Proposal for a Council Regulation (EC) amending Council Regulation (EC) No 1554/95 laying down the general rules for the system of aid for cotton and repealing Regulation (EEC) No 2169/81
Date: 1998-05-06
Institutions: European Commission
Subjects: cotton, minimum price, production aid, production improvement

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 06.05.1998 
COM(1998) 283 final 

Proposal for a 

COUNCIL REGULATION (EC) 

amending Council Regulation (EC) No 1554/95 laying down the general rules for the 
system of aid for cotton and repealing Regulation (EEC) No 2169/81 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

1. 

INTRODUCTION 

1.1.  In  response  to  the  Council's  invitation  in  June  1997,  the  Commission's  report  on 

Greek  requests  in  the  cotton  sector  (COM(98)  10  final)  examined  the  following  four 

specific requests, leaving all other aspects of the current aid scheme unchanged: 

- payment of the aid directly to producers; 

- a regionalised system of penalties; 

- increasing the production estimate by 7.5%; 

- creating a legal framework for reviewing the production  estimate during the marketing 
year. 

1.2.  The  requested  amendments  were  examined  keeping  in  mind  the  objective  of 

maintaining  or,  where  possible,  strengthening  the  effectiveness  of  the  existing  control 

arrangements. The Court of Auditors has repeatedly shown in its annual reports  that the 

market organisation for cotton has serious inspection problems. 

2. 

PROPOSED MEASURES 

Now that the Council has examined the report, the Commission proposes: 

2.1. to encourage contract ginning by private or associated ginners on behalf of producer 

groups  and  to  specify  how  the  minimum  price  will  be  paid  to  members  in  such 

circumstances; 

2.2. to  improve the production  forecasts,  which  are currently  made before  1  October  so 

that  advance  aid  payments  can  be  paid  from  16  October.  It  is  proposed  to  review  the 

production  estimate  at  a date by which  a good  deal  of the  unginned  cotton  has  usually 

been placed  in supervised  storage, or during  the second half of the month of November. 

The percentage increase applied to the reviewed production  estimate when the  advances 

are calculated would be lower than  15% to take account of the improved reliability of the 

forecast. 

1  OJ C 309,  16.11.1993, p. 1 
OJ C 340,  17.11.1996, p. 1. 

J. 

Proposal for a 

COUNCIL REGULATION (EC) N° 

of 

amending Council Regulation (EC) No 1554/95 laying down the general rules for the 
system of aid for cotton and repealing Regulation (EEC) No 2169/81 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  the  Act  of  Accession  of  Greece^  and  in  particular  paragraph  9  of 

Protocol 4 on cotton, as last amended by Regulation (EC) No  1553/951, 

Having regard to the proposal from the Commission, 

Whereas  paragraph  3  of  Protocol  4 provides  for  production  aid  to  be  granted  through 

cotton ginning undertakings; whereas when such undertakings buy unginned cotton they 

pass  the  aid  on  to  producers  by  paying  a  price  at  least  equal  to  the  minimum  price 

referred to in paragraph 8a of Protocol 4; whereas these undertakings may also gin cotton 

for third parties; 

Whereas  Article  7(l)(b)  of  Council  Regulation  (EC)  No  1554/952,  as  amended  by 

Regulation (EC) No  1584/96  , provides that where a ginning undertaking  gins cotton on 

behalf  of  an  individual  producer  or  a  producer  associated  with  that  undertaking,  a 

statement must be submitted giving details of how the aid is passed on to the producers; 

whereas  the  notion  of  associated  producers  should  be  replaced  by  that  of  producer 

groups,  and  the  conditions  to  be  met  by  groups  in  such  cases  should  be  laid  down  to 

ensure that the aid is passed on, particularly through payment of the minimum price to its 

members; 

Whereas Article 8 of Regulation  (EC) No  1554/95 provides for the estimated  production 

of unginned cotton to be fixed before  1  October for the purpose of calculating the amount 

of the advance; whereas in order to improve  initial harvest  forecasts  and  ensure that  the 

amount  paid  in  advance  is  as  close  as  possible  to  the  final  amount  of  aid  due,  the 

