VII, IX, X and XI as may become necessary taking into account, in particular new Community legislation and, as far as it concerns Annex VIII and Annex VIIIa, in case of application of respectively Article 62 and Article 71i and, as the case may be, in function of the information communicated by the Member States in relation to the part of the reference amounts corresponding to the payments for arable crops, as well as the amounts of the ceilings themselves, to be increased in function of the difference between the area actually determined and the area for which premiums were paid for arable crops in 2000 and 2001, in application of Article 9(2) and (3) of Commission Regulation (EEC) No 3887/92**, within the limit of the base areas (or maximum guaranteed area for durum wheat) and taking into account the average national yield used for the calculation of Annex VIII.

** OJ L 327, 12.12.2001, p. 11."

36. In Article 145, point (q) is replaced by the following:

"(q) measures which are both necessary and duly justified to resolve, in an emergency, practical and specific problems, in particular those related to the implementation of Chapter 4 of Title II and Chapters 5 and 6 of Title III. 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."

37. Article 146 is replaced by the following:

"Article 146 Transmission of information to the Commission

Member States shall inform the Commission in detail of the measures taken to implement this Regulation and, in particular, those relating to Articles 5, 13, 42, 58, 71d and 71e."

38. The following Article 154a is added after Article 154:

"Article 154a Transitional arrangements for new Member States

1. Where transitional measures are necessary in order to facilitate, for the new Member States, the transition from the single area payment scheme to the single payment scheme and other aid schemes referred to in Titles III and IV, such measures shall be adopted in accordance with the procedure laid down in Article 144(2).

2. The measures referred to in paragraph 1 may be adopted during a period starting on 1 May 2004 and expiring on 30 June 2009 and shall not apply beyond that date. The Council, acting by a qualified majority on a proposal from the Commission, may extend that period."

39. The following Annex VIIIa is added after Annex VIII:

"Annex VIIIa National ceilings referred to in Article 71c

The ceilings have been calculated taking account of the schedule of increments provided for in Article 143a. Therefore, those ceilings shall not be reduced to take Article 143a into account.

>TABLE POSITION>

40. Annex X shall be completed by the following entries:

"CYPRUS

HUNGARY

Regions

Dél Dunamenti síkság Dél-Dunántúl Közép-Alföld Mezaföld Berettyo-Karös-Maros vidéke".

41. The following Annexes XIa and XIb shall be inserted after Annex XI:

"Annex XIa Seed aid ceilings in the new Member States referred to in Article 99(3)

>TABLE POSITION>

Annex XIb National arable crops base areas and reference yields in the new Member States referred to in Article 101 and 103

>TABLE POSITION>

Article 2

Article 5(2) of Regulation (EC) No 1786/2003 on the common organisation of the market in dried fodder is replaced by the following:

"2. The maximum guaranteed quantity provided for in paragraph 1 shall be divided among the Member States as follows:

Guaranteed national quantity // (tonnes)

Belgo-Luxembourg Economic Union (BLEU) // 8 000

Czech Republic // 27 942

Denmark // 334 000

Germany // 421 000

Greece // 37 500

Spain // 1 325 000

France // 1 605 000

Ireland // 5 000

Italy // 685 000

Lithuania // 650

Hungary // 49 593

Netherlands // 285 000

Austria // 4 400

Poland // 13 538

Portugal* // 30 000

Slovakia // 13 100

Finland // 3 000

Sweden // 11 000

United Kingdom // 102 000

* To be adjusted at the expiry of Regulation (EEC) No 1017/94 "

Article 3

In Article 33 of Regulation (EC) No 1257/1999 the following paragraph is added:

"The measure foreseen in the last indent of the second paragraph is not applicable for the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia."

Article 4

This Regulation shall enter into force on 1 May 2004 subject to the entry into force of the Treaty of Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, [...]

For the Council

The President

>TABLE POSITION>

>TABLE POSITION>