Special Report No 8/2001 concerning refunds for the production of potato and cereal starch and potato starch aid, together with the Commission's replies
Date: 2001-07-12
Institutions: European Court of Auditors
Subjects: cereals, potato, production refund, starch

19.10.2001

EN

Official Journal of the European Communities

C 294/1

I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 8/2001

concerning refunds for the production of potato and cereal starch and potato starch aid, together
with the Commission’s replies

(pursuant to Article 248(4), second subparagraph, EC)

(2001/C 294/01)

CONTENTS

Paragraph

Page

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE MARKET IN CEREAL AND POTATO STARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE COMMUNITY AIMS TO GUARANTEE THE COMPETITIVENESS OF EUROPEAN
STARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BUDGETARY EXPENDITURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE COURT’S AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PRODUCTION REFUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management by the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The method for calculating refunds allows for considerable flexibility . . . . . . . . . . . . . .

There is a lack of information on the state of the market

. . . . . . . . . . . . . . . . . . . . . . . .

Management by the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Progress in administrative controls by national authorities, but incomplete on-the-spot
controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The follow-up of modified starch should be reviewed . . . . . . . . . . . . . . . . . . . . . . . . . . .

DIRECT AID FOR POTATO STARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management by the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The management of quotas is not consistent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

There is an inherent risk in the quota system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-3

4-6

7

8-9

10-20

10-13

10-11

12-13

14-20

14-16

17-20

21-37

21-31

21-25

26

Starch quantities are determined on the basis of an outdated conversion table . . . . . . . .

27-28

The impact of the direct aid paid to farmers has never been evaluated . . . . . . . . . . . . . .

29

Aid for potato starch mills is not based on sufficiently reliable management informa-
tion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30-31

3

4

5

5

6

6

6

6

7

8

8

8

9

9

9

10

11

12

12

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Paragraph

Page

Management by the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Member States’ on-the-spot controls show some weaknesses . . . . . . . . . . . . . . . . . . . . .

The minimum price is not always fully adhered to . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Commission’s work in the context of the clearance of accounts . . . . . . . . . . . . . . . . . .

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32-36

32-35

36

37

38-39

40-41

The Commission’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

13

13

13

13

13

15

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SUMMARY

I. The Court’s previous inquiry into refunds for the production (1) of cereal starch and potato starch covered
the period from 1986 to 1988. The Court re-examined the operation of this system, as amended as a result of
the 1992 reform of the common agricultural policy (CAP), and broadened the scope of its audit to include
specific direct support measures for the production of potato starch. In 1999, the European Union (EU) pro-
duced 6,2 million tonnes of cereal starch and 1,9 million tonnes of potato starch. In 2000, total expenditure
relating to cereal starch and potato starch stood at 900 million euro or 5,4 % of total Community expenditure
on arable crops. Leaving aside per hectare aid, the expenditure in question amounted to around 400 million
euro in 2000, or less than 1 % of total EAGGF-Guarantee expenditure.

II. As the Court emphasised in its Annual Report concerning the financial year 1988, these different forms of
aid were established because the support system for the cereals sector had the effect of maintaining Com-
munity cereals prices at a level higher than the world price.

III. The Court has examined the system for the payment of refunds and direct aid over the period 1998 to
2000 in Germany, France and the Netherlands. This examination has revealed that the administrative controls
are of a satisfactory level overall. Nevertheless, these administrative controls are still by far the most predomi-
nant form of control, and are not sufficiently supported by physical checks, including ones to guarantee the
reliability of stock accounts. The level of on-the-spot controls carried out in potato starch mills by national
auditors varies from one Member State to another, due to a lack of clarity in the relevant texts and the absence
of any precise instructions from the Commission as regards the checks to implement.

IV. The Court’s other observations essentially concern the flexibility of the method for calculating produc-
tion refunds, the justification for and the difficulties of implementing the special monitoring system required
for modified starch, the risk of fraud inherent in the quota system for the production of starch potatoes, and
the difficulty of managing quotas in a way that is in line with the realities of the market.

V. The Commission does not have at its disposal an adequate information system enabling it to assess whether
the basic objectives of the system are being achieved, in particular concerning the competitiveness of starch-
user industries, the income levels of farmers in receipt of direct aid, or compensation for the structural disad-
vantage specifically experienced by potato starch mills.

(1)

In the Community regulations concerning cereal starch and potato starch, the expression ‘production refunds’ is used
to describe the aid paid to the industry for the utilisation of cereal starch or potato starch in the manufacture of certain
goods.

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THE MARKET IN CEREAL AND POTATO STARCH

1. Potato starch and cereal starch are products of first stage pro-
cessing and are interchangeable for most purposes. Cereal starch
is mainly obtained from maize and wheat, but also from barley,
rye and rice; non-cereal starch is obtained from potatoes and
manioc. In 1999 the EU produced around 8,1 million tonnes of

starch (see Table 1). The United States of America, with an annual
production of around 30 million tonnes, is the world’s largest
producer of cereal starch. Potato starch is produced almost exclu-
sively in northern Europe, mainly in Germany, the Netherlands,
France and Denmark. The main market outlets for these products
are the food, chemicals, paper and textile industries (see Dia-
gram 1).

