EXPLANATORY MEMORANDUM

1. CONTEXT OF THE PROPOSAL

The Commission proposal for the Multiannual Financial Framework (MFF) for 2014-2020 (the MFF proposal)[1] sets the budgetary framework and main orientations for the Common Agricultural Policy (CAP). On this basis, the Commission presents a set of regulations laying down the legislative framework for the CAP in the period 2014-2020, together with an impact assessment of alternative scenarios for the evolution of the policy.

The current reform proposals are based on the Communication on the CAP towards 2020[2] that outlined broad policy options in order to respond to the future challenges for agriculture and rural areas and to meet the objectives set for the CAP, namely 1) viable food production; 2) sustainable management of natural resources and climate action; and 3) balanced territorial development. The reform orientations in the Communication have since been broadly supported both in the inter-institutional debate[3] and in the stakeholder consultation that took place in the framework of the impact assessment.

A common theme that has emerged throughout this process is the need to promote resource efficiency with a view to smart, sustainable and inclusive growth for EU agriculture and rural areas in line with the Europe 2020 strategy, keeping the structure of the CAP around two pillars that use complementary instruments in pursuit of the same objectives. Pillar I covers direct payments and market measures providing a basic annual income support to EU farmers and support in case of specific market disturbances, while Pillar II covers rural development where Member States draw up and co-finance multiannual programmes under a common framework.[4]

Through successive reforms the CAP has increased market orientation for agriculture while providing income support to producers, improved the integration of environmental requirements and reinforced support for rural development as an integrated policy for the development of rural areas across the EU. However, the same reform process has raised demands for a better distribution of support among and within Member States, as well as calls for a better targeting of measures aiming at addressing environmental challenges and better addressing increased market volatility.

In the past, reforms mainly responded to endogenous challenges, from huge surpluses to food safety crises; they have served the EU well both on the domestic and the international front. However, most of today's challenges are driven by factors that are external to agriculture and would thus require a broader policy response.

The pressure on agricultural income is expected to continue as farmers are facing more risks, a slowdown in productivity and a margin squeeze due to rising input prices; there is therefore a need to maintain income support and to reinforce instruments to better manage risks and respond to crisis situations. A strong agriculture is vital for the EU food industry and global food security.

At the same time, agriculture and rural areas are being called upon to step up their efforts to meet the ambitious climate and energy targets and biodiversity strategy that are part of the Europe 2020 agenda. Farmers, who are together with foresters the main land managers, will need to be supported in adopting and maintaining farming systems and practices that are particularly favourable to environmental and climate objectives because market prices do not reflect the provision of such public goods. It will also be essential to best harness the diverse potential of rural areas and thus contribute to inclusive growth and cohesion.

The future CAP will not, therefore, be a policy that caters only for a small, albeit essential, part of the EU economy, but also a policy of strategic importance for food security, the environment and territorial balance. Therein lies the EU added value of a truly common policy that makes the most efficient use of limited budgetary resources in maintaining a sustainable agriculture throughout the EU, addressing important cross-border issues such as climate change and reinforcing solidarity among Member States, while also allowing flexibility in implementation to cater for local needs.

The framework set out in the MFF proposal foresees that the CAP should maintain its two-pillar structure with the budget for each pillar maintained in nominal terms at its 2013 level and with a clear focus on delivering results on the key EU priorities. Direct payments should promote sustainable production by assigning 30 % of their budgetary envelope to mandatory measures that are beneficial to climate and the environment. Payment levels should progressively converge and payments to large beneficiaries be subject to progressive capping. Rural development should be included in a Common Strategic Framework with other EU shared management funds with a reinforced outcome-orientated approach and subject to clearer, improved ex-ante conditionalities. Finally, on market measures the financing of the CAP should be reinforced with two instruments outside the MFF: 1) an emergency reserve to react to crisis situations; and 2) the extension of the scope of the European Globalization Adjustment Fund.

On this basis, the main elements of the legislative framework for the CAP during the period 2014-2020 are set out in the following regulations:

- Proposal for a Regulation of the European Parliament and of the Council establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy ('the direct payments regulation');

- Proposal for a Regulation of the European Parliament and of the Council establishing a common organisation of the markets in agricultural products (Single CMO Regulation) ('the Single CMO regulation');

- Proposal for a Regulation of the European Parliament and of the Council on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) ('the rural development regulation');

- Proposal for a Regulation of the European Parliament and of the Council on the financing, management and monitoring of the common agricultural policy ('the horizontal regulation');

- Proposal for a Council regulation determining measures on fixing certain aids and refunds related to the common organisation of the markets in agricultural products;

- Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 73/2009 as regards the application of direct payments to farmers in respect of the year 2013;

- Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1234/2007 as regards the regime of the single payment scheme and support to vine-growers.

The rural development regulation builds on the proposal presented by the Commission on 6 October 2011 that sets out common rules for all funds operating under a Common Strategic Framework[5]. A regulation will follow on the scheme for most deprived persons, for which funding is now placed under a different heading of the MFF.

In addition, new rules on the publication of information on beneficiaries taking account of the objections expressed by the Court of Justice of the European Union are also under preparation with a view to finding the most appropriate way to reconcile beneficiaries' right to protection of personal data with the principle of transparency.

2. RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENT

ON THE BASIS OF THE EVALUATION OF THE CURRENT POLICY FRAMEWORK AND AN ANALYSIS OF FUTURE CHALLENGES AND NEEDS, THE IMPACT ASSESSMENT ASSESSES AND COMPARES THE IMPACT OF THREE ALTERNATIVE SCENARIOS. THIS IS THE RESULT OF A LONG PROCESS STARTED IN APRIL 2010 AND STEERED BY AN INTER-SERVICE GROUP THAT BROUGHT TOGETHER EXTENSIVE QUANTITATIVE AND QUALITATIVE ANALYSIS, INCLUDING SETTING A BASELINE IN THE FORM OF MEDIUM-TERM PROJECTIONS FOR AGRICULTURAL MARKETS AND INCOME UP TO 2020 AND MODELLING THE IMPACT OF THE DIFFERENT POLICY SCENARIOS ON THE ECONOMICS OF THE SECTOR.

The three scenarios elaborated in the impact assessment are: 1) an adjustment scenario that continues with the current policy framework while addressing its most important shortcomings, such as the distribution of direct payments; 2) an integration scenario that entails major policy changes in the form of enhanced targeting and greening of direct payments and reinforced strategic targeting for rural development policy in better coordination with other EU policies, as well as extending the legal base for a broader scope of producer cooperation; and 3) a refocus scenario that reorients the policy exclusively towards the environment with a progressive phasing out of direct payments, assuming that productive capacity can be maintained without support and that the socio-economic needs of rural areas can be served by other policies.

Against the background of the economic crisis and the pressure on public finances, to which the EU has responded with the Europe 2020 strategy and the MFF proposal, all three scenarios attach different weight to each of the three policy objectives of the future CAP which aims at a more competitive and sustainable agriculture in vibrant rural areas. With a view to a better alignment with the Europe 2020 strategy, notably in terms of resource efficiency, it will be increasingly essential to improve agricultural productivity through research, knowledge transfer and promoting cooperation and innovation (including through the European Innovation Partnership on agricultural productivity and sustainability). Whereas EU agricultural policy does not any more operate within a trade distorting policy environment, additional pressure on the sector is expected from further liberalization, notably in the framework of the DDA or the FTA with Mercosur.

The three policy scenarios were drawn up taking into account the preferences expressed in the consultation which was conducted in the context of the impact assessment. Interested parties were invited to submit contributions between 23.11.2010 and 25.1.2011 and an advisory committee was organised on 12.1.2011.The main points are summarized below:[6]

- There is broad agreement among stakeholders on the need for a strong CAP based on a two-pillar-structure in order to address the challenges of food security, sustainable management of natural resources and territorial development.

- Most respondents find that the CAP should play a role in stabilizing markets and prices.

- Stakeholders have diverse opinions concerning the targeting of support (especially redistribution of direct aid and capping payments).

- There is agreement that both pillars can play an important role in stepping up climate action and increasing environmental performance for the benefit of EU society. Whereas many farmers believe that this already takes place today, the wider public argues that Pillar I payments can be more efficiently used.

- The respondents want all parts of the EU, including less favoured areas, to be part of future growth and development.

- The integration of the CAP with other policies, such as environmental, health, trade, development, was emphasised by many respondents.

