Special report on the common organization of the market in fishery products
Date: 1985-11-28
Institutions: European Court of Auditors
Subjects: European Court of Auditors, common fisheries policy, common organisation of markets, report













EUR-Lex - 31985Y1231(06) - EN






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31985Y1231(06)

Special report on the common organization of the market in fishery products  


Official Journal C 339 , 31/12/1985 P. 0001 - 0017 





<(BLK0)LA ORG="CCF">EN</(BLK0)LA>SPECIAL REPORTon the common organization of the market  in fishery products(Observations, paragraph 4 of Article 206a of the EEC Treaty)(85/C  339/01)This report was adopted by the Court of Auditors at its meeting of 28 November  1985. The draft report had been sent on 18 September 1985 to the Commission, whose replies are  attached. >TABLE>1.  INTRODUCTION 1.1.  Title 4 of the Community budget is devoted to the  common fisheries and marine policy. The appropriations for commitment in 1984 amounted to 154,1 Mio  ECU. These appropriations may be broken down as follows: - 17,9 Mio ECU for the common organization of the market in fishery products, as compulsory  expenditure (Chapter 40), - 118,5 Mio ECU for measures to improve fisheries structures (Chapters 45 and 46), - 17,7 Mio ECU for various specific financial and social measures in the fisheries sector (Chapters  41 to 44). 1.2.  In 1984 the Court undertook a review of the implementation of the common organization of the  market in fishery products in the Member States concerned, in order to ensure that the systems set  up were in fact able to provide for the satisfactory application of the intervention mechanisms,  the main purpose of which is to guarantee the producer an adequate income. Those structural  measures not covered by this report come within the scope of the common fisheries policy's  'guidance' operations. 1.3.  Although market support expenditure for the year in question is only a relatively small  amount when compared with total expenditure, it is important to note that any growth in such  expenditure will depend primarily on the level of catches at which the threshold that brings the  guarantee system mechanism into play is set, resulting in quantities of fish offered for sale by  members of producers' organizations which cannot be sold at a price at least equal to a price fixed  in advance for each species and known as the 'withdrawal price'. 2.  DESCRIPTION OF THE MAIN FEATURES OF THE COMMON ORGANIZATION OF THE MARKET  Legal basis2.1.  Under Article 38 of the EEC Treaty, fishery products are regarded as  'agricultural products' and, as such, are subject to the principles and rules of the common  agricultural policy. 2.2.  Since 1971, these products have consequently been subject to a common form of market  organization which was established and has been governed since 1 January 1983 by the basic Council  Regulation (EEC) N° 3796/81 of 29 December 1981  (1). All the products listed in Table 1 are  currently covered by this Regulation. >TABLE>Market-regulation instruments2.3.  The basic Regulation provides for  market-regulation instruments, accompanied in certain cases by financial measures funded by the  EAGGF. These instruments are as follows: (a)  common marketing standards; (b) a system of prices; (c) a system of trade with third countries. 2.4.  Common marketing standards  (2) may be laid down for certain fishery products and may cover  classification by quality, size or weight, packing, presentation and labelling. At present they  apply to fresh products covered by the price system, i.e. 14 species of fish and one species of  crustacean; the grading of these species by size is set out in Table 2. >TABLE>2.5.  In cases where common marketing standards apply, products which do not  comply with them may not be marketed for human consumption within the Community. The Member States  are responsible for checking the conformity of the products. 2.6.  The two fundamental aspects of the price system are the guide price, fixed each year by the  Council before the beginning of the fishing year, and the Community withdrawal price, which is  fixed by the Commission and is derived from the guide price. The Community withdrawal price plays a  vital role in the implementation of most of the financial measures provided for under the terms of  the common organization of the market in fishery products. 2.7.  The main aspects of the system of trade with third countries are, in the case of imports, the  suspension of, or exemption from, customs duties in the case of products which are used primarily  in the Community's processing industry and the control of imports by means of a reference price  which is fixed each year, by product category, at a level corresponding to that of the Community  withdrawal price. In the case of exports, refunds designed to make up the difference between world  market prices and Community market prices may be granted if such a measure is found to be  economically necessary and desirable. Where necessary, these refunds are fixed by the Commission,  under the general rules laid down by the Council. Producers' organizations2.8.  Within the context of the Community regulations establishing the  common organization of the market in fishery products, 'producers' organization' means any  organization which is formally recognized by the Member State in which it has its registered office  and which has been established at the producers own initiative for the purpose of taking such  measures as will ensure that fishing is carried out on rational lines and that conditions for the  sale of their products are improved. 2.9.  These measures may include: (a)  the implementation of fishing plans to enable production and catching methods to be adapted  during the fishing year to meet demand; (b) the requirement for members to sell their output through the common organization or according  to common rules established in advance by the organization. 2.10.  The main rules of the legal system applying to producers' organizations are stated under  Title II (Articles 5 to 8) of the basic Regulation, which was the subject of implementing  provisions  (3). Financial measures funded by the EAGGF-GuaranteeMeasures currently applied2.11.  