Table 1

Cereal and potato starch — Output and sales in the EU

1995

1996

1997

1998

1999

(Million tonnes)

Output
Maize starch
Wheat starch
Potato starch
Other starches (barley, rice)

Total

Sales (1) including exports
Foodstuffs
Non-food use

Total

3,6
1,6
1,7
0,1

7,0

3,8
3,2

7,0

3,6
1,8
2,0
0,1

7,5

4,1
3,4

7,5

3,7
2,2
2,0
0,1

8,0

4,3
3,7

8,0

3,7
2,2
1,8
0,1

7,8

4,2
3,6

7,8

3,7
2,4
1,9
0,1

8,1

4,4
3,7

8,1

(1) Native cereal and potato starch in the form of derived products or incorporated into manufactured products.
Source: European Commission (DG AGRI) estimates.

Sales of potato and cereal starch and derived products on the EU internal market in 1998

Diagram 1

A. Foodstuffs sector

B. Non-foods sector

Confectionery and
beverages
Processed products

Animal feedstuffs

4 %

9 %

3 %

Paper and card
Esterified and etherified potato
and cereal starches

Organic products

Pharmaceutical products
Others (enzymes, plastics, glues
and other chemical products, etc.)

37 %

34 %

20 %

59 %

Source: Commission, DG Agri.

34 %

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2. Customs duties, which represent approximately half the value
of the product, protect the Community market, which is already
more than self-sufficient in starch supply. No starch is therefore
imported into the Community and export refunds are available
for the surplus starch exported from the Community. In 1999,
the EU exported 1,7 million tonnes of cereal and potato starch,
or 21 % of its production, in its unprocessed state or in the form
of derived or manufactured products.

3. The EU has 75 production sites, 23 of which are potato starch
mills. Around 10 million tonnes of cereals are processed into
starch, which is to say almost 5 % of European cereal production.
The entire starch potato output, which is generated by nearly
18 000 farmers, is processed into starch. For these farmers, the
production of starch potatoes often complements that of sugar
beet and cereal crops.

THE COMMUNITY AIMS TO GUARANTEE THE
COMPETITIVENESS OF EUROPEAN STARCH

4. The objective of the system of support for the production of
cereal and potato starch is to secure the competitiveness of the
European non-food, starch-user industries against external manu-
facturers that are able to sell goods containing starch purchased
on the world market at prices lower than the Community prices.
Under Council Regulation (EEC) No 1766/92 of 30 June 1992 on
the common organisation of the market (CMO) in cereals (1), a
refund is granted to manufacturers for starch obtained from cere-
als, for potato starch or for derived products where they are used
for the manufacture of certain non-food products that are not
subject to import duties or are only subject to low duties.

5. Approximately one third of all non-food cereal and potato
starch produced in the EU is processed into modified cereal or
potato starch. Since modified cereal and potato starches take up a

very significant share of the market, and particularly because of
the lack of protection in this sector, they have, since 1986, been
included on the list of products eligible for a production refund.

6. The system of production refunds is complemented by special
measures in respect of starch potatoes intended for the produc-
tion of starch, on the grounds that they are in direct competition
with cereals used for the production of starch. These special mea-
sures provide for payment by the starch industry of a minimum
price to producers of starch potatoes, the payment of direct Com-
munity aid to these same producers (around 41 % of the mini-
mum price (2) prior to 2000) and the allocation of a premium to
the potato starch mills to compensate for the structural disadvan-
tages (3) suffered by manufacturers of potato starch in compari-
son with manufacturers of cereal starch. In addition, there is a
quota system, the object of which is to keep both potato starch
production and budgetary expenditure under control. The sup-
port measures only apply to the quantities of potatoes produced
under grower contracts.

BUDGETARY EXPENDITURE

7. During the period from 1997 to 2000 budgetary expenditure
on refunds for the production of cereal and potato starch varied
between 49,6 and 169,2 million euro per year. The level of expen-
diture is directly influenced by fluctuations in world maize prices.
Annual expenditure on direct aid for potato starch varies little and
amounts to an average of around 200 million euro. In 2000, total
expenditure on cereal and potato starch, including export refunds
and per hectare aid for cereals used to produce starch, totalled
898,5 million euro, representing 5,4 % of Community expendi-
ture on arable crops (see Table 2). Leaving aside per hectare aid,
the expenditure in question amounted to around 400 million
euro in 2000, or less than 1 % of total EAGGF-Guarantee expen-
diture.

(1) OJ L 181, 1.7.1992, p. 21.

(2) With the Agenda 2000 reform, this percentage rose to 51 % for

2000/01 and to 62 % as from 2001/02.