- Innovation, development of competitive businesses and provision of public goods to EU citizens are seen as ways to align the CAP with the Europe 2020 strategy.

The impact assessment thus compared the three alternative policy scenarios:

The refocus scenario would accelerate structural adjustment in the agricultural sector, shifting production to the most cost efficient areas and profitable sectors. While significantly increasing funding for the environment, it would also expose the sector to greater risks due to limited scope for market intervention. Furthermore, it would come at a significant social and environmental cost as the less competitive areas would face a considerable income loss and environmental degradation, since the policy would lose the leverage of direct payments coupled with the cross compliance requirements.

At the other end of the spectrum, the adjustment scenario would best allow for policy continuity with limited but tangible improvements both in agricultural competitiveness and environmental performance. There are however serious doubts as to whether this scenario could adequately address the important climate and environmental challenges of the future, which also underpin the long-term sustainability of agriculture.

The integration scenario breaks new ground with enhanced targeting and greening of direct payments. The analysis shows that greening is possible at a reasonable cost to farmers although some administrative burden cannot be avoided. Similarly, a new impetus in rural development is possible provided that the new possibilities are efficiently used by Member States and regions and that the common strategic framework with the other EU funds does not remove synergies with Pillar I or weaken rural development's distinctive strengths. If the right balance is struck, this scenario would best address the long term sustainability of agriculture and rural areas.

On this basis the impact assessment concludes that the integration scenario is the most balanced in progressively aligning the CAP with the EU's strategic objectives and this balance is also found in the implementation of the different elements in the legislative proposals. It will also be essential to develop an evaluation framework to measure the performance of the CAP with a common set of indicators linked to policy objectives.

Simplification has been an important consideration throughout the process and should be enhanced in a variety of ways, for instance in the streamlining of cross compliance and market instruments, or the design of the small farmers scheme. In addition, the greening of direct payments should be designed in such a way as to minimize administrative burden including the costs of controls.

3. LEGAL ELEMENTS OF THE PROPOSAL

It is proposed to maintain the current structure of the CAP in two pillars with annual mandatory measures of general application in Pillar I complemented by voluntary measures better tailored to national and regional specificities under a multi-annual programming approach in Pillar II. However, the new design of direct payments seeks to better exploit synergies with Pillar II, which is in turn placed under a Common Strategic Framework to better coordinate with other EU shared management funds.

On this basis, the current structure of four basic legal instruments is also maintained, albeit with the scope of the financing regulation enlarged to bring together common provisions into what is now called the horizontal regulation.

The proposals comply with the principle of subsidiarity. The CAP is a truly common policy: it is an area of shared competence between the EU and the Member States that is being handled at EU level with a view to maintaining a sustainable and diverse agriculture throughout the EU, addressing important cross-border issues such as climate change and reinforcing solidarity among Member States. In the light of the importance of future challenges for food security, the environment and territorial balance, the CAP remains a policy of strategic importance to ensure the most effective response to the policy challenges and the most efficient use of budgetary resources. In addition, it is proposed to maintain the current structure of instruments in two pillars where Member States have more leeway to tailor solutions to their local specificities and also co-finance Pillar II. The new European Innovation Partnership and risk management toolkit are also placed within Pillar II. At the same time the policy will be better aligned with the Europe 2020 strategy (including a common framework with other EU funds) and a number of improvements and simplification elements introduced. Finally, the analysis carried out in the framework of the impact assessment clearly shows the cost of no action in terms of negative economic, environmental and social consequences.

The Single CMO regulation lays down rules for the common organisation of agricultural markets, with the aid scheme for the most deprived to be placed under a separate instrument.

The 2008-2009 dairy crisis showed the need to maintain an effective safety net mechanism as well as to streamline available tools. The discussions in the High Level Expert Group on Milk that followed also pointed to the need to improve the functioning of the food chain. The regulation thus aims to streamline, expand and simplify provisions on the basis of experience to date with public intervention, private storage, exceptional/emergency measures and aid to specific sectors as well as to facilitate cooperation through producer and interbranch organisations.

Certain sectoral aids are removed (e.g. skimmed milk, hops and silkworms). The milk quota system and the wine planting ban are set to expire under existing legislation which is thus left unchanged in this respect. Sugar quotas are set to expire by 30 September 2015. A single animal disease / loss of consumer confidence provision and a general market disturbance clause are provided with the latter expanded to cover all sectors in the current Single CMO.

The product coverage for recognition of producer organisations and their associations as well as interbranch organisations by Member States is expanded to all sectors in the current Single CMO. Support for the setting up of producer groups in the fruit and vegetable sector is moved to rural development.

The regulation reflects the proposal already made for the milk sector that set out basic conditions if Member States make written contracts compulsory with a view to strengthening the bargaining power of milk producers in the food chain. It also reflects the proposal already made on marketing standards in the context of the quality package.

From a simplification perspective, doing away with certain sectoral aids, the decoupling of the aid scheme in the silk worm sector, ending the sugar quota system and removing the requirements for registration of supply contracts and for attestation of equivalence in the hops sector will positively impact the burden on Member States and red tape for operators. It will no longer be necessary to maintain a capacity to implement the sectoral aid schemes and to allocate resources to control them.

4. BUDGETARY IMPLICATION

The MFF proposal provides that a significant part of the EU budget should continue to be dedicated to agriculture, which is a common policy of strategic importance. Thus, in current prices, it is proposed that the CAP should focus on its core activities with EUR 317.2 billion allocated to Pillar I and EUR 101.2 billion to Pillar II over the 2014-2020 period.

The Pillar I and Pillar II funding is complemented by additional funding of EUR 17.1 billion consisting of EUR 5.1 billion for research and innovation, EUR 2.5 billion for food safety and EUR 2.8 billion for food support for the most deprived persons in other headings of the MFF, as well as of EUR 3.9 billion in a new reserve for crises in the agricultural sector and up to EUR 2.8 billion in the European Globalization Adjustment Fund outside the MFF, thus bringing the total budget to EUR 435.6 billion over the 2014-2020 period.

As regards distribution of support among Member States, it is proposed that all Member States with direct payments below 90% of the EU average will see one third of this gap closed. The national ceilings in the direct payments regulation are calculated on this basis.

The distribution of rural development support is based on objective criteria linked to the policy objectives taking into account the current distribution. As is the case today, less developed regions should continue to benefit from higher co-financing rates, which will also apply to certain measures such as knowledge transfer, producer groups, cooperation and Leader.

Some flexibility for transfers between pillars is introduced (up to 5% of direct payments): from Pillar I to Pillar II to allow Member States to reinforce their rural development policy, and from Pillar II to Pillar I for those Member States where the level of direct payments remains below 90% of the EU average.

Details on the financial impact of the CAP reform proposals are set out in the financial statement accompanying the proposals.

2011/0281 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

establishing a common organisation of the markets in agricultural products (Single CMO Regulation)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 42 and Article 43(2) thereof,

Having regard to the proposal from the European Commission[7],

After transmission of the draft legislative act to the national Parliaments,

Having regard to the opinion of the European Economic and Social Committee[8],

Having consulted the European Data Protection Supervisor[9]

Acting in accordance with the ordinary legislative procedure[10],

Whereas:

1. The Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on "The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future"[11] sets out potential challenges, objectives and orientations for the Common agricultural Policy (CAP) after 2013. In the light of the debate on that Communication, the CAP should be reformed with effect from 1 January 2014. That reform should cover all the main instruments of the CAP, including Council Regulation (EU) No [COM(2010)799] of […] establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation)[12]. In view of the scope of the reform, it is appropriate to repeal Regulation (EU) No [COM(2010)799] and to replace it with a new Single CMO Regulation. The reform should also, as far as possible, harmonise, streamline and simplify the provisions, particularly those covering more than one agricultural sector, including by ensuring that non-essential elements of measures may be adopted by the Commission by way of delegated acts.

2. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

3. Pursuant to Article 43(3) of the Treaty on the Functioning of the European Union (the Treaty), the Council shall adopt measures on fixing prices, levies, aid and quantitative limitations. In the interest of clarity, where Article 43(3) of the Treaty applies, this Regulation should explicitly refer to the fact that measures will be adopted by the Council on that basis.

4. This Regulation should contain all the basic elements of the Single CMO. The fixing of prices, levies, aid and quantitative limitations is in certain cases inextricably linked to those basic elements.

5. This Regulation should apply to all agricultural products listed in Annex I to the Treaty in order to ensure the existence of a common organisation of the market for all such products, as required by Article 40(1) of the Treaty.

