Council Regulation (EC) No 1051/2001 of 22 May 2001 on production aid for cotton
Date: 2001-05-22
Institutions: Council of the European Union
Subjects: Greece, aid system, cotton, production aid

1.6.2001

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COUNCIL REGULATION (EC) No 1051/2001

of 22 May 2001

on production aid for cotton

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community,

difference between the guide price and the world market
price. In the light of experience, the foundations of the
system and its various components should be main-
tained.

Having regard to Protocol 4 on cotton (1), annexed to the Act
of Accession of Greece, and in particular the paragraph 6
thereof,

(4)

Having regard to the proposal from the Commission (2),

Having regard to the opinion of the European Parliament (3),

Having regard to the opinion of the Economic and Social
Committee (4),

(5)

Whereas:

(1)

(2)

(3)

Examination of
the aid scheme
the operation of
provided for in paragraph 11 of Protocol 4 annexed to
the Act of Accession of Greece reveals a need to main-
tain the existing arrangements for cotton, but with
certain adjustments.

The measures relating to cotton are laid down in
Protocol 4, Council Regulation (EC) No 1554/95 of 29
June 1995 laying down the general rules for the system
of aid for cotton and repealing Regulation (EEC) No
2169/81 (5) and Council Regulation (EEC) No 1964/87
of 2 July 1987 adjusting the system of aid for cotton
introduced by Protocol 4 annexed to the Act of Acces-
sion of Greece (6). The arrangements provided for in
Protocol 4 should be maintained, particularly the poss-
ibility for the Council to adjust the scheme, and, in the
interests of simplification, all the implementing meas-
ures needed for the grant of the aid should be brought
together in a single Council Regulation.

Paragraph 6 of Protocol 4 stipulates that the necessary
measures for implementing the scheme for cotton must
be adopted. The production aid provided for in para-
graph 3 of Protocol 4 is currently based on a system, in
the framework of guaranteed national quantities, that
guarantees a minimum price to producers and, through
the aid paid to ginning undertakings, makes up the

(1) OJ L 291, 19.11.1979, p. 174. Protocol as last amended by Regula-

tion (EC) No 1050/2001. (see p. 1 of this Official Journal).

(2) Proposition of 13 December 1999 (not yet published in the Official

(6)

(7)

(8)

(3) Opinion delivered on 15 February 2001 (not yet published in the

Journal).

Official Journal).

(4) OJ C 140, 18.5.2000, p. 33.
(5) OJ L 148, 30.6.1995, p. 48. Regulation as last amended by Regula-

tion (EC) No 1419/98 (OJ L 190, 4.7.1998, p. 4)

(6) OJ L 184, 30.6.1995, p. 14. Regulation as last amended by Regula-

tion (EC) No 1553/95 (OJ L 148, 30.6.1995, p. 45).

The guide price, the minimum price payable to produ-
cers and the guaranteed national quantities should be
fixed at
that maintain the balance achieved
between crops and enable operators to run medium-
term production and processing programmes.

levels

The provisions for determining the world market price
for unginned cotton should be maintained. This price
may be established on the basis of
the relationship
between the price for ginned cotton and the price calcu-
lated for unginned cotton. When calculating the price of
ginned cotton, account should be taken of offers made
on the world market and of quotations on those
exchanges that are important for international trade.

The current mechanism, whereby when a certain
production quantity is exceeded the guide price is
reduced proportionately in the Member States respon-
sible for the overrun, should be maintained in order to
ensure that penalties are applied fairly. However, the
reduction in the guide price may be limited provided
that, taking account in particular of the average world
market price, a certain level of expenditure is not
exceeded. The consequences of the guaranteed national
quantities mechanism must be applied to both the
minimum price and the aid.

The percentage reduction in the guide price which now
applies, equal to half the overrun in the national guaran-
teed quantity, may under certain circumstances threaten
budgetary discipline. That percentage should therefore
be increased from a certain production threshold.

To ensure that the system is balanced, the production
aid should henceforth be paid in full to beneficiaries,
without prejudice to the various reductions provided for
by the Community rules. The current state of production
structures is such that the aid has to be granted to
ginning undertakings, which pay producers a price at
least equal to the minimum price and an advance on
that price, and which accept certain conditions regarding
checks on the quantities eligible for aid.