(3) This structural disadvantage arises from environmental constraints
and from the fact that potatoes keep badly. Potato starch mills only
receive delivery of their raw materials for six to eight months per year,
whereas cereal starch mills are able to work all year round.

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Changes in expenditure on potato and cereal starch (1997 to 2000)

Table 2

1997

1998

1999

2000

(Mio EUR)

Expenditure on potato and cereal starch
Production refunds
Potato starch
Maize starch
Wheat starch
Other cereal starches

Total
Potato starch production premium
Potato starch premium
Compensatory payment

Total
Export refunds
Potato starch
Cereal starch

Total
Subtotal 1

18,2
33,6
7,6
0,2

59,6

42,4
165,7

208,1

19,1
NA

19,1
286,8

14,2
28,0
7,0
0,4

49,6

41,6
162,7

204,3

17,1
NA

17,1

271

54,9
86,3
27,5
0,5

169,2

37,3
145,6

182,9

29,7
NA

29,7
381,8

47,8
94,0
25,5
0,8

168,1

39,1
154,1

193,2

37,5
NA

37,5
398,8

Expenditure on cereals used to produce starch
Per hectare aid for cereals (1)

526,2

538,4

527,7

499,7

Subtotal 2
Total expenditure on potato and cereal starch (subtotals 1 + 2)
Total expenditure under the arable crops chapter
Relative share (%)

526,2
813
17 462,1
4,7

538,4
809,4
17 945,2
4,5

527,7
909,5
17 865,9
5,1

499,7
898,5
16 663,1
5,4

(1) It is estimated that around 5 % of the Community output of cereals is processed into starch (the expenditure shown here does not take into account expenditure on pro-

portional set aside).

NA: data not available (budgetary nomenclature makes no distinction between expenditure on potato starch/cereal starch).
Source: EAGGF-Guarantee documents, expenditure taken into account up to 15 October each year.

THE COURT’S AUDIT

PRODUCTION REFUNDS

8. The regulations in force at the time of the audit were intro-
duced as part of the reform of the common agricultural policy
(CAP) in 1992. The Court’s previous inquiry into ‘refunds for the
production and use of cereal and potato starch’ covered the period
1986 to 1988 (1). The special support system for potato starch
had never been audited by the Court.

Management by the Commission

The method for calculating refunds allows for
considerable flexibility

9. The Court examined to what extent the system had achieved
its objectives. It also verified the legality and regularity of transac-
tions on the basis of payments effected during the years 1998 to
2000 in Germany, France and the Netherlands, and verified the
functioning of the control systems in these three Member States,
which together receive around 70 % of the budgetary expenditure
concerned.

10. The production refund rate is decided on a monthly basis (2)
by the Commission after consulting the Management Committee
for Cereals. The refund may be modified during the month if the
prices of maize and/or wheat in the Community or on the world
market change significantly. For this reason, there were 17 differ-
ent refund rates in 1998, 13 in 1999 and 21 in 2000. As maize is
the reference cereal for the manufacture of cereal starch, the
refund is calculated, among other things, on the basis of the dif-
ference between the market price for maize in the Community

(1) Annual Report of the Court of Auditors concerning the financial year

(2) Article 3 of Commission Regulation (EEC) No 1722/93 of 30 June

1988 (OJ C 312, 12.12.1989, p. 73).

1993 (OJ L 159, 1.7.1993, p. 112).

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and its price on the world market. As it is authorised to do by the
wording of Regulation (EEC) No 1722/93, the Commission applies
such parameters as it considers appropriate to the calculations.
These parameters were the subject of a Commission working
document approved by the Management Committee in November
1997 and amended in February 1999.

11. The Court examined a sample of files relating to the fixing
of the refund amount by the Commission. The value of the data
used by the Commission varies in its comprehensiveness from
period to period, depending on whether data are available on the
price of maize, transport costs and other costs. In certain cases,
the Commission adjusts the calculation methods set out in its
working document. This flexibility in calculating the refund has
been fiercely criticised by the cereal and potato starch-user indus-
tries. The latter deplore the method’s lack of transparency and the
fact that the refund is unpredictable and believe that their produc-
tion and marketing programmes are adversely affected by this (1).

There is a lack of information on the state of the market

12. Not much information is available on movements in the
prices of cereal and potato starch because there is no world price
quotation, properly speaking, for these products. This is due,
amongst other things, to the diversity of raw materials used in the
manufacture of starch, each of which has its own market, and to
the fact that prices vary greatly depending on the type of starch
(native or modified). Diagram 2, taken from a study published in
July 1999 (2), nevertheless traces, for the paper industry (3), the
changes between 1991 and 1997 in the difference between the
price of starch on the American market, which is considered to
be the world reference price, and the average estimated price for
starch on the European market. This shows that, apart from the
period between April 1993 and April 1995, production refunds
have systematically failed to eliminate a more or less substantial
difference in price in favour of the non-European industry. At its
maximum, in 1996, the non-compensated difference amounted
to approximately 30 % of the purchase price of starch.