6. It should be clarified that Regulation (EU) No […] [horizontal CAP Regulation][13] and the provisions adopted pursuant to it should apply to the measures set out in this Regulation. In particular the [horizontal CAP Regulation] lays down provisions to guarantee compliance with the obligations laid down by CAP provisions, including checks and the application of administrative measures and administrative penalties in case of non-compliance, and rules related to the lodging and releasing of securities and the recovery of undue payments.

7. This Regulation and other acts adopted under Article 43 to the Treaty refer to the description of products and references to the headings or subheadings of the combined nomenclature. Amendments to the Common Customs Tariff nomenclature may necessitate consequential technical adjustments to such Regulations. The Commission should be able to adopt implementing measures to make such adjustments. In the interests of clarity and simplicity, Council Regulation (EC) No 234/79 of 5 February 1979 on the procedure for adjusting the Common Customs Tariff nomenclature used for agricultural products[14] which currently provides for such a power should be repealed and the power integrated into the present Regulation.

8. In order to take into account the specificities of the rice sector, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of updating the definitions concerning the rice sector set out in Part I of Annex II of this Regulation.

9. In order to ensure that production is orientated towards certain varieties of paddy rice, the Commission should be able to adopt implementing measures in respect of fixing increases and reductions of the public intervention price.

10. Marketing years should be fixed for cereals, rice, sugar, dried fodder, seeds, olive oil and table olives, flax and hemp, fruit and vegetables, bananas, milk and milk products, and silkworms, and adapted as far as possible to the biological production cycles of each of those products.

11. In order to take into account the specificities of the fruit and vegetables and processed fruit and vegetables sectors, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of fixing the marketing years for those products.

12. In order to stabilise the markets and to ensure a fair standard of living for the agricultural community, a differentiated system of price support for the different sectors has been developed and direct support schemes have been introduced, taking into account the different needs in each of these sectors on the one hand and the interdependence between different sectors on the other. Those measures take the form of public intervention or, as the case may be, the payment of aid for private storage. There continues to be a need to maintain price support measures whilst streamlining and simplifying them.

13. For the sake of clarity and transparency, the provisions should be made subject to a common structure, whilst maintaining the policy pursued in each sector. For that purpose it is appropriate to distinguish between reference prices and intervention prices and to define the latter, in particular, clarifying that only intervention prices for public intervention correspond to the applied administered prices referred to in the first sentence of paragraph 8 of Annex 3 to the WTO Agreement on Agriculture (i.e. price gap support). In this context it should be understood that market intervention can take the form of public intervention as well as other forms of intervention that do not use ex-ante established price indications.

14. As appropriate to each sector concerned in the light of the practice and experience under previous CMOs, the system of intervention should be available during certain periods of the year and should be open during that period either on a permanent basis or should be opened depending on market prices.

15. The price level at which buying-in under public intervention, i.e. price gap support, should be carried out at a fixed price for certain quantities for some products and in other cases should depend on tendering, reflecting the practice and experience under previous CMOs.

16. This Regulation should provide for the possibility of disposal of products bought in public intervention. Such measures should be taken in a way that avoids market disturbances and that ensures equal access to goods and equal treatment of purchasers.

17. In order to ensure market transparency, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of laying down the conditions under which it may decide to grant private storage aid in order to achieve the aim of balancing the market and stabilising the market prices, and taking into account the market situation.

18. In order to take into account the specificities of the different sectors, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of adopting the requirements and conditions to be met by products to be bought-in under public intervention and to be stored under the system of private storage aid, in addition to the requirements laid down in this Regulation as well as in respect of adopting the applicable price increases or reductions for quality purposes as regards both buying-in and sales and in respect of adopting the provisions relating to the obligation for the paying agencies to have all the beef boned after the take-over and prior to the placing into storage.

19. In order to take account of the diversity of situations relating to the storage of intervention stocks in the Union and to ensure adequate access to public intervention for operators, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the requirements to be met by intervention storage places for the products to be bought-in under the system, provisions relating to the sale of small quantities remaining in storage in the Member States; and rules for direct sale quantities which may no longer be repackaged or are deteriorated; and certain rules on storage of products inside and outside the Member State responsible for them and their treatments as regards customs duties and any other amounts to be granted or levied under the CAP.

20. In order to ensure that private storage has the desired effect on the market, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of measures for reducing the amount of aid to be paid where the quantity stored is lower than the contracted quantity; and conditions for granting of an advance payment.

21. In order to safeguard the rights and obligations of operators participating in public intervention or private storage measures, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of provisions relating to the use of tendering procedures; the eligibility of operators; and an obligation to lodge a security guaranteeing.

22. In order to standardise the presentation of the different products for the purposes of improving market transparency, price recording and the application of market intervention arrangements in the form of public intervention and private storage, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of Union scales for the classification of carcasses in the beef and veal, pigmeat and sheepmeat and goatmeat sectors.

23. In order to ensure accuracy and reliability of the classification of carcasses, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the review of the application of classification of carcases in Member States by a Union committee.

24. The existing scheme for food distribution to the most deprived in the Union adopted under the common agricultural policy should be the subject of a separate regulation adopted to reflect its social cohesion objectives. Provision should nevertheless be made in this Regulation to allow for disposal of products held in public intervention by making them available for use in the scheme.

25. The consumption of fruit and vegetables and milk products amongst children should be encouraged, including by durably increasing the share of those products in the diets of children at the stage when their eating habits are being formed. Union aid to finance or co-finance the supply to children in educational establishments of such products should therefore be promoted.

26. In order to ensure a sound budgetary management of the schemes, appropriate provisions for each one should be established. Union aid should not be used to replace funding for any national existing school fruit schemes. In the light of budgetary constraints, Member States should nonetheless be able to replace their financial contribution to the schemes with contributions from the private sector. In order to make their school fruit scheme effective, Member States should provide for accompanying measures for which Member States should be allowed to grant national aid.

27. In order to promote the healthy eating habits of children, to ensure the efficient and targeted use of European Funds and to promote awareness of the scheme the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the school fruit scheme concerning: the products that are ineligible for the scheme; the target group of the scheme; the national or regional strategies that Member States must draw up in order to benefit from the aid, including the accompanying measures; the approval and selection of aid applicants; objective criteria for the allocation of aid between Member States, the indicative allocation of aid between Member States and the method for reallocating aid between Member States based on applications received; the costs eligible for aid, including the possibility of fixing an overall ceiling for such costs; and requiring participating Member States to publicise the subsidising role of the scheme.

28. In order to take account of the evolution in the dairy products consumption patterns and of the innovations and developments on the dairy products market, to ensure that the appropriate beneficiaries and applicants qualify for the aid and to promote awareness of the aid scheme, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the school milk scheme concerning: the products that are eligible for the scheme; the national or regional strategies that Member States must draw up in order to benefit from the aid and the target group for the scheme; the conditions for granting aid; the lodging of a security guaranteeing the execution where an advance of aid is paid; monitoring and evaluation; and requiring educational establishments to communicate the subsidising role of the scheme.

29. The aid scheme for hop producer organisations is only used in one Member State. In order to create flexibility and to harmonise the approach in this sector with the other sectors, the aid scheme should be discontinued, with the possibility to support the producer organisations under rural development measures.

30. Union financing is required to encourage approved operator organisations to draw up work programmes for the purpose of improving the production quality of olive oil and table olives. In that context, this Regulation should provide for Union support to be allocated in accordance with the priorities given to the activities undertaken within the respective work programmes. However, the activities concerned should be limited to the most useful and co-financing should be introduced in order to improve the quality of such programmes.

31. In order to ensure that the aid provided for olive oil and table olive operator organisations meet their objective of improving the production quality of olive oil and table olives and to ensure that olive oil and table olive operator organisations respect their obligations, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission concerning the conditions for the approval of operator organisations for the purposes of the aid scheme, the suspension or withdrawal of such approval; the measures eligible for Union financing; the allocation of Union financing to particular measures; the activities and costs that are not eligible for Union financing; and the selection and approval of work programmes and concerning requiring the lodging of a security.

32. This Regulation distinguishes between fruit and vegetables, which include fruit and vegetables for marketing and fruit and vegetables intended for processing, on the one hand, and processed fruit and vegetables, on the other hand. Rules on producer organisations, operational programmes and Union financial assistance only apply to fruit and vegetables and fruit and vegetables solely intended for processing.