The basic  Regulation provides for a series of financial measures funded by the EAGGF-Guarantee and designed  to facilitate the implementation of the common organization and the attainment of its objectives.  The measures currently applied are as follows: (a)  intervention measures: (i) financial compensation, (ii)  carry-over premium, (iii)  special carry-over premium; (b) export refunds. Out of total expenditure in 1984 of 14,746 Mio ECU, financial compensation represented about 94  %  of the amount spent on interventions; the carry-over premium and special carry-over premium  accounted respectively for 0,5  % and 5,5  % of this total. It should be noted that the amount of  the refunds has been fixed at zero since 1 November 1983  (4), on account of the negligible price  differences found to exist on the world market. 2.12.  The expenditure for 1982 to 1984 funded by the EAGGF-Guarantee under the common organization  of the market in fishery products is shown, for each Member State, in Table 3. >TABLE>Financial compensation2.13.  The system of financial compensation is described in  Article 13 of the basic Regulation and in several implementing provisions  (5). It is paid to  producers' organizations which withdraw from the market, at public auctions, products which cannot  be sold at a price at least equal to the Community withdrawal price. The measure is limited as  regards both the quantities eligible to qualify for it and its value, which is calculated on the  basis of a sliding scale. It is in fact paid up to a maximum limit of 20  % of the annual  quantities of the product concerned which are put up for sale by the producers' organization. This  20  % is subdivided into four tranches of 5  % respectively. For the first, second, third and  fourth tranches, the amount of the financial compensation is equal, respectively, to 85  %, 70  %,  55  % and 40  % of the withdrawal price. The financial compensation is paid by the Member State to  the producers' organization at the request of the latter and after the end of the fishing year.  However, monthly advances are paid to the producers' organizations which apply for them and which  lodge a security equal to 105  % of the amount of the advance. 2.14.  For their part, the producers' organizations pay their members indemnities which may not  exceed the withdrawal price but must be at least 2,5 points higher than the percentage of the  withdrawal price that is taken into consideration for the calculation of financial compensation. In  this way, their members are obliged to accept a measure of financial solidarity, the main purpose  of which is to supplement, within the organization, the measures intended to reduce and to limit  surpluses which are to be submitted for intervention. 2.15.  Payment of financial compensation is subject to a number of conditions, the most important  of which are as follows: (a)  the granting of financial compensation is subject to the condition that the producers'  organization shall use the Community withdrawal price as its minimum price throughout the year  (6)  failing which it will be refused all financial compensation; (b) the products withdrawn must: (i) have been caught by a member of the producers' organization, (ii)  have been graded in accordance with the common marketing standards prior to being offered for  sale, and comply with this grading at the time of withdrawal, (iii)  have been offered for sale to all interested operators and must have remained unsaleable at  a price at least equal to the withdrawal price, (iv) have been rendered unfit for human consumption immediately after their withdrawal and disposed  of for purposes other than human consumption; there also exists the possibility of distributing the  products withdrawn free of charge to charitable institutions or, in the absence of any authorized  outlet, of throwing them back into the sea. 2.16.  The total quantities withdrawn from the market in 1982 to 1984 are shown, for each Member  State, in Table 4. >TABLE>Carry-over premium2.17.  The carry-over premium is a new measure, introduced in  Regulation (EEC) N° 3796/81 in order to avoid 'where possible ... the destruction of fish of a high  commercial value which have been withdrawn from the market' (18th recital). It is aid paid to  producers' organizations which decide to process certain products withdrawn from the market and to  put them back on the market after a specified period of storage. 2.18.  The rules governing the carry-over premium are set out in Article 14 of the basic Regulation  and in two implementing regulations  (7) which lay down the species and categories of products in  respect of which a carry-over premium may be applied for (see Table 5). The amount of the premium,  which may not exceed the cost of processing and storage nor exceed 50  % of the Community  withdrawal price for the fresh product, is fixed by the Commission, in accordance with the  Management Committee procedure, before the beginning of each fishing year. >TABLE>2.19.  A quantitative limit is also fixed for the carry-over premium: the premium  is in fact granted only for quantities not exceeding 15  % of the annual quantity of the product in  question put up for sale by the producers' organization. The only quantities that are eligible to  receive this premium are those which, after having been withdrawn from the market, are kept in such  a way as to preserve the quality of the products and are subjected by the following day, at the  latest, to one or more of three processing methods - freezing, salting or drying - followed by  storage for a period varying according to the type of processing. The processed products must  finally be placed back on the market. 2.20.  Producers' organizations in receipt of the carry-over premium must keep stock records in  accordance with the procedure laid down in Regulation (EEC) N° 3321/82, Article 5  (8). If the  products are processed on behalf of a producers' organization by an external undertaking, the  contract concluded between the two parties must stipulate that the undertaking is required to keep  the stock records. 2.21.  The premium is paid by the Member State after the end of each fishing year. Monthly advances  may be granted, however, provided that a security equal to 105  % of the amount applied for is  lodged by the producers' organization. Special carry-over premium2.22.  