1  OJL  148, 30.06.95, p. 45. 

2  OJ L 148, 30.06.95, p. 48. 

3  OJ L 206, 16.08.96, p. 16. 

Whereas Article 8 of Regulation (EC) No  1554/95 provides for the estimated production 

of unginned cotton to be fixed before  1  October for the purpose of calculating the amount 

of the advance; whereas in order to improve initial harvest  forecasts  and ensure that the 

amount  paid  in  advance  is  as  close  as  possible  to  the  final  amount  of  aid  due,  the 

production  estimate  should  be  revised  at  a  date  by  which  a  large  proportion  of  the 

unginned  cotton  harvest  has  already  been  placed  in  supervised  storage;  whereas  the 

increased reliability of such a revised estimate would require application of a percentage 

increase  of  less  than  15% when  calculating  the resulting  advance, without  this  causing 

any risks for  the budget; whereas the advances paid prior to the revised  estimate  should 

be adjusted, taking account of the administrative costs of applying the new mechanism, 

HAS ADOPTED THIS REGULATION: 

Article  1 

Regulation (EC) No 1554/95 is amended as follows: 

1.  Article 5(3) is replaced by the following: 

"3. 

Entitlement to the aid shall be acquired when the cotton is ginned. However,  aid 

may be paid in advance from 16 October following the start of the marketing year 

when the unginned cotton enters the cotton ginning undertaking, provided that an 

adequate security has been lodged. The amount of the advance shall be calculated 

in accordance with paragraph 3 a. 

Any aid balance outstanding  shall be paid once the actual  quantity  produced  has 

been  determined  and  any  adjustment  to  the  aid  referred  to  in  Article  2  of 

Regulation (EEC) No  1964/878 has been made. It shall be paid before  the end of 

the marketing year, at the latest." 

2.  The following paragraph is inserted: 

"3a.  The level of the advance per 100 kg of unginned cotton shall be equal to the guide 

price minus the world price and reduced further by an amount calculated using the 

7 JO n° LI 84 du 3.07.87, p. 14. 

8 OJL  184, 3.7.87, p. 14. 

V 

method provided for in Article 6, but replacing actual production by the estimated 

production of unginned cotton fixed in accordance with Article 8(1) plus  15 %. 

From  16 December  following the start of the marketing year, the amount of the aid 

referred  to  in  the  first  subparagraph  shall  be  replaced  by  a  revised  amount 

calculated  using  the  same method  but  based  on the  revised  production  estimate 

for  unginned  cotton  fixed  in  accordance  with  Article  8(2),  plus  at  least  7.5%. 

Advances  paid  between  16  October  and  15  December  shall  be  increased 

accordingly,  except  where  the  difference  between  the  two  amounts  is  less  than 

ECU 1/100 kg." 

3.  Article 7 is replaced by the following: 

«Article 7 

1. 

Without  prejudice  to  paragraph  2,  aid  shall  be  granted  only  to  those  cotton 

ginning undertakings which apply for it and which: 

(a) have submitted a contract stipulating payment to the producer of a price at least equal 

to  the  minimum  price  referred  to  in  Article  8a  of  Protocol  4  and  containing  a  clause 

specifying that: 

-  in  the  event  of  application  of  Article  2(3)  and/or (4)  of  Regulation  (EEC)  No 

1964/87,  the  agreed  price  shall  be  adjusted  in  consequence  of  the  effect  of  the 

application of that Article upon the aid, 

-  in  the  event  of  a difference  between  the  duality  of  the  cotton  delivered  and the 

standard quality, as referred to in paragraph 8 of Protocol 4, the price agreed will be 

adjusted proportionally by common consent between the contracting parties; 

b) keep stock accounts on ginned and unginned cotton that satisfy requirements to be laid 

down, so that entitlement to the aid can be checked; 

c) provide the other supporting documents needed for checking entitlement to the aid; 

d)  furnish  proof that the  cotton  delivered  under the contract  has been  the  subject  of  the 

declaration of area sown referred to in Article 8. 

r 

2.  Aid shall be granted only to those cotton ginning undertakings which apply for  it and 

'which  gin  cotton  on behalf  of  an  individual  producer  or  a producer  group  meeting  the 

criteria laid  down in the third  subparagraph  of paragraph  4 of Protocol  4, provided  such 

undertakings: 

a) satisfy the conditions referred to in paragraph  1(b) and (c); 

b) have submitted a statement giving details of the conditions under which the ginning is 

carried out and how the aid is administered; 

c)  undertake  to  pass  on  the  aid  to  the  individual  producers  ciy where  applicable,  the 

producer groups concerned; 

d)  furnish  proof  that  the  cotton  referred  to  in  the  statement  referred  to  in  point  (b)  has 

been the subject of the declaration of area sown referred  to in Article 8. 

e) furnish proof that producer groups are obliged to provide for and comply with a clause 

equivalent  to the one in paragraph  1(a) and  an undertaking  by  such  groups  to keep and 

produce supporting documents concerning payment of the minimum price. 