33. The production of fruit and vegetables is unpredictable and the products are perishable. Even limited surpluses can significantly disturb the market. Therefore, measures for crisis management should be established and those measures should continue to be integrated into operational programmes.

34. The production and marketing of fruit and vegetables should fully take into account environmental concerns, including cultivation practices, management of waste materials and disposal of products withdrawn from the market, in particular as regards protection of water quality, maintenance of biodiversity and the upkeep of the countryside.

35. Support for setting up producer groups should be provided for all sectors in all Member States under rural development policy so the specific support in the fruit and vegetables sector should be discontinued.

36. In order to give producer organisations in the fruit and vegetables sector greater responsibility for their financial decisions and to gear the public resources assigned to them towards future requirements, terms should be set out for the use of those resources. Joint financing of operational funds set up by producer organisations is an appropriate solution. Additional scope for financing should be permitted in particular cases. Operational funds should only be used to finance operational programmes in the fruit and vegetables sector. In order to control Union expenditure, there should be a cap on assistance granted to producer organisations that establish operational funds.

37. In regions where the organisation of production in the fruit and vegetables sector is weak, granting of additional national financial contributions should be allowed. In case of Member States which are at a particular disadvantage with regard to structures, such contributions should be reimbursed by the Union.

38. In order to ensure an efficient, targeted and sustainable support of producer organisations in the fruit and vegetables sector, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of operational funds and operational programmes, the structure and content of a national framework and a national strategy; Union financial assistance; crisis prevention and management measures; and national financial assistance.

39. It is important to provide for support measures in the wine sector which are liable to strengthen competitive structures. While those measures should be defined and financed by the Union, it should be left to Member States to select the appropriate set of measures to meet the needs of their regional bodies, taking into account their particularities, where necessary, as well as integrating them into national support programmes. Member States should be responsible for the implementation of such programmes.

40. One key measure eligible for national support programmes should be the promotion and marketing of Union wines in third countries. Restructuring and conversion activities should continue to be covered on account of their positive structural effects on the wine sector. Support should also be available for investments in the wine sector which are geared towards improving economic performance of the enterprises as such. Support for by-product distillation should be a measure available to Member States which desire to use such an instrument to ensure the quality of wine, while preserving the environment.

41. Preventive instruments such as harvest insurance, mutual funds and green harvesting should be eligible for support under the wine support programmes so as to encourage a responsible approach to crisis situations.

42. The provisions on support to vine-growers by way of allocation of payment entitlements as decided by Member States were made definitive. Therefore the only such support which may be provided is the one decided by Member States by 1 December 2013 under Article 137 of Regulation (EU) No [COM(2011)799] and under the conditions set out in that provision.

43. In order to ensure that wine support programmes meet their objectives and that there is a targeted use of the European Funds, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of rules: on the responsibility for expenditure between the date of receipt of the support programmes, and modifications to support programmes and their date of applicability; on eligibility criteria of support measures, the type of expenditure and operations eligible for support; measures ineligible for support and the maximum level of support per measure; on changes to support programmes after they have become applicable; on requirements and thresholds for advance payments, including the requirement for a security where an advance payment is made; containing general provisions and definitions for the purposes of support programmes; to avoid misuse of the support measures and double funding of projects; under which producers shall withdraw the by-products of winemaking, exceptions from this obligation in order to avoid additional administrative burden and provisions for the voluntary certification of distillers; laying down the requirements for the Member States for the implementation of the support measures, as well as restrictions to ensure consistency with the scope of the support measures; regarding payments to beneficiaries, including payments through insurance intermediaries.

44. Beekeeping is characterised by the diversity of production conditions and yields and the dispersion and variety of economic operators, both at the production and marketing stages. Moreover, in view of the spread of varroasis in several Member States in recent years and the problems which that disease causes to honey production, action by the Union continues to be necessary as varroasis cannot be completely eradicated and is to be treated with approved products. Given such circumstances and in order to improve the production and marketing of apiculture products in the Union, national programmes for the sector should be drawn up every three years with a view to improving the general conditions for the production and marketing of apiculture products. Those national programmes should be partly financed by the Union.

45. In order to ensure a targeted use of Union funds for apiculture, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of: the measures which may be included in apiculture programmes, rules on the obligations relating to the content of national programmes, their drawing up and the related studies; and the conditions for the allocation of the Union's financial contribution to each participating Member State.

46. Union aid for silkworm rearing should be decoupled into the direct payments system following the approach taken for aids in other sectors.

47. The aid for Union-produced skimmed milk and skimmed-milk powder intended for use as a feedingstuff and for processing into casein and caseinates has not proved effective in supporting the market and should therefore be discontinued, along with the rules concerning the use of casein and caseinates in the manufacture of cheese.

48. The application of standards for the marketing of agricultural products can contribute to improving the economic conditions for the production and marketing as well as the quality of such products. The application of such standards is therefore in the interest of producers, traders and consumers.

49. Following the Communication from the Commission on agricultural product quality policy[15] and subsequent debates, it is deemed appropriate to maintain marketing standards by sectors or products, in order to take into account the expectations of consumers and to contribute to the improvement of the economic conditions for the production and marketing of agricultural products as well as to their quality.

50. In order to guarantee that all products are of sound, fair and marketable quality, and without prejudice to Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety[16], a basic general marketing standard as envisaged in the aforementioned Communication of the Commission should be appropriate for products not covered by marketing standards by sectors or products. When such products conform to an applicable international standard, as appropriate, those products should be considered as conforming to the general marketing standard.

51. For some sectors and/or products, definitions, designations and/or sales descriptions are important elements for the determination of conditions of competition. Therefore, it is appropriate to lay down definitions, designations and sales descriptions for those sectors and/or products, which should only be used in the Union for the marketing of products which comply with the corresponding requirements.

52. Provisions of a horizontal nature should be established for marketing standards.

53. Marketing standards should apply to enable the market to be supplied with products of standardised and satisfactory quality and should relate, in particular, to definitions, grading into classes, presentation and labelling, packaging, production method, conservation, transport, information on producers, content of certain substances, related administrative documents, storage, certification and time limits.

54. Taking into account the interest of consumers to receive adequate and transparent product information, it should be possible to determine the place of farming, on a case by case approach at the appropriate geographical level, while taking into account the specificities of some sectors, in particular concerning processed agricultural products.

55. Marketing standards should apply to all agricultural products marketed in the Union.

56. It is appropriate to provide for special rules in respect of products imported from third countries if national provisions in force in third countries justify derogations from the marketing standards if their equivalence to Union legislation is guaranteed.

57. It is appropriate to introduce the possibility for Member States to maintain or adopt certain national rules on quality levels as regards spreadable fats.

58. In order to address changes in the market situation, taking into account the specificity of each sector, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of acts to adopt, modify and derogate from requirements related to the general marketing standard, and rules concerning the conformity to it.

59. In order to take account of the expectations of consumers and to contribute to the improvement of the economic conditions for the production and marketing of agricultural products as well as to their quality and in order to adapt to the constantly changing market conditions, to the evolving consumer demands, as well as in order to take into account the developments in relevant international standards and to take technical progress into account and avoid creating obstacles to product innovation, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of acts to adopt marketing standards by sectors or products, at all stages of the marketing, as well as derogations and exemptions from the application of such standards and in respect of necessary modification, derogation or exemption from definitions and sales descriptions.

60. In order to ensure the correct and transparent application of national rules for certain products and/or sectors as regards marketing standards, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of establishing conditions for application of such marketing standards as well as the conditions for the holding, circulation and use of the products obtained from the experimental practices.

61. In order to take account of the specificities in trade between the Union and certain third countries, the special character of some agricultural products and the specificity of each sector, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission concerning a tolerance for each marketing standard beyond which the entire batch of products should be considered as not respecting the standard and concerning rules which define the conditions under which imported products are considered as providing an equivalent level of compliance with the Union requirements concerning marketing standards and which allow for measures derogating from the rules that products be marketed in the Union only in accordance with such standards and determine the rules relating to the application of the marketing standards to products exported from the Union.

62. The concept of quality wines in the Union is based, inter alia, on the specific characteristics attributable to the wine's geographical origin. Such wines are identified for consumers through protected designations of origin and geographical indications. In order to allow for a transparent and more elaborate framework underpinning the claim to quality by the products concerned, a regime should be established under which applications for a designation of origin or a geographical indication are examined in line with the approach followed by Union's horizontal quality policy applicable to foodstuffs other than wine and spirits in Council Regulation (EC) No 510/2006 of 20 March 2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs[17].