Price of potato starch and cereal starch for the paper industry in Europe and the world and the effect of production refunds

Diagram 2

Europe
International (USA)
Europe ‘net of aid’

700

600

500

e
n
n
o
t
/
u
c
E

400

300

200

100

0

January 1991
April 1991

April 1992
July 1991
October 1991
January 1992

April 1993
October 1992
July 1992
January 1993

April 1994
October 1993
July 1993
January 1994

July 1994
October 1994
April 1995
January 1995

July 1995
October 1995
April 1996
January 1996

October 1996
July 1996
January 1997

Note: The European ‘net of aid’ price curve has been added on the basis of data received from the Commission.
Source: Joint study by the European Commission and the Confederation of European Paper Industries (CEPI), published in 1999: ‘Competitive-

ness study of the european pulp, paper and board manufacturing industry 1998’, p. 15.

(1) Sources: Association des amidonneries de céréales de l’Union
européenne (AAC), Union des syndicats des industries des produits
amylacés et de leurs dérivés (USIPA), Confederation of European paper
industries (CEPI), Committee of the European Starch Potato Produc-
ers’ Unions (CESPU), Union des féculeries européennes (UFE).

(2)

‘Competitiveness study of the European pulp, paper and board manu-
facturing industry 1998’, joint study by the European Commission
(DG Industry) and the CEPI (Confederation of European Paper Indus-
try), Brussels, 1999.

(3) The paper industry absorbs around 15 % of European cereal starch

and potato starch output.

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In 2000, the Commission decided to have an independent
13.
body carry out an evaluation of its policy in the cereal starch sec-
tor. The results of this evaluation were not available at the time of
the Court’s audit.

ability of stock accounts. In the Netherlands, the Court
expressed reservations as to the quality of the stock accounts
of a large beneficiary enterprise because some extracts from
these stock accounts reported negative stocks at the beginning
and/or the end of the processing period;

Management by Member States

Progress in administrative controls by national authorities
but incomplete on-the-spot controls

14. Before refunds are paid, the Member State authority respon-
sible must ensure that the cereal or potato starch has been used
in the manufacture of approved products, in accordance with the
details contained in the refund certificate. Checks are usually car-
ried out by means of administrative controls, but these must,
where necessary, be supported by physical checks (1). Refunds
must be paid within five months of the date on which the con-
trols are completed (2).

15. The Court did not detect any inaccuracies in the itemised
accounts of payments found in the files examined in the three
Member States visited. The procedures in force had improved
since the Court’s previous audit and ensured a satisfactory level of
administrative control overall.

16. Nonetheless, the Court’s audit did reveal the following short-
comings:

(a)

in France, the controls carried out are almost exclusively
administrative. Although the solid content and purity level of
basic cereal starch are important parameters for calculating
the amount of refund, the procedure laid down in national
rules for taking samples of such starch for laboratory analysis
is not applied. Chemical analyses of samples of finished prod-
ucts are not carried out either, except for the tests carried out
by the customs laboratory prior to granting approval (3);

(b) in the three Member States visited, traders provide stock
account extracts in support of their payment applications.
On-the-spot controls to reconcile stock accounting data with
physical stocks of basic cereal starch or finished products are
not carried out on a systematic basis. However, such reconcili-
ations are the only means of testing the consistency and reli-

(c)

in accordance with the regulatory provisions, the system in
force in the Netherlands authorises the payment of advances
on refunds before the national control body has carried out
its checks. However, at the time of the Court’s audit, there
were long delays (up to a year) in making the necessary cor-
rections to the payment accounts after the checks have been
carried out.

The follow-up of modified starch should be reviewed

17. As the process for producing modified starches has the
unusual property of being reversible, Article 10 of Regulation
(EEC) No 1722/93 imposes thorough controls on their manufac-
ture and use, to ensure that modified starch for which a refund
has been paid is not reprocessed into a basic product in order to
obtain a further refund.

18.
In its Annual Report concerning the financial year 1988, the
Court concluded that the arrangements for checking the final use
of modified starches were unsatisfactory as regards both the type
of proof accepted in the Member States and the monitoring pro-
cedure, which was based on the T5 customs control document (4).
Regulation (EEC) No 1722/93, which entered into force on 1 July
1993, set up a system of evidence whereby manufacturers submit
quarterly declarations to the responsible authorities, and retained
the obligatory use of T5 documents when the product in ques-
tion is the subject of intra-Community trade or is exported to
third countries via the territory of another Member State.

19. However, the follow-up of the use of modified starches is still
unreliable. Article 10 of Regulation (EEC) No 1722/93 is not
applied in a uniform manner in the Member States and there are
practical difficulties in applying it:

(a) monitoring the product through to its final use may prove
quite impossible, as the goods subject to control go to many
end-users, sometimes via intermediaries;

(b) in some Member States, the provisions on the use of T5 docu-

ments are not respected by traders;

(c) risk analysis varies considerably, depending on the depart-

ments responsible for checks.