The special carry-over premium for Mediterranean sardines and  anchovies is a new measure provided for in paragraph 3 of Article 14 of the basic Regulation  (9)  and set out in two implementing regulations. The amount of the premium is laid down in Regulation  (EEC) N° 2204/82  (10) and may be reviewed by the Commission in accordance with the Management  Committee procedure on the basis, in particular, of: (a)  any variations in the difference between the supply costs of the industry in the Community and  those of the non-member countries supplying the Community; (b) the trend of processing costs within the Community. 2.23.  This premium is provided for a period of four years as from 1 January 1983, the date of  entry into force of the Council's implementing Regulation  (11). It was introduced 'because, on the  one hand, of the particular difficulties faced by the Mediterranean anchovy and sardine sector, and  on the other hand, of the slow development of producers' organizations in the Mediterranean area'  (basic Regulation, 18th recital). 2.24.  The special carry-over premium has some features in common with the carry-over premium; the  objective of both is to encourage the processing of products which are difficult to dispose of in  their fresh state. However, unlike the carry-over premium, the special carry-over premium does not  relate to products withdrawn from the market, it is not subject to a maximum quantitative limit and  it is not paid exclusively to producers' organizations. 2.25. The recipients of the special carry-over premium are either producers' organizations which  subject the products in question to one or more of the forms of processing laid down in the  Community regulations (freezing, salting, drying or tinning of sardines and anchovies falling under  heading N° 16.04 of the Common Customs Tariff), or processing undertakings which have concluded  with the producers' organizations a purchase contract stipulating a purchase price at least equal  to 105  % of the Community withdrawal price. An exception is made, however, in the case of Greece,  where, until the end of 1985, the premium may be paid to processors who conclude purchase contracts  with producers who are not members of producers' organizations and to individual producers who  process their products themselves. 2.26. Each purchase contract must be concluded for a period of at least two months and must specify  the quantities and categories of the products to be delivered, together with the schedule of  deliveries. 2.27.  The processors must keep stock records in accordance with the special procedure laid down  under Article 6 of Regulation (EEC) N° 3138/82  (12). 2.28.  Applications for payment of the special carry-over premium may be submitted by those  concerned to the competent authorities of the Member State concerned on conclusion of the  processing operations. If processing is carried out on the basis of a purchase contract, the  application for the premium is submitted after all the quantities purchased have been processed  and, at the latest, within three months from the end of the processing operations. Advances may be  granted if a security equal to 105  % of the advance applied for is provided. Link with the policy on management of resources2.29.  The conservation of fish stocks is the main  aspect of the common fisheries policy. The Community system for the conservation and management of  fishery resources is established in Council Regulation (EEC) No 170/83 of 25 January 1983  (13). It  consists, in particular, of conservation measures, rules for the use and distribution of resources,  special provisions for coastal fishing and supervisory measures. 2.30.  The conservation measures, in particular, may include, for each species or group of  species: (a)  the establishment of zones where fishing is prohibited or restricted to certain periods, types  of vessel, fishing gear or certain end-uses; (b) the setting of standards as regards fishing gear; (c) the setting of a minimum fish size or weight per species; (d) the restriction of fishing, in particular by limits on catches. 2.31.  When it becomes necessary to limit catches, the following provisions are fixed each year: (a)  the total allowable catch (TAC) for each stock or group of stocks; (b) the share available to the Community; (c) the total catch allocated to third countries; (d) the specific conditions for making these catches. 2.32.  The total catch available to the Community is distributed between the Member States (quota  system) in a manner which assures each Member State relative stability of fishing activities for  each of the stocks concerned. Table 6 shows the allocation of quotas for 1984 and 1985, with  reference to the main species of fish. 2.33.  The basic Regulation establishes a formal link between the interventions financed by the  EAGGF-Guarantee and the catch limits imposed under the policy on the management of resources.  According to paragraph 2 of Article 26 of this Regulation, 'intervention measures shall be financed  (...) in respect of products from a stock or group of stocks only up to the limit of any quantities  allocated to the Member State in question from the total volume of allowable catches for the stock  or groups of stocks in question'. 2.34.  The obligation on producers' organizations to keep fishing plans may appear to be a  significant factor contributing towards the monitoring of observance of the various quotas  allocated to the Member States. 2.35.  According to the Community regulations, observance of the quotas must be checked on a  regular basis by Community inspectors. There has been a delay in recruiting and appointing these  inspectors, so that it is not possible at present to assess the results of these measures. >TABLE>3.  INSPECTIONS CARRIED OUT BY THE COURT IN THE MEMBER STATES  Introduction3.1.  During 1984, the Court carried out on-the-spot inspections in several ports in  all the Member States engaging in maritime activities. The main objective was to check the degree  of reliability and effectiveness of the systems introduced in each Member State, in order to ensure  that the rather complex Community regulations were being implemented correctly. These inspections  were particularly imperative since, prior to the Court's inspection, the Commission had not made  any visits of this type to the national administrations concerned. The observations below are based  on the results of the investigations carried out and they refer to the most important points raised  in the previous chapter. Observance of the common marketing standards3.2.  