63. In order to preserve the particular quality characteristics of wines with a designation of origin or a geographical indication, Member States should be allowed to apply more stringent rules.

64. To qualify for protection in the Union, designations of origin and geographical indications for wine should be recognised and registered at the Union level in accordance with procedural rules laid down by the Commission.

65. Protection should be open to designations of origin and geographical indications of third countries where they are protected in their country of origin.

66. The registration procedure should enable any natural or legal person having a legitimate interest in a Member State or a third country to exercise his rights by notifying his objections.

67. Registered designations of origin and geographical indications should enjoy protection against uses which unduly take advantage of the reputation that complying products command. So as to promote fair competition and not to mislead consumers, that protection should also affect products and services not covered by this Regulation, including those not found in Annex I to the Treaty.

68. In order to take existing labelling practices into account, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of permitting the use of a name of a wine grape variety to be used even though it contains or consists of a protected designation of origin or a protected geographical indication.

69. In order to take account of the specificities of the production in the demarcated geographical area, to ensure product quality and traceability and to ensure the legitimate rights or interests of producers or operators the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission concerning the principles for the demarcation of the geographical area, and definitions, restrictions and derogations related to the production in the demarcated geographical area; concerning the conditions under which product specifications may include additional requirements; and concerning the elements of the product specification; the type of applicant that may apply for the protection of a designation of origin or geographical indication; the procedures to be followed in respect of an application for the protection of a designation of origin or geographical indication, including on preliminary national procedures, scrutiny by the Commission, objection procedures, and procedure on amendment, cancellation and conversion of protected designations of origin or protected geographical indication; the procedures applicable to trans-border applications; procedures for applications relating to geographical areas in a third country; the date from which protection shall run; the procedures related to amendments to product specifications; and the date on which an amendment shall enter into force.

70. In order to ensure adequate protection and that economic operators and competent authorities are not prejudiced by the application of this Regulation as regards wine names which have been granted protection prior to 1 August 2009, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of adoption restrictions regarding the protected name and in respect of transitional provisions concerning: wine names recognised by Member States as designations of origin or geographical indications by 1 August 2009; preliminary national procedure; wines placed on the market or labelled before a specific date; and amendments to the product specifications.

71. Certain terms are traditionally used in the Union and convey information to consumers about particularities and quality of wines complementing the information conveyed by designations of origin and geographical indications. So as to ensure the working of the internal market and fair competition and to avoid consumers being misled, those traditional terms should be eligible for protection in the Union.

72. In order to ensure an adequate protection, the legitimate rights of producers or operators and to take account of the specificities in trade between the Union and certain third countries the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of provisions regarding the language and the spelling of a traditional term to be protected; regarding the definition of the type of applicants that may apply for the protection of a traditional term; the conditions of validity of an application for recognition of a traditional term; the grounds for objecting to a proposed recognition of a traditional term; the scope of the protection, including the relationship with trade marks, protected traditional terms, protected designations of origin or geographical indications, homonyms, or certain wine grape names; the grounds for cancellation of a traditional term; the date of submission of an application or a request; the procedures to be followed in respect of an application for the protection of a traditional term, including scrutiny by the Commission, objection procedures and the procedures on cancellation and modification and in respect of the conditions under which traditional terms may be used on products from third countries and provide for related derogations.

73. The description, designation and presentation of products of the wine sector covered by this Regulation can have significant effects on their marketability. Differences between the laws of the Member States on the labelling of products of the wine sector may impede the smooth functioning of the internal market. Rules should therefore be laid down which take into account the legitimate interests of consumers and producers. For this reason, it is appropriate to provide for Union rules on labelling.

74. In order to ensure compliance with existing labelling practices, with horizontal rules related to labelling and presentation, and to consider the specificities of the wine sector; in order to ensure the efficiency of the certification, approval and verification procedures and the legitimate interests of operators and that economic operators are not prejudiced the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of exceptional circumstances justifying omitting reference to the terms “protected designation of origin” or “protected geographical indication”; in respect of the presentation and use of labelling particulars other than those provided for in this Regulation; certain compulsory particulars; optional particulars; and presentation; in respect of the necessary measures as regards labelling and presentation of wines bearing a designation of origin or a geographical indication, whose designation of origin or geographical indication meets the necessary requirements; in respect of wine placed on the market and labelled before 1 August 2009; and in respect of derogations on labelling and presentation.

75. Provisions concerning wine should be applied in the light of the agreements concluded under Article 218 of the Treaty.

76. It is appropriate to lay down rules for the classification of wine grape varieties, according to which Member States producing more than 50 000 hectolitres per year continue to be responsible for classifying the wine grape varieties from which wine may be made on their territories. Certain wine grape varieties should be excluded.

77. It is appropriate to determine certain oenological practices and restrictions for the production of wine, in particular as regards coupage and the use of certain types of grape must, grape juice and fresh grapes originating in third countries. In order to meet the international standards, for further oenological practices, the Commission should as a general rule base itself on the oenological practices recommended by the International Organisation of Vine and Wine (OIV).

78. For the wine sector, Member States should be allowed to limit or to exclude the use of certain oenological practices and be allowed to keep more stringent restrictions for wines produced in their territory, as well as permit the experimental use of unauthorised oenological practices under conditions to be defined.

79. In order to provide for a satisfactory level of traceability of the products concerned, in particular in the interest of consumer protection, provision should be made for all the wine sector products covered by this Regulation to have an accompanying document when circulating within the Union.

80. For a better management of wine-growing potential Member States should communicate to the Commission an inventory of their production potential based on the vineyard register. To encourage Member States to communicate the inventory, support for restructuring and conversion is limited to those Member States which have communicated the inventory.

81. In order to facilitate the monitoring and the verification of the production potential by Member States, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the scope and content of the vineyard register and exemptions.

82. In order to facilitate the transport of wine products and verification thereof by Member States, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of rules on the accompanying document, its usage and the exemptions to the obligation to use such a document; establish the conditions under which an accompanying document is to be regarded as certifying protected designations of origin or geographical indications; establish an obligation to keep a register; specify who shall keep a register and exemptions from the obligation to keep a register; indicate the operations to be included in the register; and establish rules concerning the use of accompanying documents and registers.

83. Specific instruments will still be needed after the end of the quota system to ensure a fair balance of rights and obligations between sugar undertakings and sugar beet growers. Therefore, the standard provisions governing agreements between them should be established.

84. In order to taking into account the specificities of the sugar sector and the interests of all parties, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of such agreements, in particular as regards the conditions governing the purchase, delivery, taking over and payment of beet.

85. Producer organisations and their associations can play useful roles in concentrating supply and promoting best practices. Interbranch organisations can play important part in allowing dialogue between actors in the supply chain, and in promoting best practices and market transparency. Existing rules on the definition and recognition of such organisations and their associations covering certain sectors should therefore be harmonised, streamlined and extended to provide for recognition on request under statutes set out in EU law in all sectors.

86. Existing provisions in various sectors, boosting the impact of producer organisations their associations and interbranch organisations by permitting Member States, under certain conditions, to extend certain rules of such organisations to non-member operators have proved effective and should be harmonised, streamlined and extended to all sectors.

87. As regards live plants, beef and veal, pigmeat, sheepmeat and goatmeat, eggs and poultrymeat provision should be made for the possibility of adopting certain measures to facilitate the adjustment of supply to market requirements which may contribute to stabilising the markets and to ensuring a fair standard of living for the agricultural community concerned.

88. In order to encourage action by producer organisation, their associations and interbranch organisations to facilitate the adjustment of supply to market requirements, with the exception of action relating to withdrawal from the market, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of measures concerning live plants, beef and veal, pigmeat, sheepmeat and goatmeat, eggs and poultrymeat sectors to improve quality; promote better organisation of production, processing and marketing; facilitate the recording of market price trends; and permit the establishment of short and long-term forecasts on the basis of the means of production used.

89. In order to improve the operation of the market for wines, Member States should be able to implement decisions taken by interbranch organisations. The scope of such decisions should, however, exclude practices which could distort competition.