(1) Article 9(3) of Regulation (EEC) No 1722/93.
(2) Article 11(2) of Regulation (EEC) No 1722/93.
(3) On the basis of Article 4 of Regulation (EEC) No 1722/93, only
manufacturers approved by the competent authorities in the Member
States are entitled to claim refunds.

(4) Document that accompanies goods and is used to verify their utilisa-
tion and/or arrival at their final destination (Articles 471 et seq of
Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying
down provisions for the implementation of Council Regulation (EEC)
No 2913/92 establishing the Community Customs Code (OJ L 253,
11.10.1993)).

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20. The Court’s audit made it possible to review certain aspects
of the context specific to controls on modified starch. When the
system entered into force, refund rates were very high compared
with the cost of reprocessing modified starch into basic starch
(see Diagram 3). According to the national authorities, there is
now less risk of fraudulent reprocessing, and refunds are currently
far lower than reprocessing costs. The production refund reached

a maximum of 41,44 euro per tonne in 2000, whereas, accord-
ing to the calculations made by the industry at the Court’s request,
the cost of reconverting modified starches into basic starch could
be estimated to be, for the same period, 100 euro per tonne. In
addition, the national authorities maintain that the control field
is limited, as few European factories have plant that is suitable for
reprocessing modified starch.

Rises and falls in the level of production refund for potato starch and cereal starch

Diagram 3

e
n
n
o
t
/
o
r
u
E

200

180

160

140

120

100

80

60

40

20

0

May 1996
January 1990
September 2000
May 1995
May 1994
May 1993
May 1992
May 1991
May 1990
May 2000
May 1999
May 1998
May 1997
September 1990
September 1992
September 1993
September 1994
September 1995
September 1996
September 1997
September 1998
September 1999
January 1997
January 1996
January 1995
January 1994
January 1993
January 1992
January 1991
September 1991
January 1998
January 1999
January 2000
January 2001

Source: Commission (DG Agri).

DIRECT AID FOR POTATO STARCH

Management by the Commission

The management of quotas is not consistent

21. Since the 1992 reform, starch potato producers have received
direct aid per tonne of starch, in addition to the minimum price.
In order to combat the effects of rising production and to prevent
any slippage in budgetary expenditure, the Council set up a quota
system in 1994 providing for the allocation of quotas to Member
States and sub-quotas to potato starch mills.

for the following year in advance. Such flexibility is, however, out
of phase with the potential variations in production, which can
be as much as 20 %, depending on climatic conditions.

23. The ceiling of 1 702 000 tonnes fixed for EU-12 in 1994
included a reserve of 110 000 tonnes for Germany, which the lat-
ter was required to utilise as of the 1996/97 marketing year. The
additional production for that marketing year amounted to
104 554 tonnes, i.e. an increase in output of 17 % in Germany
and 6 % for EU-12. This additional production destabilised the
European market for more than two years, until the industry
decided to reduce the quantities made available on the market (see
Diagram 4). According to those involved in producing potato
starch, it is only since 2000 that potato starch prices have returned
to an advantageous level.

22. Potato starch mills have some room for manoeuvre in man-
aging their sub-quotas, since they have the option of increasing
their sub-quota for one year by using up to 5 % of their sub-quota

24. The quota established in 1994 also included 2 000 tonnes
for Spain, even though Spain has no potato starch manufactur-
ing industry.

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Diagram 4

Changes in potato starch production and quotas in the EU

s
e
n
n
o
t
0
0
0
1

1 900

1 850

1 800

1 750

1 700

1 650

1 600

1 550

1 500

Quota

Production

1995/1996

1996/1997

1997/1998

1998/1999

1999/2000

2000/2001

2001/2002

Source: Commission, DG AGRI.

Breakdown by Member State of changes in potato starch quotas

Table 3

Member State

1995/1996

1996/1997

1997/1998

1998/1999

1999/2000

2000/2001

2001/2002

(Tonnes)

178 460
591 717
2 000
281 516
538 307
49 100
54 750
63 900
1 759 750
110 000

Denmark
Germany
Spain
France
Netherlands
Austria
Finland
Sweden
Total
Reserve
many
Total
Source: Regulation (EEC) No 1868/94 and subsequent amendments thereto.

178 460
591 717
2 000
281 516
538 307
49 100
54 750
63 900
1 759 750
104 554

178 460
696 271
2 000
281 516
538 307
49 100
54 750
63 900
1 864 304

1 864 304

1 869 750

for Ger-

178 460
696 271
2 000
281 516
538 307
49 100
54 750
63 900
1 864 304

178 460
696 271
2 000
281 516
538 307
49 100
54 750
63 900
1 864 304

173 439
676 680
1 972
273 595
523 161
48 409
53 980
63 001
1 814 237

168 215
656 298
1 943
265 354
507 403
47 691
53 178
62 066
1 762 148

25. Quotas were not changed at the time of the triennial review
in 1997. Under the Agenda 2000 reform, quotas were reduced for
2000/01 and 2001/02 (see Table 3).