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The aid varies in amount according to the world market
price and needs to be applied to the quantities of cotton
eligible for aid depending on the actual period when the
aid application is made. The current scheme allows
ginning undertakings to fix that amount,
in their aid
applications, on the basis, in particular, of the date of
conclusion of sales contracts for the ginned cotton in
their possession. In order better to facilitate the disposal
of ginned cotton on the world market, it is advisable in
future to allow contracts to be concluded before the
to extend the
harvesting period and, consequently,
period during which aid applications may be submitted.

(15)

(16)

(9)

(10)

(11)

(12)

(13)

It seems inadvisable to regulate contractual relations
between producers
at
Community level. The current principle of common
consent between the contracting parties should be main-
tained but spelt out in greater detail.

undertakings

ginning

and

The amount of aid to be granted cannot be known until
actual production in each Member State has been deter-
mined. To offset the adverse effects of late payment of
aid, provision should continue to be made for part of
the aid to be paid in advance.

Producer Member States must
set up the control
arrangements necessary to ensure that the aid system
operates correctly, using where applicable the integrated
administration and control
in
Council Regulation (EEC) No 3508/92 of 27 November
1992 establishing an integrated administration and
control system for certain Community aid schemes (1).

system provided for

the environmental measures

The cultivation of cotton in regions not suited to it is
likely to have harmful effects on the environment as well
as on the agricultural economy of those regions where
this crop is important.
In order to take account of
environmental objectives, Member States should deter-
mine and adopt
they
consider suitable to regulate the use of agricultural land
for cotton production. In future, Member States must
introduce measures to restrict the crop under objective
environmental criteria and remind producers of the need
to comply with the legislation in force. The two main
producer Member States should draw up a report on the
impact on the cotton sector of national environmental
measures at a time when an assessment is possible.

(14)

In order to facilitate the implementation and proper
administration of the aid system, provision should be
made for a procedure establishing close cooperation
between Member States and the Commission within a
management committee. The Management Committee
for natural fibres provided for in Council Regulation
(EC) No 1673/2000 of 27 July 2000 on the common

(1) OJ L 355, 5.12.1992, p. 1. Regulation as last amended by Regula-

tion (EC) No 820/97. (OJ L 117, 7.5.1997, p. 1).

organisation of the market in flax and hemp (2), should
be used for that purpose.

The measures necessary for the implementation of this
Regulation should be adopted in accordance with
Council Decision 1999/468/EC of 28 June 1999 laying
down the procedures for the exercise of implementing
powers conferred on the Commission (3).

In order to ensure that Community expenditure linked
to the application of the measures provided for in this
Regulation is subject to financial and monetary rules and
adequate procedures, and in view of the specifically agri-
cultural nature of unginned cotton, Council Regulation
(EC) No 1258/1999 of 17 May 1999 on the financing of
the common agricultural policy (4) and Council Regula-
tion (EC) No 2799/98 of 15 December 1998 estab-
lishing agrimonetary arrangements for the euro should
apply in this area (5).

(17)

The adjustments to the scheme provided for in this
Regulation should be implemented as
smoothly as
possible and transitional measures may therefore be
required,

HAS ADOPTED THIS REGULATION:

CHAPTER I

GENERAL PRINCIPLES

Article 1

1.
This Regulation lays down the measures needed for the
grant of the production aid provided for in paragraph 3 of
Protocol 4 annexed to the Act of Accession of Greece.

2.

For the purposes of this Regulation:

(a) ‘unginned cotton’ means the fruit of

the cotton plant
(Gossypium) which has
reached maturity and been
harvested and which contains pod and leaf fragments and
soil matter;

(b) ‘ginned cotton’ means cotton fibres (other than linters and
waste), neither carded nor combed, from which the seeds
and most of the pod and leaf fragments and soil matter
have been removed.

The marketing year shall run from 1 September to 31

3.
August.

Article 2

1.
The amount of the production aid for unginned cotton
shall be fixed by the Commission on the basis of the difference
between:

— a guide price fixed for unginned cotton in accordance with

Article 3(1) and Article 7, and

— the world market price determined in accordance with

Article 4.