3.  Failure  to  comply  with  the  clause  or  undertaking  referred  to  in paragraph  2(e)  by  a 

producer  group having  ginning  carried  out  on its behalf  shall  be considered  a failure  to 

meet the criteria referred to in the third subparagraph of paragraph 4 of Protocol 4." 

4.  Article 8 is replaced by the following: 

"Article 8 

"1.  Before  1 October, the estimated production of unginned cotton referred  to in the first 

subparagraph  of  Article  5  (3a)  shall  be  drawn  up  using  the  procedure  referred  to  in 

Article 11(1), account being taken of crop estimates. 

In order to draw  up these  estimates,  a system  of declarations  of the areas  sown  shall  be 

established. 

2. Before  1 December, the revised  estimate of produo'on  cf unginned cotton referred  te 

in  the  second  subparagraph  of  Article  5  (3a)  shall  \e  drawn  up  using  the  procedure 

referred  to in Article  11(1), account being taken of the progress of the harvest." 

C 

Article 2 

This  Regulation  shall  enter  into  force  on  the third  day  following  its  publication  in  the 

Official  Journal of the European Communities. It shall apply from 1  September 1998. 

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

States. 

Done at 

For the Council 

9-

Financial Statement 

1 .BUDGET HEADING: 

Bl-141 

APPROPRIATIONS:  ECU 757 million 

2.TTTLE: 
Proposal for a Council Regulation amending Regulation (EC) No  1554/95 laying down the general rules for the system of aid for 

cotton and repealing Regulation (EEC) No 2169/81 

3.LEGAL BASIS: 

Article 39 of the Treaty establishing the European Community 

4.AIMS OF PROJECT: 

In response  to the  Council's  invitation  in June  1997, the Commission  has examined  the Greek requests  in the cotton  sector 

(COM(98)  10 final). It now proposes: 

to encourage contract ginning on behalf of producer groups. 
to ensure that the advance paid is closer to the final amount of aid due. 

5.FINANCIAL IMPLICATIONS 

5.0EXPENDITURE 

_ CHARGED TO THE EC BUDGET 

(REFUNDS/INTERVENTION) 
- NATIONAL ADMINISTRATION 
-OTHER 

5.1 

REVENUE 
- OWN RESOURCES OF THE EC 
(LEVIES/CUSTOMS DUTIES) 
- NATIONAL 

5.0.1  ESTIMATED EXPENDITURE 
5.1.1  ESTIMATED REVENUE 

5.2  METHOD OF CALCULATION: 

Period of 
12 months 

CURRENT 
FINANCIAL YEAR 
(98) 

FOLLOWING 
FINANCIAL YEAR 
(99) 

. 

2000 

2001 

2002 

2003 

6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE RELEVANT CHAPTER OF THE 

CURRENT BUDGET? 

YES/NO 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF THE CURRENT BUDGET? 

6.2  IS A SUPPLEMENTARY BUDGET NECESSARY? 

6.3  WILL FUTURE BUDGET APPROPRIATIONS BE NECESSARY? 

OBSERVATIONS: 

YES/NO 

¥£&NQ 

YES/NO 

The new provisions proposed are technical amendments without any financial implications. 
The review of the calculation of advances on the basis of production  estimated at a later date and a percentage  increase of less 
than  15% should not cause any risk of wrong payments.  The n;w system for calculating advance payments does not change the 
total amount of the aid for cotton. 

r 

ISSN 0254-1475 

COM(98) 283 final 

DOCUMENTS 

EN 

03  01  15  10 

Catalogue  number  :  CB-C0-98-292-EN-C 

ISBN 92-78-35561-5 

Office  for Official  Publications of the European  Communities 

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