90. In the absence of Union legislation on formalised, written contracts, Member States may, within their own contract law systems, make the use of such contracts compulsory provided that in doing so the Union law is respected and in particular that the proper functioning of the internal market and the common market organisation is respected. Given the diversity of situations across the Union, in the interests of subsidiarity, such a decision should remain with Member States. However, in the milk and milk products sector, to ensure appropriate minimum standards for such contracts and good functioning of the internal market and the common market organisation, some basic conditions for the use of such contracts should be laid down at the Union level. Since some dairy co-operatives may have rules with similar effect in their statues, in the interests of simplicity they should be exempted from the requirement for a contract. In order to ensure that any such system is effective it should apply equally where intermediate parties collect milk from farmers to deliver to processors.

91. In order to ensure the rational development of production and thus a fair standard of living for dairy farmers, their bargaining power vis-à-vis processors should be strengthened which should result in a fairer distribution of value-added along the supply chain. Therefore, in order to attain these CAP objectives, a provision should be adopted pursuant to Articles 42 and 43(2) of the Treaty to allow producer organisations constituted by dairy farmers or their associations to negotiate contract terms, including price, for some or all of its members' production with a dairy. In order to maintain effective competition on the dairy market, this possibility should be subject to appropriate quantitative limits.

92. The registration of all supply contracts regarding hops produced in the Union is a burdensome measure and should be discontinued.

93. In order to ensure that the objectives and responsibilities of producer organisations, associations of producer organisations, interbranch organisations and operator organisations are clearly defined so as to contribute to the effectiveness of their actions, to take into account the specificities of each sector, and to ensure the respect of competition and the good functioning of the common market organisation, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of rules on: the specific aims which may, shall or shall not be pursued by such organisations and associations, including derogations from those listed in this Regulation; the rules of association, the recognition, structure, legal personality, membership, size, accountability and activities of such organisations and associations, the effects deriving from recognition, the withdrawal of recognition, and mergers; transnational organisations and associations; outsourcing of activities and the provision of technical means by organisations or associations; the minimum volume or value of marketable production of organisations and associations; the extension of certain rules of the organisations to non-members and the compulsory payment of subscriptions by non-members, including a list of stricter production rules which may be extended, further requirements as regards representativeness, the economic areas concerned, including Commission scrutiny of their definition, minimum periods during which the rules should be in force before their extension, the persons or organisations to whom the rules or contributions may be applied, and the circumstances in which the Commission may require that the extension of rules or compulsory contributions be refused or withdrawn.

94. A single market involves a trading system at the external borders of the Union. That trading system should include import duties and export refunds and should, in principle, stabilise the Union market. The trading system should be based on the undertakings accepted under the Uruguay Round of multilateral trade negotiations and in bilateral agreements.

95. Monitoring trade flows is foremost a matter of management which should be addressed in a flexible way. The decision on the introduction of licence requirements should be made taking account of the need for licences for the management of the markets concerned and, in particular, for monitoring the imports or exports of the products in question.

96. In order to take account of the evolution of trade and market developments, the needs of the markets concerned and when necessary for monitoring imports or exports, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the list of the products of sectors subject to the presentation of an import or export licence; and the cases and situations where the presentation of an import or export licence is not required.

97. In order to define the main elements of the licence system, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of acts to: define the rights and obligations deriving from the licence, its legal effects, including the possibility of a tolerance as regards the respect of the obligation to import or export, and the indication of the origin and provenance where that is compulsory; provide that the issue of an import licence or the release into free circulation shall be subject to the presentation of a document issued by a third country or an entity certifying inter alia the origin, the authenticity and the quality characteristics of the products; adopt the rules applicable to the transfer of the licence or, as necessary, the restrictions on this transmissibility; adopt the rules necessary for the reliability and the efficiency of the licence system and the situations where a specific administrative assistance between Member States is needed to prevent or deal with cases of fraud and irregularities; and determine the cases and situations where the lodging of a security guaranteeing that the products are imported or exported within the period of validity of the licence is or is not required.

98. The essential elements of customs duties applicable to agricultural products reflecting WTO agreements and bilateral agreements are laid down in the Common Customs Tariff. The Commission should be empowered to adopt measures for the detailed calculation of import duties pursuant to those essential elements.

99. In order to prevent or counteract adverse effects on the Union market which could result from imports of certain agricultural products, imports of such products should be subject to payment of an additional duty, if certain conditions are fulfilled.

100. In order to ensure the efficiency of the entry price system, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of providing for inclusion a check of the customs value against another value than the unit price.

101. It is appropriate, under certain conditions, to open and administer import tariff quotas resulting from international agreements concluded in accordance with the Treaty or from other acts.

102. In order to ensure fair access to the quantities available, the application of the agreements, commitments and rights of the Union, and an equal treatment of operators within the import tariff quota, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of acts to: determine the conditions and eligibility requirements that an operator has to fulfil to submit an application within the import tariff quota; adopt provisions relating to the transfer of rights between operators and when necessary the limitations to transfer within the management of the import tariff quota; make the participation in the import tariff quota subject to the lodging of a security; adopt all the necessary provisions for any particular specificities, requirements or restrictions applicable to the tariff quota as set out in the international agreement or other act concerned.

103. Agricultural products may in certain cases benefit from special import treatment in third countries if the products comply with certain specifications and/or price conditions. Administrative cooperation between the authorities in the importing third country and the Union is necessary to ensure the correct application of such a system. To that end, the products should be accompanied by a certificate issued in the Union.

104. In order to ensure that products that are exported may benefit from a special treatment on import into a third country if certain conditions are respected, in accordance with agreements concluded by the Union in accordance with Article 218 of the Treaty, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of requiring the competent authorities of the Member States, on request and after appropriate checks, to issue a document certifying that the conditions are met.

105. The customs duty system makes it possible to dispense with all other protective measures at the external borders of the Union. The internal market and duty mechanism could, in exceptional circumstances, prove to be inadequate. In such cases, in order not to leave the Union market without defence against disturbances that might ensue, the Union should be able to take all necessary measures without delay. Such measures should comply with the international commitments of the Union.

106. The possibility of prohibiting the use of inward and outward processing arrangements should be provided for. It is thus appropriate to enable suspension of the use of inward and outward processing arrangements in such situations.

107. Provisions for granting refunds on exports to third countries, based on the difference between prices within the Union and on the world market, and falling within the limits set by the commitments made within the WTO, should serve to safeguard the Union's participation in international trade in certain products falling within this Regulation. Subsidised exports should be subject to limits in terms of value and quantity.

108. Compliance with the limits in terms of value should be ensured at the time when the export refunds are fixed through the monitoring of payments under the rules relating to the European Agricultural Guarantee Fund. Monitoring can be facilitated by the compulsory advance fixing of export refunds, while allowing the possibility, in the case of differentiated refunds, of changing the specified destination within a geographical area to which a single export refund rate applies. In the case of a change of destination, the export refund applicable to the actual destination should be paid, with a ceiling on the amount applicable to the destination fixed in advance.

109. Compliance with the quantity limits should be ensured by a reliable and effective system of monitoring. To that end, the granting of export refunds should be made subject to an export licence. Export refunds should be granted up to the limits available, depending on the particular situation of each product concerned. Exceptions to that rule should be permitted only for processed products not listed in Annex I to the Treaty, to which volume limits do not apply. Provision should be made for a derogation from strict compliance with management rules where exports benefiting from export refunds are not likely to exceed the quantity laid down.

110. In the case of the export of live bovine animals, provision should be made whereby export refunds are granted and paid only if the provisions established in Union legislation concerning animal welfare, in particular those concerning the protection of animals during transport, are respected.

111. In order to ensure equality of access to export refunds for exporters of agricultural products covered by this Regulation, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of applying certain rules for agricultural products to products exported in the form of processed goods.

112. In order to encourage exporters to respect animal welfare conditions and to enable the competent authorities to verify correct expenditure of export refunds where this is conditional on respect for animal welfare requirements, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of animal welfare requirements outside the customs territory of the Union, including the use of independent third parties.

113. In order to ensure that operators respect their obligations when participating in tendering procedures, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of designating the primary requirement for release of licence securities for tendered export refunds.

114. In order to minimise the administrative burden for operators and authorities, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of acts to set thresholds below which the obligation to issue or present an export licence may not be required, designate destinations or operations where an exemption for the obligation to present an export licence can be justified and permit in justified situation export licences to be granted ex-post.

115. In order to adhere to practical situations justifying full or partial eligibility to export refunds, and in order to help operators bridge the period between the application for and the final payment of the export refund, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of measures pertaining to: another date for the refund; the consequences for the payment of the export refund when the product code or destination mentioned in a licence is not in conformity with the actual product or destination; advance payment of export refunds including the conditions for the lodging and release of a security; checks and proof when doubts on the real destination of products exist including the opportunity for re-importation into the customs territory of the Union; destinations treated as exports from the Union, and inclusion of destinations within the customs territory of the Union eligible for export refunds.