(2) OJ L 193, 29.7.2000, p. 16.
(3) OJ L 184, 17.7.1999, p. 23.
(4) OJ L 160, 26.6.1999, p. 103.
(5) OJ L 349, 24.12.1998, p. 1.

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The aid shall be granted for unginned cotton purchased
2.
at a price at least equal to the minimum price, fixed in accord-
ance with Article 3(2) and Article 9.

— 782 000 tonnes for Greece,

— 249 000 tonnes for Spain,

— 1 500 tonnes in each of the other Member States.

CHAPTER II

PRICE MECHANISM

Article 3

The guide price shall be set at EUR 106,30 per 100 kg

1.
of unginned cotton.

This price shall relate to cotton:

— of sound and fair merchantable quality,
— containing 10 % moisture and 3 % impurities,
— with the characteristics needed to produce, after ginning,
32 % grade 5 fibres (white middling) 28 mm in length
(1-3/32(cid:1)).

2.
The minimum price shall be set at EUR 100,99 per
100 kg of unginned cotton for the quality selected for the ex
holding guide price.

Article 4

1.
The world market price for unginned cotton shall be
determined by taking account of the historical relationship
between the world market price for ginned cotton and the
price calculated for unginned cotton. It shall be fixed periodi-
cally by the Commission on the basis of the world market price
for ginned cotton referred to in Article 5.

2.
If the world market price for unginned cotton cannot be
determined in accordance with paragraph 1, it shall be estab-
lished on the basis of the most recent price determined.

Article 5

1.
The world market price for ginned cotton shall be deter-
mined on the basis of a grade 5 (white middling) product with
a fibre length of 28 mm (1-3/32(cid:1)), account being taken of the
offers made on the world market and of the quotations on one
or more European exchanges that are important for inter-
national trade. This price shall be determined using the most
favourable offers and quotations among those that are consid-
ered representative of the real market price cif for the product
delivered to a Community port.

2. Where the offers and quotations recorded do not satisfy
the requirements referred to in paragraph 1, the necessary
adjustments shall be made.

CHAPTER III

STABILISER MECHANISM

Article 6

Article 7

The measures referred to in this Article shall apply

1.
without prejudice to Article 8.

2.
If during a marketing year the sum of actual production
in Spain and Greece exceeds 1 031 000 tonnes, the guide price
referred to in Article 3(1) shall be reduced for that marketing
year in any Member State where the actual production exceeds
the guaranteed national quantity.

The guide price shall be reduced for the Member State
3.
concerned by a percentage based on the rate by which its
guaranteed national quantity has been overshot. However if
actual production in either Spain or Greece is lower than its
guaranteed national quantity, the difference between the total
and
actual
1 031 000 tonnes shall be expressed as a rate of the guaran-
teed national quantity that has been overshot, and the guide
price shall be reduced on the basis of this rate.

two Member

production

States

the

of

The guide price reduction is equal to 50 % of the rate of

4.
overshot referred to in paragraph 3.

However if the sum of actual production in Spain and Greece
reduced by 1 031 000 tonnes is higher than 469 000 tonnes,
the reduction in the guide price of 50 % shall be increased by 2
percentage points:

— in the case of Greece, for each step of 15 170 tonnes in
full or part thereof of which the production exceeds the
guaranteed national quantity increased by 356 000 tonnes,

— in the case of Spain, for each step of 4 830 tonnes in full or
part thereof of which the production exceeds the guaran-
teed national quantity increased by 113 000 tonnes.

Article 8

If during a marketing year:

— Article 7 has been applied,

— the weighted average of the world market price adopted in
order to fix the amount of aid is greater than EUR 30,20
per 100 kg, and

— the total budget expenditure on the aid system is less than

EUR 770 million,

the budget remainder referred to in the third indent shall be
used in order to increase aid in each Member State where
actual production exceeds its guaranteed national quantity.

However,
subparagraph may not exceed:

the amount of aid as increased under the first

A guaranteed national quantity for unginned cotton shall be
introduced, equal for each marketing year to:

— either the amount of aid calculated without application of

Article 7,

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— or the amount of aid calculated after application of Article
7 on the basis of 1 120 000 tonnes of unginned cotton
subdivided
quantity of
270 000 tonnes for Spain and 850 000 tonnes for Greece.

guaranteed national

into a

Article 9

The minimum price referred to in Article 3(2) shall be reduced
by the same amount as the guide price under Article 7.