State that has a shortfall. In 1998, an UCLAF inquiry uncovered
the illicit transfer of 20 000 tonnes of potatoes from the Nether-
lands to Germany. The unduly received aid amounted to 1,5 mil-
lion euro. The regulations provide for very heavy penalties for
potato starch mills that accept quantities of potatoes that are not
covered by grower contracts (1).

There is an inherent risk in the quota system

26. The quota system applied to the production of potato starch
involves a major inherent risk, namely the fraudulent transfer of
surplus production from one Member State to another Member

(1) Article 13(4) of Regulation (EC) No 97/95 (OJ L 16, 24.1.1995, p. 3).
According to this Article, the maximum penalty is the cancellation of
all premiums to be paid to the starch manufacturer concerned for two
consecutive marketing years.

 
 
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Starch quantities are determined on the basis of an
outdated conversion table

27. Community rules (1) lay down the minimum price, the pro-
ducer payment and the premium paid to potato starch mills for
each tonne of starch obtained from potatoes delivered by farm-
ers. These items are adjusted according to the starch content
established on the basis of a sample using a method laid down in
the regulations (2). Diagram 5 shows the amounts paid to farmers
and potato starch mills per tonne of potatoes delivered, as a func-
tion of the starch content calculated on the basis of the Regula-
tion, between 1993/94 and 1999/2000 (3). This graph shows that
there is a point of inflection at 19,7 % of the notional content.
The inflection point is attributable to the fact that, according to
the regulations, part of the starch content of the potatoes cannot
be extracted (see Diagram 6).

28. The conversion table (4) used for all the calculations was
already in use by the European potato starch mills before the
minimum price was introduced under the first CMO in cereals in
1996. The most recent adjustment to the conversion table, which
dates back to the 1982/83 crop year (5), retained the principle of
the table being established around the inflection point. Since that
time, potato starch mill technology has progressed and starch
potato varieties have been improved. As the quantities of starch
extracted are higher than those that result from applying the
regulations, starch mills obtain ‘bonus production’ which is not
charged to their sub-quota and for which no payment is made.
The bonus ranged from 2 % to 10 % in the Member States visited,
depending on the starch mill concerned (6).

Minimum prices and compensatory payments for potato producers and premiums paid to potato starch producers up to 1999/2000
(prior to the Agenda 2000 reform)

Diagram 5

s
e
o
t
a
t
o
p
f
o
e
n
n
o
t
/
o
r
u
E

55

50

45

40

35

30

25

20

15

10

5

0

Minimum price for producers

Compensatory payment for producers

Premium paid to potato starch producers

13,0  13,5  14,0  14,5  15,0  15,6  16,0  16,6  17,1  17,6  18,1  18,6  19,1  19,6  20,0  20,5  21,0  21,4  21,7  22,1  22,5  22,9 %
352  362  372  382  392  402  412  422  432  442  452  462  472 481,6 488  498  508  515 521,3  528,8

542

535

grammes

Starch content
(as a percentage or on the basis of the underwater weight of 5 050 grammes of potatoes)

Source: Annex II to Commission Regulation (EC) No 97/95.

(1) Commission Regulation (EC) No 97/95 of 17 January 1995 (OJ L 16,

24.1.1995, p. 3).

(2) Annex II to Regulation (EC) No 97/95.
(3) Within the framework of the Agenda 2000 reform, the minimum
price has been lowered in two steps. 75 % of the reduction has been
offset by an increase in the payment to potato producers.

(4) Table giving the relationship between the underwater weight of a
sample of potatoes and the theoretical starch content of this sample.
(5) Commission Regulation (EEC) No 2293/82 of 19 August 1982

(6)

(OJ L 245, 20.8.1982, p. 47).
It should however be noted that, at the beginning of the 1990s, the
production penalty for starch manufacturers in the new Länder of Ger-
many could be as much as 15 %.

 
 
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Percentage of potato starch not extractable on the basis of Annex II to Regulation (EC) No 97/95

Diagram 6

e
l
b
a
t
c
a
r
t
x
e
t
o
n
h
c
r
a
t
s
o
t
a
t
o
p
f
o
e
g
a
t
n
e
c
r
e
P

17 %

16 %

15 %

14 %

13 %

12 %

11 %

10 %

9 %

8 %

7 %

6 %

5 %

13,0 %

13,6 %

14,1 %

14,7 %

15,3 %

15,8 %

16,4 %

16,9 %

17,5 %

18,1 %

18,6 %

19,2 %

19,7 %

20,2 %

20,7 %

21,2 %

21,6 %

22,0 %

22,4 %

22,8 %

352 g

363 g

374 g

385 g 396 g

407 g

418 g

429 g

440 g 451 g

462 g 473 g 483 g

491 g

502 g 511,8 g 519 g

526 g 534 g 541,4 g

Theoretical starch content
(percentage or underwater weight of 5 050 grammes of potatoes)

Note: If the theoretical starch content lies between 13 % and 19,7 %, it is estimated that around 6,5 % of the potato starch contained in the potatoes is lost during the extrac-

tion process. Starch loss increases from 19,7 % onwards.