116. In order to ensure that products benefiting from export refunds are exported from the customs territory of the Union and to avoid their return to that territory, and in order to minimise the administrative burden for operators in generating and submitting proof that refund products reached a country of destination for differentiated refunds, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of measures pertaining to: the time limit by which the exit from the customs territory of the Union must be finalised, including the time for temporary re-entry; the processing that products benefiting from export refunds may undergo during that period; the proof of having reached a destination for differentiated refunds; the refund thresholds and conditions under which exporters may be exempted from such proof; and conditions for approval of proof of reaching a destination for differentiated refunds by independent third parties.

117. In order to take account of the specificities of the different sectors, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of specific requirements and conditions for operators and of the products eligible for an export refund including, in particular, the definition and characteristics of the products, and the establishment of coefficients for the purposes of calculating export refunds.

118. In order to prevent illicit crops from disturbing the market for hemp for fibre, this Regulation should provide for checks on imports of hemp and hemp seed to ensure that such products offer certain guarantees with regard to the tetrahydrocannabinol content. In addition, imports of hemp seed intended for uses other than sowing should continue to be subject to a control system which provides for the authorisation of the importers concerned.

119. Minimum export prices for flowering bulbs are no longer useful and should be abolished.

120. In accordance with Article 42 of the Treaty the provisions of the Treaty concerning competition shall apply to production of and trade in agricultural products only to the extent determined by Union legislation within the framework of Article 43(2) and (3) of the Treaty and in accordance with the procedure laid down therein.

121. The rules on competition relating to the agreements, decisions and practices referred to in Article 101 of the Treaty and to the abuse of dominant positions should be applied to the production of, and trade in, agricultural products, in so far as their application does not jeopardise the attainment of the objectives of the CAP.

122. A special approach should be allowed in the case of farmers' or producer organisations or their associations the objective of which is the joint production or marketing of agricultural products or the use of joint facilities, unless such joint action excludes competition or jeopardises the attainment of the objectives of Article 39 of the Treaty.

123. A special approach should be allowed as regards certain activities of interbranch organisations on the condition that they do not lead to the partitioning of markets, affect the sound operation of the CMO, distort or eliminate competition, entail the fixing of prices, or create discrimination.

124. The proper working of the single market would be jeopardised by the granting of national aid. Therefore, the provisions of the Treaty governing State aid should, as a general rule, apply to agricultural products. In certain situations exceptions should be allowed. Where such exceptions apply, the Commission should be in a position to draw up a list of existing, new or proposed national aid, to make appropriate observations to the Member States and to propose suitable measures.

125. Due to the specific economic situation of the production and marketing of reindeer and reindeer products, Finland and Sweden should continue to grant national payments in that regard.

126. In order to address justified cases of crisis even after the end of the transitional period, the distillation support measure provided for under the support programmes in 2012, Member States should be able to make national payments for crisis distillation within an overall budgetary limit of 15 % of the respective value of the Member State's relevant yearly budget for its national support programme. Such national payments should be notified to the Commission and approved under this Regulation before being granted.

127. The provisions on the grubbing-up premium and certain measures under wine support programmes should not by themselves preclude national payments for the same purposes.

128. In Finland sugar beet growing is subject to particular geographical and climatic conditions which will adversely affect the sector beyond the general effects of the sugar reform. That Member State should therefore be authorised, on a permanent basis, to make national payments to its sugar beet growers.

129. Member States should be allowed to continue to make national payments for nuts as currently provided for under Article 120 of Regulation (EC) No 73/2009 in order to cushion the effects of decoupling of the former Union aid scheme for nuts. For clarity, since that Regulation is to be repealed, the national payments should be provided for in this Regulation.

130. Restrictions to free circulation resulting from the application of measures intended to combat the spread of animal diseases could cause difficulties on the market in one or more Member States. Experience shows that serious market disturbances such as a significant drop in consumption or in prices may be attributed to a loss in consumer confidence due to public health or animal or plant health risks. In the light of experience measures attributable to a loss in consumer confidence should be extended to plant products.

131. The exceptional market support measures for beef and veal, milk and milk products, pigmeat, sheepmeat and goatmeat, eggs and poultrymeat should be directly related to health and veterinary measures adopted in order to combat the spread of disease. They should be taken at the request of Member States in order to avoid serious disruption on the markets.

132. Special intervention measures should be provided in order to react efficiently and effectively against threats of market disturbance. The scope of those measures should be defined.

133. In order to react efficiently and effectively against threats of market disturbance caused by significant price rises or falls on internal or external markets or any other factors affecting the market, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the necessary measures for the sector concerned including, where necessary, measure to extend or modify the scope, duration or other aspects of other measures provided for under this Regulation, or suspend import duties in whole or in part including for certain quantities and/or periods.

134. The Commission should be authorised to adopt the necessary measures to solve specific problems in case of emergency.

135. Undertakings, Member States and/or third countries may be required to submit communications for the purposes of applying this Regulation, monitoring, analysing and managing the market in agricultural products, ensuring market transparency, the proper functioning of CAP measures, of checking, controlling, monitoring, evaluating and auditing CAP measures, and implementing international agreements, including notification requirements under those agreements. In order to ensure a harmonised, streamlined and simplified approach, the Commission should be empowered to adopt all the necessary measures regarding communications. In so doing it should take into account the data needs and synergies between potential data sources.

136. In order to make communications fast, efficient, accurate, and cost effective, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the nature and type of the information to be notified; the methods of notification; the rules related to the access rights to the information or information systems made available; and the conditions and means of publication of the information.

137. Union legislation concerning the protection of individuals with regard to the processing of personal data and on the free movement of such data, in particular Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data and Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data are applicable.

138. Funds should be transferred from the Reserve for crises in the agricultural sector under the conditions and procedure referred to in paragraph 14 of the Interinstitutional Agreement between the European Parliament, the Council and the Commission on cooperation in budgetary matters and on sound financial management[18], and it should be clarified that this Regulation is the applicable basic act.

139. In order to ensure the smooth transition from the arrangements provided for in Regulation (EU) No [COM(2010)799] to those laid down in this Regulation, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of the necessary measures, in particular those necessary to protect the acquired rights and legitimate expectations of undertakings.

140. The use of urgency procedure should be reserved for exceptional cases where this proves to be necessary in order to react efficiently and effectively against threats of market disturbance or where market disturbances are occurring. The choice of an urgency procedure should be justified and the cases in which the urgency procedure should be used should be specified.

141. In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by the Member States of the Commission's exercise of implementing powers[19].

142. The examination procedure should be used for the adoption of the acts implementing this Regulation given that those acts relate to the CAP as referred to in point (ii) of Article 2(2)(b) of Regulation (EU) No 182/2011. However, the advisory procedure should be used for the adoption of the acts implementing this Regulation relating to competition matters given that the advisory procedure is used for the adoption of acts implementing competition law in general.

143. The Commission should adopt immediately applicable implementing acts where, in duly justified cases imperative grounds of urgency so require, relating to adopting, amending or revoking Union safeguard measures, suspending the use of processing or inward or outward processing arrangements, if necessary to react immediately to the market situation, and resolving specific problems in an emergency, if such immediate action is needed to deal with the problems.

144. In respect of certain measures under this Regulation which require swift action or which consist in the mere application of general provisions to specific situations without involving discretion, the Commission should be empowered to adopt implementing acts without applying Regulation (EU) No 182/2011.

145. The Commission should further be empowered to carry out certain administrative or management tasks which do not entail the adoption of delegated or implementing acts.

146. Pursuant to Regulation (EU) No [COM(2010)799] several sectoral measures, including on milk quotas, sugar quotas and other sugar measures and the restrictions on the planting of vines, as well as certain state aids, will expire within a reasonable period following the entry in force of this Regulation. After the repeal of Regulation (EU) No [COM(2010)799], the relevant provisions should continue to apply until the end of the schemes concerned.

147. In order to ensure a smooth transition from the arrangements provided for in Regulation (EU) No [COM(2010)799] to the provisions of this Regulation, the Commission should be empowered to adopt transitional measures.