Loopholes were found to exist with regard to the  application of the common marketing standards to pelagic species (sardines, anchovies, herring and  mackerel). The countries concerned are the following: (a)  in Italy, it was noted during visits to four fish markets that the sardines and anchovies  offered for sale were automatically considered to be of one and the same freshness and size  category ('E3'), despite the fact that the Community regulations provide for four size categories,  in addition to three freshness categories, for sardines and anchovies. The fish are graded on the  vessel and unloaded in boxes which are all supposed to contain the same quality and quantity of  fish. In addition, the lots displayed for sale are not labelled in accordance with the Community  regulations; (b) in Greece, the common marketing standards are not generally applied at all to sardines and  anchovies; (c) in France, on the Mediterranean coast, sardines and anchovies are generally sold in bulk on the  basis of a sample assessment of the quality and quantity of the catches (a practice known as  'agréage'). A similar system of bulk sales was observed in Ireland and Denmark in the case of  herring and mackerel: here the fish is sold prior to unloading, on the basis of samples taken in  the holds of the vessels. 3.3.  These methods of offering fish for sale, which sometimes represent traditional practices  going back to before the introduction of the common organization of the market, are not in accord  with the formal requirements of Community legislation. The lack of stringency in the grading has  repercussions when the quantity and quality of the product withdrawn from the market and the  applicable withdrawal price are established, as the determination of these factors is subject to  reservations that result directly from the inaccurate methods applied. Producers' organizations3.4.  The actual role played by producers' organizations in the common  organization of the market in fishery products varies considerably from one Member State to the  other. The two principal tasks assigned to the producers' organizations are the preparation of  fishing plans to enable supply to be adapted to demand during the fishing year and the  concentration of supply and the regularization of prices. It was observed, however, that these two  tasks were not carried out anywhere entirely in accordance with the objectives laid down in the  regulations. 3.5.  The random nature of catches and rapid changes in market conditions, influenced among other  things by external factors such as the unloading of vessels from non-Member States, often lead  producers' organizations to draw up fishing plans which confine themselves to defining estimates on  the basis of the number of vessels in operation and the results of previous years. In the high-sea  fishing sector, some organizations may to some extent 'guide' the fishing activities of their  members, by means of daily instructions transmitted by radio to the vessels in operation. This  system, which certainly contributes towards rationalizing fishing, nevertheless has more in common  with flexible day-to-day management than with the implementation of a plan. In this connection, the  Commission should make it clear to the producers' organizations what should be included under the  concept of a fishing plan, which is an essential instrument for the upstream stabilization of the  market. 3.6.  In the case of concentration of supply and regularization of prices, the role of the  producers' organizations is limited by the fact that, in most cases, the fish is sold at public  auctions where the same rules of sale apply to all producers, irrespective of whether they belong  to an organization or not. Within such a context, the role of the producers' organization is  neutralized, as has been observed in certain cases, and is limited, in practice, to ensuring that  the Community withdrawal price is applied. Conversely, producers who are not members of  organizations may benefit from the economic advantages that flow from the general maintenance of  prices. 3.7.  Furthermore, the Community regulations governing producers' organizations in the fisheries  sector do not place fishermen under any obligation to become members. Thus, according to  information obtained in certain Member States, there still appears to be a large number of  producers carrying out their activities independently of any producers' organization. This fact is  confirmed by the data set out in Table 7. These producers are therefore outside the scope of the  common policy on market regulation, which, depending on the situation existing in the various  countries, may jeopardize the effectiveness of the common market policy. >TABLE>3.8.  It was observed that producers sometimes regard the producers' organization  not as a group established for concerted joint action but primarily as a means of gaining access to  the intervention measures financed by the EAGGF. This situation was found to exist in Denmark, in  some Scottish ports and in certain places on the Italian Adriatic coast, as described below: (a)  in Denmark, a Member State with a very large fishing industry, only one producers'  organization existed in 1984, representing about 86  % of Danish fishing vessels and 90  % of the  tonnage landed. However, the fact that only one, very large, recognized organization exists  suggests less than total commitment by Danish fishermen to the organization model advocated in the  Community legislation. An on-the-spot visit established that the Danish producers' organization  does not play an active role in either the organization of fishing activities or marketing. It is  essentially an accounting and administrative body, responsible for processing application files,  with a view to obtaining financial compensation, and for calculating the amounts involved; (b) in some ports in Scotland and on the Italian Adriatic coast, the producers were already  organized into cooperatives or associations for administering their common interests. However, the  existing bodies, instead of applying for recognition, preferred to be duplicated by a purely formal  structure. The recognized producers' organization has virtually n° staff and practically n°  resources of its own and is primarily concerned - as in the case of Denmark - with administering  the intervention measures financed by the EAGGF. Financial compensationDenaturing of products withdrawn from the market3.9.  