Source: Annex II to Commission Regulation (EC) No 97/95.

The impact of the direct aid paid to farmers has never
been evaluated

29. The establishment of both the minimum price and the direct
aid for producers of starch potatoes is entirely bound to the inter-
vention price and the direct aid for cereals. The Commission has
no study or analysis that would enable it to verify whether the aid
granted to European potato producers helps to give them a fair
standard of living.

Aid for potato starch mills is not based on sufficiently
reliable management information

30. According to one of the recitals of the Regulation introduc-
ing this form of aid, the aid is justified by the ‘increasing advan-
tage enjoyed by the cereal starch industry, particularly because of
the by-products obtained from such manufacture’ (1). This aid

(1) Recital 3 of Council Regulation (EEC) No 1127/78 of 22 May 1978

(OJ L 142, 30.5.1978, p. 24).

measure was introduced in 1978 following the great drought of
1976 and has remained ever since. The premium was also justi-
fied by the seasonal nature of potato starch production and by
specific environmental constraints. The aid was initially set at
10 ecu per tonne of potato starch and went up to 16,93 ecu in
1979 (2) and 18,68 ecu in 1982. This amount became 22,25 ecu
in 1995, following the adjustment of the green rate.

31. According to representatives of the potato starch industry,
the structural disadvantage experienced by potato starch mills in
comparison to cereal starch mills is considerably higher than
22,25 euro per tonne of potato starch produced. In 1996, the
Union of potato starch manufacturers of the European Union
commissioned an economic study by the Dutch Economic Insti-
tute for Agricultural Research. According to this institute, potato
starch manufacturers were at a structural disadvantage of 81 euro
per tonne as compared with maize starch manufacturers in 1995.
The study was updated in 2001 and put this disparity at 84 euro
per tonne in 2000 (3).

(2) Council Regulation (EEC) No 1555/79 of 24 July 1979 (OJ L 188,

(3)

26.7.1979, p. 12).
‘The economic position of potato starch after Agenda 2000’. Agri-
cultural Economics Research Institute LEI-DLO (The Hague, Nether-
lands), 18.6.2001.

 
 
 
 
 
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Management by the Member States

Member States’ on-the-spot controls show some
weaknesses

32. The Member States are required to introduce a control scheme
involving on-the-spot checks whose function is to verify the real-
ity of operations qualifying for the premiums and compliance
with the sub-quota allocated to each potato starch manufacturer.
These checks look at all the operations carried out during the
manufacturing process on a basis of at least 10 % of the quanti-
ties of potatoes supplied to the mill in question (1). The inspec-
tors are allowed access to all the enterprise’s data.

(b) in the Netherlands, the payment of the minimum price is sys-
tematically deferred by a system of interest-free loans which
the majority of farmers grant to the mill.

The Commission’s work in the context of the clearance of
accounts

37.
In 1995 and 1996 the Commission carried out audit visits to
several Member States in the context of its work concerning the
clearance of accounts for 1993 and 1994. The Commission did
not issue any reservations regarding the checks carried out in the
Netherlands (independence of the checks, see paragraph 35) and
did not make any observations concerning calculation of the
minimum price (see paragraph 36).

33. The Member States interpret the provisions of the regula-
tions in different ways. The reason for this is that the text is unclear
and there are no instructions from the Commission as to exactly
what checks should be carried out. In the three Member States
visited, labour-intensive checks are carried out on well over 10 %
of deliveries, but the quality of these checks is very variable.

CONCLUSION

34. Although numerous checks are carried out to verify the
accuracy of payments, one easily implemented key check — an
analysis of the changes over time in the ‘production bonuses’ —
is not carried out in any of the Member States visited. The ‘pro-
duction bonuses’ (2 % to 10 % depending on the starch mill) rep-
resent the difference between actual potato starch production and
the notional production calculated by applying the Community
Regulation. This analysis is essential to detect any deliveries of
potatoes that have not been declared by mills whose sub-quotas
have run out.

35.
In the Netherlands, the independence of the checks is not
guaranteed, because they are carried out by a foundation financed
by the only potato starch manufacturer in the country. The gen-
eral supervision by the AID (General Inspection Services report-
ing to the Ministry of Agriculture) does not compensate for this
weakness.

38. The Court’s audit brought to light certain inadequacies or
problems in the implementation of the Community schemes in
support of industries that use cereal and potato starch and the
specific aid measures for the potato starch sector. However,
although the beneficiaries feel that the aid system does not fully
achieve its objectives, especially as regards competitiveness, they
did not question its components or the way it operates.

39. The level of production refunds paid to the user industries is
influenced by the fact that Community prices for maize are higher
than world prices. The objective of the Agenda 2000 reform was
to align Community cereals prices with world prices in the medium
term. If this objective were achieved, aid to starch-using industries
would automatically cease to exist.