148. Council Regulation (EC) No 1601/96 of 30 July 1996 laying down, in respect of hops, the amount of aid to producers for the 1995 harvest[20] is a temporary measure, which by its nature, is now obsolete. Council Regulation (EC) No 1037/2001 of 22 May 2001 authorising the offer and delivery for direct human consumption of certain imported wines which may have undergone oenological processes not provided for in Council Regulation (EC) No 1493/1999[21] has been superseded by the provisions of the Agreement between the European Community and the United States of America on trade in wine adopted by Council Decision 2006/232/EC of 20 December 2005[22] and is therefore obsolete. In the interests of clarity and legal certainty Regulations (EC) No 1601/96 and (EC) No 1037/2001 should be repealed.

149. As regards contractual relations in the milk and milk products sectors, the measures set out in this Regulation, are justified in the current economic circumstances of the dairy market and the structure of the supply chain. They should therefore be applied for a sufficiently long duration (both before and after the abolition of milk quotas) to allow them to have full effect. However, given their far-reaching nature, they should nevertheless be temporary in nature, and be subject to review. The Commission should adopt reports on the development of the milk market, covering in particular potential incentives to encourage farmers to enter into joint production agreements, to be submitted by 30 June 2014 and 31 December 2018 respectively,

HAVE ADOPTED THIS REGULATION:

TABLE OF CONTENTS

EXPLANATORY MEMORANDUM 2

1. CONTEXT OF THE PROPOSAL 2

2. RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENT 4

3. LEGAL ELEMENTS OF THE PROPOSAL 6

4. BUDGETARY IMPLICATION 7

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a common organisation of the markets in agricultural products (Single CMO Regulation) 9

PART I INTRODUCTORY PROVISIONS 37

PART II INTERNAL MARKET 41

TITLE I MARKET INTERVENTION 41

CHAPTER I Public intervention and aid for private storage 41

Section 1 General provisions on public intervention and aid for private storage 41

Section 2 Public intervention 42

Section 3 Aid for Private storage 45

Section 4 Common provisions on public intervention and aid for private storage 46

CHAPTER II Aid schemes 50

Section 1 Schemes to improve access to food 50

Subsection 1 School Fruit Scheme 50

Subsection 2 School milk scheme 52

Section 2 Aid in the olive oil and table olives sector 54

Section 3 Aid in the fruit and vegetables sector 55

Section 4 Support programmes in the wine sector 62

Subsection 1 General provisions and eligible measures 62

Subsection 2 Specific support measures 64

Subsection 3 Procedural provisions 68

Section 5 aid in the apiculture sector 69

TITLE II RULES CONCERNING MARKETING AND PRODUCER ORGANISATIONS 71

CHAPTER I Rules concerning marketing 71

Section 1 Marketing standards 71

Subsection 1 Introductory provisions 71

Subsection 2 General marketing standard 71

Subsection 3 Marketing standards by sectors or products 72

Subsection 4 Marketing standards related to import and export 78

Subsection 5 Common provisions 79

Section 2 Designations of origin, geographical indications and traditional terms in the wine sector 80

Subsection 1 Introductory provisions 80

Subsection 2 Designations of origin and geographical indications 80

Subsection 3 Traditional terms 89

Section 3 Labelling and presentation in the wine sector 92

CHAPTER II SPECIFIC PROVISIONS FOR INDIVIDUAL SECTORS 96

Section 1 Sugar 96

Section 2 Wine 97

Section 3 Milk and milk products 98

CHAPTER III Producer organisations and associations, interbranch organisations, operator organisations 101

Section 1 Definition and recognition 101

Section 2 Extension of rules and compulsory contributions 103

Section 3 Adjustment of supply 105

Section 4 Procedural rules 106

PART III TRADE WITH THIRD COUNTRIES 108

CHAPTER I Import and export licences 108

Chapter II Import duties 110

Chapter III Tariff quota management and special treatment of imports by third countries 112

Chapter IV Special import provisions for certain products 114

Chapter V Safeguard and inward processing 115

Chapter VI Export refunds 118

Chapter VII Outward processing 122

PART IV COMPETITION RULES 124

CHAPTER I Rules applying to undertakings 124

CHAPTER II State aid rules 126

PART V GENERAL PROVISIONS 130

CHAPTER I Exceptional measures 130

Section 1 Market disturbance 130

Section 2 market support measures related to animal diseases and loss of consumer confidence due to public, animal or plant health risks 131

Section 3 Specific problems 132

CHAPTER II Communications and reporting 132

CHAPTER III Reserve for crises in the agricultural sector 134

PART VI DELEGATIONS OF POWER, IMPLEMENTING PROVISIONS, TRANSITIONAL AND FINAL RULES 135

CHAPTER I Delegations of power and implementing provisions 135

CHAPTER II Transitional and final provisions 136

ANNEX I LIST OF PRODUCTS REFERRED TO IN ARTICLE 1(2) Part I: Cereals 138

Part II: Rice 140

Part III: Sugar 141

Part IV: Dried fodder 141

Part V: Seeds 142

Part VI: Hops 143

Part VII: Olive oil and table olives 143

Part VIII: Flax and hemp 143

Part IX: Fruit and vegetables 144

Part X: Processed fruit and vegetable products 144

Part XI: Bananas 147

Part XII: Wine 147

Part XIII: Live trees and other plants, bulbs, roots and the like, cut flowers and ornamental foliage 148

Part XIV: Tobacco 148

Part XV: Beef and veal 148

Part XVI: Milk and milk products 149

Part XVII: Pigmeat 149

Part XVIII: Sheepmeat and goatmeat 150

Part XIX: Eggs 150

Part XX: Poultrymeat 151

Part XXI: Ethyl alcohol of agricultural origin 151

Part XXII: Apiculture products 152

Part XXIII: Silkworms 152

Part XXIV: Other products 153

ANNEX II DEFINITIONS REFERRED TO IN ARTICLE 3(1) Part I: Definitions concerning the rice sector 161

Part II: Definitions concerning the hops sector 164

Part III: Definitions concerning the wine sector 164

Part IV: Definitions concerning the beef and veal sector 166

Part V: Definitions concerning the milk and milk products sector 166

Part VI: Definitions concerning the eggs sector 166

Part VII: Definitions concerning the poultrymeat sector 167

Part VIII: Definitions concerning the apiculture sector 168

ANNEX III STANDARD QUALITY OF RICE AND SUGAR AS REFERRED TO IN ARTICLE 7 169

ANNEX IV BUDGET FOR SUPPORT PROGRAMMES REFERRED TO IN ARTICLE 41(1) 171

ANNEX V INTERNATIONAL ORGANISATIONS REFERRED TO IN ARTICLE 56(3) 172

ANNEX VI DEFINITIONS, DESIGNATIONS AND SALES DESCRIPTION OF PRODUCTS REFERRED TO IN ARTICLE 60 173

Part I. Meat of bovine animals aged less than 12 months 173

I. Definition 173

II. Sales descriptions 173

Part II.Grapevine products 176

Part III.Milk and milk products 183

Part IV.Milk for human consumption falling within CN code 0401 184

Part V.Products of the poultrymeat sector 187

Part VI.Spreadable fats 189

Part VII.Descriptions and definitions of olive oil and olive pomace oils 192

Appendix to Annex VI (referred to in Part II) Wine growing zones 193

ANNEX VII OENOLOGICAL PRACTICES REFERRED TO IN ARTICLE 62 Part I Enrichment, acidification and de-acidification in certain wine-growing zones 198

Part II Restrictions 201

ANNEX VIII CORRELATION TABLES REFERRED TO IN ARTICLE 164 204

LEGISLATIVE FINANCIAL STATEMENT 220

PART IINTRODUCTORY PROVISIONS

Article 1 Scope

1. This Regulation establishes a common organisation of the markets for agricultural products, which shall mean all the products listed in Annex I TFEU with the exception of the fishery and aquaculture products listed in Annex I to Regulation (EU) No [COM(2011)416] on the common organisation of the markets in fishery and aquaculture products.

2. Agricultural products as defined in paragraph 1 shall be divided into the following sectors as listed in Annex I:

(a) cereals, Part I of Annex I;

(b) rice, Part II of Annex I;

(c) sugar, Part III of Annex I;

(d) dried fodder, Part IV of Annex I;

(e) seeds, Part V of Annex I;

(f) hops, Part VI of Annex I;

(g) olive oil and table olives, Part VII of Annex I;

(h) flax and hemp, Part VIII of Annex I;

(i) fruit and vegetables, Part IX of Annex I;

(j) processed fruit and vegetables, Part X of Annex I;

(k) bananas, Par