According to one of  the rules applying to withdrawal operations, once the products have been unloaded, graded, offered  for sale and withdrawn from the market, they must be rendered unfit for human consumption  immediately after withdrawal (paragraph 2 of Article 2 of Regulation (EEC) N° 1501/83  (14)), to  prevent them being reintroduced into the standard distribution network. The method generally used  for rendering fish withdrawn from the market unfit for human consumption is that of denaturing by  means of a dye. 3.10.  The following findings were made: (a)  in a French Mediterranean port (Port Vendres), the products withdrawn from the market,  particularly sardines, were not even unloaded, did not undergo any denaturing process and were  thrown back into the sea. This operation is therefore not monitored either by the competent  producers' organization or by the local authorities and it was not possible to inspect any document  relating to this operation; (b) there are still problems in Italy and Denmark, and n° formal provision has been adopted to  ensure systematic observance of the requirement that fish withdrawn from the market be rendered  unfit for human consumption; (c) at a port visited in Ireland, the quantities withdrawn are either sent for processing at the  fish meal factory without prior denaturing or kept, without denaturing, in the cold storage tanks  of trawlers before being thrown back into the open sea; (d) in the Netherlands, the national regulations have introduced a derogation from the Community  regulations  (15) in the case of withdrawals of large quantities of fish. This is because  denaturing does not take place immediately, at the place of sale, but is effected on the premises  of cold storage companies. 3.11.  The situation observed in the abovementioned Member States amounts to failure to comply with  the obligation to render products withdraw from the market unfit for human consumption immediately  after withdrawal. In addition, it effectively negates substantial precautionary measures provided  for in Community legislation in order to forestall the possibility of fraud. If these provisions  are not observed more scrupulously, the Commission should consider introducing proper measures to  supervise withdrawal operations. Observance of the Community withdrawal price3.12.  An on-the-spot inspection of the documentation  relating to sales made by producers' organizations in Italy at the fish markets visited showed that  sardines and anchovies are sometimes sold below the Community withdrawal price, whereas they should  have been withdrawn from the market according to the regulations. 3.13.  Failure to observe the Community regulations is supposed to disqualify the offenders from  any entitlement to financial compensation for the year in question. The Court considers that this  practice, which does not comply with one of the basic conditions for the granting of financial  compensation, is in conflict with the stated objective of maintaining producers' incomes through  market regulation. Financial solidarity among members of producers' organizations3.14.  In Italy, the four producers'  organizations visited restrict themselves to paying the sums obtained by way of financial  compensation, to those of their members who withdraw products without making any contribution out  of their own funds. The principle of the financial solidarity of the organization as a whole (see  paragraph 2.14) is therefore not observed. Carry-over premium3.15.  Applying for this premium brings with it the option, for producers'  organizations, of using processing plants and storage facilities, either on their own or in  sub-contracted operations, and being able to dispose of the processed product on a market which  will often be different from that of the fresh product. The carry-over premium does not appear to  constitute a strong enough incentive to encourage all the producers' organizations potentially  involved to undertake processing and marketing operations, which are often new to them. 3.16.  The premium has been used only by the Federal Republic of Germany, to a limited extent, on  account of the small quantities of fish withdrawn from the market in that country. In the other  Member States there was n° occasion for use of the premium. The Court therefore notes that the  objective set by the Community regulations in this respect - i.e. to avoid 'the destruction of fish  of a high commercial value' - has been achieved only very incompletely. Special carry-over premiumKeeping of stock records3.17.  The small-scale fishery undertakings to  be found in Greece are not easily able to comply with the requirement of keeping records. In the  case of some undertakings in France, these records showed that there is n° accurate identification  of the lots after the fish has been processed. The lots covered by each contract are not monitored  from the arrival of the fresh or frozen sardines up to the moment when they are stored in tinned  form. The Court considers that there should be closer observance of the stock records, so that  products for which a premium is granted may be easily checked and distinguished from those products  which have not received the special carry-over premium. Control system to be introduced by the Member States3.18.  Article 4 of Regulation (EEC) N°  2204/82 provides that the Member States concerned shall introduce a system to ensure that the  products in respect of which application has been made for the special carry-over premium do in  fact qualify for it. 3.19.  During the Court's mission to Greece, it was found that the departmental divisions appointed  to carry out such a control system were not in a position to supply the results of these controls  for the financial year. This should, however, be regarded as a fundamental condition for the  granting of the special carry-over premium. The roles of intermediaries3.20.  