CHAPTER IV

AID BENEFICIARIES

Article 10

The aid shall be paid in full to the beneficiaries referred to in
Articles 11 and 12 who make an application.

Article 11

In order to receive aid, cotton ginning undertakings other than
those referred to in Article 12 must:

(a) have submitted a signed contract stipulating, in particular,
payment to the producer of a price at least equal to the
minimum price and containing a clause specifying that:

— where Article 7 is applied, the agreed price will be
adjusted in consequence of the effect of the application
of that Article on the aid,

— if the quality of the cotton delivered differs from the
quality referred to in Article 3(2), the price agreed will
common consent between the
be
contracting parties in proportion to the effect of that
difference in quality on the price of the ginned product
in relation to the price referred to in Article 5;

adjusted by

(b) have paid an advance on the minimum price of an amount
to be determined by common consent between the
contracting parties, subject to conditions to be laid down;

(c) keep stock accounts on ginned and unginned cotton that
satisfy requirements to be laid down and provide the other
supporting documents necessary so that entitlement to the
aid can be checked;

(d) furnish proof that the cotton delivered under the contract is
the subject of the declaration of area sown referred to in
Article 16(2).

Article 12

1.
In order to receive the aid, cotton ginning undertakings
that gin cotton on behalf of individual producers or producer
groups meeting the criteria laid down in paragraph 4 of
Protocol 4 must:

(a) have submitted a statement, approved by the producer or
producer group concerned, giving details of the conditions
under which the ginning is carried out and how the aid is
administered;

(b) undertake to pass on the full amount of the aid to the
individual producers or, where applicable, the producer
groups concerned;

(c) satisfy the conditions referred to in Article 11(c);

(d) furnish proof that the cotton referred to in the statement
referred to in (a) has been the subject of the declaration of
area sown referred to in Article 16(2);

(e) furnish proof that producer groups are obliged to comply
with an undertaking equivalent to the clause in the contract
referred to in Article 11(a) and an undertaking by such
groups
supporting documents
concerning payment of
the minimum price to their
members.

to keep and produce

2.
Failure to comply with the clause or undertaking referred
to in paragraph 1(e) by a producer group having ginning
carried out on its behalf shall be considered a failure to meet
the criteria referred to in paragraph 4 of Protocol 4.

CHAPTER V

GRANT OF THE AID

Article 13

The aid shall be paid by the producer Member State in whose
territory the ginning takes place.

Article 14

The amount of the aid to be paid shall be the amount

1.
applicable on the day the application for aid is made.

Aid applications shall be lodged, together with a security where
required, during a period to be determined, for a quantity of
unginned cotton which must enter the cotton ginning under-
taking after the beginning of the marketing year concerned and
before a date to be specified.

2.
Entitlement to the aid shall be acquired when the cotton
is ginned. However, aid may be paid in advance, at the request
of the interested party, from 16 October following the start of
the marketing year, when the unginned cotton enters the
cotton ginning undertaking, provided an adequate security has
been lodged. The amount of the advance shall be calculated in
accordance with paragraph 3.

The balance of the aid shall be paid before the end of the
marketing year at the latest, once any adjustments to the aid
resulting from application of Article 7 have been determined.

The amount of the advance shall be equal to the guide
3.
price referred to in Article 3(1), minus the world price and
reduced further by an amount calculated in accordance with
Article 7, but replacing actual production by the estimated
production fixed in accordance with the first indent of Article
19(2), plus 15 %.

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From 16 December following the start of the marketing year,
the amount of the advance 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 fixed in
accordance with the second indent of Article 19(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 EUR 1/
100 kg.

Article 15

The aid shall be paid only for products of sound and fair

1.
merchantable quality.

2.
If the quantity of ginned cotton is less than or equal to
33 % of the quantity of unginned cotton that has entered the
cotton ginning undertaking, aid shall be granted for
the
quantity of ginned cotton, multiplied by 100 and divided by
32.

If the quantity of ginned cotton is greater than 33 % of the
quantity of unginned cotton that has entered the cotton
ginning undertaking, aid shall be granted for the quantity of
unginned cotton, multiplied by 33 and divided by 32.