During the on-the-spot inspection in France on the premises of  processing firms, it was found that intermediaries between the processors and the producers'  organizations both invoiced the fish delivered to the processors and paid for the fish purchased  from fishermen's organizations. These middle-men effectively prevent contact between the two  parties. It is therefore not possible to monitor the origin of the fish, observance of the  contracts and the price paid to the fishermen's organizations, which must be at least 105  % of the  withdrawal price. In addition, one intermediary company applied for and obtained special carry-over  premiums on behalf of certain processors who had given n° express authority for it to do so. This  situation, besides ultimately running counter to the producers' interests, also obstructs the  fundamental role which the producers' organizations are supposed to play within the context of the  common fisheries policy. Purchase price of sardines to producers' organizations3.21.  In 1983, the minimum purchase price  in France was 1,97 FF/kg and in 1984 it was 2,10 FF/kg (105  % of the withdrawal price). An  inspection of a number of contracts revealed that they rarely showed the net purchase price paid to  the producers' organizations, since the prices given on the contracts include other cost factors  (intermediaries, transport, etc.). 3.22.  The Court considers that the Commission should specify the information which should be  contained in the contracts (in accordance with Article 3 of Regulation (EEC) N° 3138/82), in order  to show the actual price obtained by the producers' organizations, as all the regulations are  designed to ensure that this price remains at an adequate level. Management of stocks3.23.  During the on-the-spot audits in the countries concerned, the following  findings were made  : (a)  no efficient system for monitoring compliance with the catch quotas had been introduced in the  Netherlands or in Ireland, whereas considerable efforts had been made along these lines in the  other Member States; (b) in France, a schedule of allocating national quotas by region had not yet been applied at the  time of the visit (July 1984), with the result that serious difficulties occurred with regard to  the strict management of quotas at local level. 3.24.  Because of the incomplete nature except in the United Kingdom of the system for monitoring  observance of the quotas which has been introduced into the various Member States, it is not  possible to ensure that, in accordance with the Community provisions, quantities caught outside the  quota do not benefit from the EAGGF-Guarantee intervention measures. 4.  CONCLUSIONS 4.1.  The main conclusion to emerge from the above observations  is that the common organization of the market in fishery products, as set up by the Community  regulations, has not in actual fact led to a sufficient measure of 'common practices', with the  result that the regulations have not to date been able to take full effect. The practices  traditionally followed by producers, which sometimes vary greatly from one Member State to another,  should in fact have been adapted to the basic rules of the common organization of the market: this  applies in particular to the common marketing standards and the detailed rules governing the  special carry-over premium, in respect of which the Court noted the greatest disparities. The Court  considers that the Commission should not allow producers a discretionary margin in their observance  of the regulations. 4.2.  As provided for in the Community regulations, the entire common organization of the market is  based on a voluntary organization of the trade and, consequently, the optimum operation of  producers' organizations. It was noted in this respect, however, that very few organizations -  particularly those which have recently been set up - seem to make full use of the range of measures  proposed by the Community. Furthermore, the existence in certain cases of large-scale independent  producers undermines the effects which the rules of the system imposed on markets by Community  measures are supposed to produce. They benefit indirectly from price maintenance because of the  existence of the withdrawal price, which is the minimum price below which their competitors who are  members of producers' organizations undertake not to sell. This fact alone is enough to show that,  under such conditions, the market is n° longer fully organized. There is indeed cause to question  the sense of a minimum selling price which is not applied to all operators and which therefore only  concerns part of the market.   This report was adopted by the Court at its meeting of 28  November 1985. For the Court of AuditorsMarcel MARTPresidentTHE COMMISSION'S REPLIES 2.   DESCRIPTION OF THE MAIN FEATURES OF THE MARKET ORGANIZATION Link with the policy on management of  resources2.35.  Community inspectors have been performing their duties since November 1983:  monthly catch figures have been sent to Brussels since 1980. The elimination of the 'grey market' in the Netherlands, the improvements in the recording of  landings in transit, the identification of the 'paper quotas' problem etc., show that it is  possible to assess, on a provisional basis at least, the effectiveness of some Community measures. 3.  AUDITS CARRIED OUT BY THE COURT IN THE MEMBER STATES Introduction3.1.  The  Commission also carried out a number of inspections in preparing the decisions on the clearance of  accounts. The EAGGF inspectors made checks on both paying agencies and producers' organizations in  respect of 1982 and 1983. These checks revealed a number of shortcomings which were also remarked on by the Court. The  observations were set forth in the EAGGF's internal reports and in several cases the Commission was  recommended to make financial corrections. Similarly, the Commission made visits to ports (and more particularly the headquarters of the  national administrations) in the course of 1984, to monitor implementation of those provisions of  the common fisheries policy which relate to fish stocks. Observance of the common marketing standards3.2 and 3.3.  The Commission shares the view expressed  by the Court as regards the consequences of the loopholes in the application of the common  marketing standards for certain species, bearing the following in mind: - Firstly, monitoring compliance with the common marketing standards is entirely the responsibility  of the Member States. For this reason the Commission has reminded several Member States of their  obligations and intends to take any necessary measures should the situation continue; - Secondly, as regards sample assessment, the Commission would point out that it recently presented  to the Council a proposal for a Regulation  (1) whereby certain pelagic species would be graded by  sample assessment, subject to certain conditions. This proposal would make for stricter application  of the common marketing standards. Producers' organizations3.4.  Under the Community rules Member States are obliged to keep a  constant watch on the operation of producers' organizations. The authorities of the Member State on  whose territory the producers' organization is established have more resources at their disposal  than the Commission for checking that the organization in question is complying with the Community  rules (Regulation (EEC) N° 105/76). 3.5.  The concept in question is already dealt with by Regulation (EEC) N° 1995/84, Article 5(1) of  which states that a catch plan is to be drawn up on the basis of forecasts of the potential output  per species, respecting any quantities allocated to the Member State and on the basis of an  analysis of market requirements. The plan is to include appropriate measures for bringing the means  of production and catches into line with demand during the fishing year. Within this framework  producers' organizations are free to define the technical means which they intend to employ. The catch plan is thus an economic instrument the purpose of which is to adjust supply to the  actual situation on the market. One specific objective of the market organization is the short-term  regulation of catches within the framework of the catch plan, in the light of day-to-day  fluctuations in prices. 3.6.  The whole question of the position and role of producers' organization is dealt with in the  answer to point 4.2. 3.7.  The Commission would point out that, since the beginning, producers' organizations have been  set up on a non-compulsory basis, for reasons of public law in some Member States and to take  account of production conditions specific to this sector. However, to lessen the negative effects which the existence of non-affiliated producers could have  on the stability of the market, Article 7 of the basic Regulation  (2) enables Member States to  oblige such producers, under certain conditions, to comply with the marketing rules of a producers'  organization (extension of rules). 3.8.  The Commission has taken note of the Court's observations concerning certain specific cases.  It will request the Member States responsible to ensure that the producers' organization comply  with the Community rules or to withdraw recognition in the event of non-compliance. The Commission would also point out that a second producers' organization has now been set up in  Denmark. Financial compensation3.9 to 3.14  The Commission shares the Court's opinion concerning the  loopholes in the application of Community rules on the denaturing of products withdrawn from the  market, on the observance of the Community withdrawal price and on financial solidarity. - As regards the denaturing of products, the Commission has already requested the Member States  concerned to take all necessary steps to ensure that the relevant Community rules are strictly  applied. - As regards non-compliance with the Community rules on withdrawal prices by producers'  organizations in Italy, the Commission has already requested, following an on-the-spot  investigation, that recognition should be withdrawn from one of the producers' organizations. The Commission has also requested the Italian authorities to provide it with full information  concerning the judicial inquiry which is now being conducted into a producers' organization. All  EAGGF payments to these two producers' organizations have been suspended. Carry-over premium3.15.  The Commission would point out that recourse to the carry-over premium is  merely an option available to producers' organizations. They can decide for or against applying for  the premium, within the framework of their specific marketing policy. Use of the premium depends on  several factors, such as whether the market will be able to absorb the processed products at a  later date. The incentive provided is determined by the level of the premium. In the fixing of this level,  account must be taken of two basic factors which are difficult to reconcile: on the one hand,  producers' organizations must be given sufficient incentive to process and store their products; on  the other hand, the balance of the markets for fresh and processed products must not be adversely  affected. To encourage producers' organizations to make wider use of the carry-over premium, the Commission  recently sent to the Member States an explanatory memo so that the possibilities offered by the  scheme in question would be more fully understood. Special carry-over premiumControl system to be introduced by the Member States3.19  It is from  the Greek administrative authorities and not from the departments inspected by the Court of  Auditors that the Commission regularly receives the communications required under the Community  rules, as specified in Article 13(2) of Regulation (EEC) N° 3138/82. The role of intermediaries3.20.  The Commission has noted the observations made by the Court of  Auditors and will contact the national authorities concerned. Purchase price of sardines to producers' organizations3.21.  The Commission would point out that  the price to be paid to the vendor must be stated in the contract. This is a condition for the  validity of the contract and is explicitly stipulated by the Community rules (Article 3(1) and  Article 4(1) of Regulation N° 3138/82). Other cost factors may be included in the contract if the net purchase price paid to the vendor is  clearly stated and if this price is equal to the withdrawal price plus 5  %. Checks on the  information shown in the contracts are a matter for the agency designated for this purpose by the  Member State. On several occasions the Commission staff have also discussed with the Member States, within the  appropriate bodies, the various ways in which compliance with the withdrawal price could be  defined. Depending on the outcome of these discussions, the Commission may adopt appropriate  measures. Management of stocks3.23.  