The quantity of ginned cotton shall be equal to its weight,

3.
adjusted where necessary for any difference between:

— either the percentage of impurities recorded compared to
the representative percentage for grade 5 or the grade
recorded and grade No 5, and

— the percentage moisture content recorded compared to the

level representative of commercial fibre.

Article 16

The producer Member States shall set up a system of
1.
penalties and controls enabling them, in particular, to ensure
that the minimum price is complied with and to ascertain:

— the quantity of unginned Community cotton which has

entered each cotton ginning undertaking,

— the quantity of unginned Community cotton which has

been ginned,

— the quantity of ginned cotton obtained in each cotton
ginning undertaking from the cotton referred to in the first
indent.

The producer Member States shall establish a system of
in particular to ensure that

2.
declarations of the areas sown,
cotton covered by aid applications is of the origin stated.

Article 17

1. Member States shall determine, for the cotton sector:

— measures to improve the environment, in particular cultiva-
tion techniques to reduce the negative impact on the envir-
onment,

— research programmes to develop more environmentally-

friendly growing methods,

2. Member States shall take the environmental measures
they consider suitable in view of the specific situation of the
agricultural areas used for cotton production.
In addition,
Member States shall take the necessary steps to remind produ-
cers that
they are required to comply with environmental
legislation.

3. Member States shall, where appropriate, restrict the areas
eligible for production aid for unginned cotton on the basis of
objective criteria relating to:

— the agricultural economy of those regions where cotton is a

major crop,

— the soil and climate in the areas in question,
— the management of irrigation water,
— rotation systems and cultivation methods likely to improve

the environment.

Before 31 December 2004, the Hellenic Republic and the
4.
Kingdom of Spain shall send the Commission a report on the
environmental situation in the cotton sector and the impact of
national measures adopted in accordance with paragraphs 1, 2
and 3.

CHAPTER VI

GENERAL

Article 18

The Commission shall be assisted by the Management
1.
Committee of natural fibres established by Article 10 of Regu-
lation (EC) No 1673/2000 (hereinafter referred to as ‘the
Committee’).

2. Where reference is made to this paragraph, Articles 4 and
7 of Decision 1999/468/EC shall apply.

The period provided for in Article 4(3) of Decision 1999/
468/EC shall be set at one month.

3.

The Committee shall adopt its rules of procedure.

Article 19

1.
The detailed rules for implementation of this Regulation
shall be adopted according to the procedure laid down in
Article 18(2).

inter alia,

Such rules shall concern,
the information to be
forwarded by Member States to the Commission and all the
necessary inspection measures
the European
Community's financial interests against fraud and other irregu-
larities. These measures may be based on the integrated admin-
istration and control system established by Regulation (EEC)
No 3508/92.

to protect

In accordance with the procedure referred to in Article
fix for each Member State

2.
18(2),
concerned, before dates to be specified:

the Commission shall

— the means of informing producers of the results of such
research and the advantages of using the techniques
concerned.

— taking account of crop forecasts, the estimated production
referred to in the first subparagraph of Article 14(3) and
the resultant provisional reduction in the guide price,

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— taking account of the progress of the harvest, the revised
production estimate referred to in the second subparagraph
of Article 14(3) and the new resultant provisional reduction
in the guide price,

— taking account in particular of the quantities on which aid
has been applied for, actual production in the current
marketing year, together with the reduction in the guide
price referred to in Article 7 and the increase in the aid
referred to in Article 8.

Article 21

If it proves necessary to introduce transitional measures to
facilitate implementation of the adjustments to the system laid
down by this Regulation, such measures shall be adopted in
accordance with the procedure referred to in Article 18(2).
They shall apply until the end of the 2001/2002 marketing
year at the latest.

Article 22

Regulations (EEC) No 1964/87 and (EC) No 1554/95 are
hereby repealed.

Article 20

Article 23

Regulations (EC) No 2799/98 and No 1258/1999 on the
the common agricultural policy shall apply,
financing of
mutatis mutandis,
to the arrangements provided for in this
Regulation.

This Regulation shall enter into force on the day of its publica-
tion in the Official Journal of the European Communities.

It shall apply from 1 September 2001. However, Article 21
shall apply from the date of entry into force of this Regulation.

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

Done at Brussels, 22 May 2001.

For the Council

The President

M. WINBERG