The Commission has ascertained that all Member States have now  introduced systems of recording and monitoring catches to ensure that quotas are observed. The  degree to which these systems have been developed varies from one Member State to another; their  effectiveness is gradually improving in the Community as a whole. It should be pointed out that the  Netherlands have recently made a considerable effort to ensure that their fishermen respect the  quotas, despite the problems arising from the fact that the Netherlands fleet is large in  comparison to the fish stocks at its disposal. In the case of France it should be pointed out that there is a scheme for allocating the most  important stocks (eg., saithe, herring) to producers' organizations. The national authorities have  sole responsibility for implementing any scheme for allocating quotas by region. 3.24.  The problem raised by the Court of Auditors must be resolved within the general context of  better monitoring of the activities of Community vessels. 4.  CONCLUSIONS 4.1.  The Commission, which will continue its efforts in this  sector bearing in mind the concern expressed by the Court of Auditors, would point out that, as  regards the shortcomings found by the Court, it has requested the Member States to take all  necessary measures to ensure stricter application of the Community rules. Steps have recently been  taken in this direction, such as the withdrawal of recognition from some producers' organizations  and the tightening of national implementing provisions. On 24 September 1985, moreover, the Commission placed before the Council a proposal for a  Regulation which would ensure, amongst other things, stricter application of marketing standards   (3). 4.2.  Voluntary and autonomous management of the market by producers' organizations is an essential  basis for the market organization and goes hand in hand with the right to choose whether or not to  set up a producers' organization and whether or not to join such an organization. The same applies  to intervention on the market: a producers' organization can opt for the Community price system or  for autonomous price arrangements. These fundamental principles were laid down by the Council in the light of the practical needs of  this sector, a feature of which is the great diversity from one region to another, and bearing in  mind the constitutional law in force in certain Member States. It is interesting to note that over 70  % of Community output of the products listed in Annex I to  the basic Regulation is marketed by producers' organizations, which apply the Community withdrawal  prices to almost all the quantities concerned. This indicates the relative importance of producers'  organizations on the market as a whole. (1) Council Regulation (EEC) N° 2142/70 of 20 October 1970 (OJ N° L 236,  27. 10. 1970, p. 5), subsequently replaced by Council Regulation (EEC) N° 100/76 of 19 January 1976  (OJ N° L 20, 28. 1. 1976, p.1).  (2) OJ N° L 379, 31. 12. 1981, p. 1.  (3) Council Regulation (EEC) N° 103/76 of 19 January 1976 (OJ N° L 20, 28. 1. 1976, p. 29), amended  by Council Regulation (EEC) N° 3166/82 of 22 November 1982 (OJ N° L 332, 27. 11. 1982, p. 4). For  one species of crustacean, Council Regulation (EEC) N° 104/76 of 19 January 1976 (OJ N° L 20, 28.  1. 1976, p. 35), last amended by Regulation (EEC) N° 3118/85 of 4 November 1985 (OJ N° L 297, 9.  11. 1985, p. 3).  (4) See: (a)  Council Regulation (EEC) N° 105/76 of 19 January 1976 (OJ N° L 20, 28. 1. 1976, p. 39) on the  recognition of producers' organizations in the fishing industry; (b) Commission Regulation (EEC) N° 2062/80 of 31 July 1980 (OJ N° L 200, 1. 8. 1980, p. 82) on the  conditions and procedure for granting and withdrawing recognition of producers' organizations and  associations thereof in the fishing industry. This Regulation was recently amended by Commission  Regulation N° 1995/84 of 12 July 1984 (OJ N° L 186, 13. 7. 1984, p. 23).  (5) Commission Regulation (EEC) N° 3090/83 of 31 October 1983 (OJ N° L 301, 1. 11. 1983, p. 65).  (6) See also: (a)  Council Regulation (EEC) N° 2202/82 of 28 July 1982 (OJ N° L 235, 10. 8. 1982, p. 1), laying  down general rules for the granting of financial compensation in respect of certain fishery  products; (b) Commission Regulation (EEC) N° 3137/82 of 19 November 1982 (OJ N° L 335, 29. 11. 1982, p. 1),  laying down detailed rules for the granting of financial compensation in respect of certain fishery  products; (c) Commission Regulation (EEC) N° 1501/83 of 9 June 1983 (OJ N° L 152, 10. 6. 1983, p. 22), on the  disposal of certain fishery products which have been the subject of measures to stabilize the  market.  (7) As provided for in paragraph 1 of Article 2 of Council Regulation (EEC) N° 2202/82 of 28 July  1982 (OJ N° L 235, 10. 8. 1982, p. 2).  (8) See also Council Regulation (EEC) N° 2203/82 of 28 July 1982 (OJ N° L 235, 10. 8. 1982, p. 4),  laying down general rules for the granting of a carry-over premium for certain fishery products,  and Commission Regulation (EEC) N° 3321/82 of 9 December 1982 (OJ N° L 351, 11. 12. 1982, p. 20),  laying down detailed rules for the granting of a carry-over premium for certain fishery products.  (9) See also: (a)  Council Regulation (EEC) N° 2204/82 of 28 July 1982 (OJ N° L 235, 10. 8. 1982, p. 7), laying  down general rules for the granting of a special carry-over premium for Mediterranean sardines and  anchovies; (b) Commission Regulation (EEC) N° 3138/82 of 19 November 1982 (OJ N° L 335, 29. 11. 1982, p. 9),  laying down detailed rules for the granting of a special carry-over premium for Mediterranean  sardines and anchovies, amended by Commission Regulation N° 3646/84 of 21 December 1984 (OJ N° L  335, 21. 12. 1984, p. 57).  (10) OJ N° L 24, 27. 1. 1983, p. 1.(11) See paragraph 2 of Article 8 of the 1973 Dutch Regulation on the denaturing of fish varieties  affected by the Community regulations. See also the correspondence of the 'ProduktÍschap voor vis  en visprodukten' (Marketing board for fish and fish products) with the Ministry of Agriculture, of  15 February 1984.  (1) COM(85) 513 final of 24. 9. 1985.  (2) Regulation (EEC) N° 3796/81.  (3) COM(85) 513 final.