RECOMMENDATIONS

The minimum price is not always fully adhered to

40. As regards the refund scheme for cereal and potato starch
production, the Court recommends that the Commission:

36. Direct payments to producers and potato starch mills are
dependent on the mills paying a minimum price. Some practices
observed in the Member States visited undermine adherence to
the minimum price guaranteed to potato producers by the Regu-
lation:

(a) examine the possibility of making the calculation of refund
rates clearer and more predictable (see paragraph 11). It is also
suggested that it examine the possibility of simplifying the
mechanism;

(a)

in one German plant, a delivery charge equivalent to around
4 % of the minimum price is levied on suppliers who are not
company shareholders;

(b) develop a method to enable it to assess whether the scheme
achieves satisfactory results in terms of the competitiveness of
the Community industry (see paragraph 12);

(1) Article 13(1) of Regulation (EC) No 97/95 (OJ L 16, 24.1.1995, p. 3).

found during the audit (see paragraph 16);

(c) ask the Member States to remedy the control weaknesses

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(d) given the problems posed by their implementation, carry out
an evaluation of the provisions of the regulations relating to
the checks on modified starches. The Commission should
examine the control mechanism with a view to changing the
way it works, and also look into another approach that would
involve making detailed accounting checks only on the enter-
prises that are technically capable of carrying out reprocess-
ing (see paragraphs 18 to 20).

41. With regard to direct aid for the production and processing
of starch potatoes, the Commission should:

(a) examine the possibility of reviewing the 5 % flexibility margin
that the mills have for the management of their sub-quotas
and ensure that the variation in quotas is compatible with the
market’s capacity to absorb the product (see paragraphs 22 to
25);

present and future Member States (see paragraph 28). It is also
important for the Commission to obtain data from the mills
on the actual production of potato starch eligible for refunds;

(c) document and analyse the effects of the direct aid scheme on
the income of the farmers concerned (see paragraph 29);

(d) collect relevant information so that the structural disadvan-
tage suffered by potato starch manufacturers can be measured
(see paragraph 30);

(e) clarify certain provisions concerning checks in the Member
States (see paragraphs 33 and 35), and recommend that Mem-
ber States monitor the ‘bonus production’ obtained by manu-
facturers of potato starch (see paragraph 34);

(b) evaluate the method for calculating the starch content of
potatoes laid down by the regulations, given that this calcula-
tion directly influences all the amounts disbursed. This evalu-
ation should take into account the general technical level in

(f) ask the Member States concerned to remedy the anomalies
found by the Court in respect of adherence to the minimum
price to be paid to farmers by manufacturers of potato starch
(see paragraph 36).

This Report was adopted by the Court of Auditors in Luxembourg at its meeting of 11 and 12 July 2001.

For the Court of Auditors

Jan O. KARLSSON

President

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THE COMMISSION’S REPLIES

SUMMARY

I. From the comments of the Court, especially those set out under ‘Conclusion’, the Commission concludes
that the Court is generally of the opinion that the scheme does not give rise to major difficulties in terms of
implementation. The Court points to a number of shortcomings but, apart from the problem in one Member
State, these do not appear to be of a serious nature. Every system can be improved, however, and the Com-
mission will of course draw the attention of the Member States to the conclusion reached by the Court in its
report.

II. While confirming that aid to the cereal and potato starch sector is linked to the policy on cereal prices, the
Commission would point to an additional factor, namely production refunds aimed at ensuring the competi-
tiveness of Community starch products in relation to imports incorporated in non-protected non-food prod-
ucts (e.g. cardboard and organic chemicals).

III. Control missions were, in the framework of the clearance of accounts, carried out in 1996 in respect of
the 1994 and 1995 budget years. Following the new clearance procedure and the risk assessment of all EAGGF-
Guarantee expenditure, and given the results of the audits carried out in 1996, which did not reveal any major
problems, no further controls have been carried out by the Clearance of accounts department. Given the
resources available, the said department cannot, for the reason given above and as explained in its annual work
schedule, cover each scheme. That is also why the Clearance of accounts department uses as a basis sector let-
ters of the Court which, after analysis, are sent to the Member States together with a reference to Article 8 of
Regulation (EC) No 1663/95.

IV. The Commission’s aim, in ensuring that potato starch production complies with the quota regime, is to
eliminate the risks pointed out by the Court of Auditors as regards the supervision of the market and the
management of controls covering in particular cultivation contracts.

V. The Commission regularly reviews the situation in the sector and consults the trade and the competent
departments in the Member States. Moreover, in the context of the systematic evaluation of sectoral agricul-
tural policies, the Agriculture Directorate-General (DG) included in its programme for the year 2000 the
launch of a study centred on an evaluation of the Community policy on starch and starch products. The main
evaluation issues relate:

— on the one hand, to the effectiveness and efficiency of the measures adopted in the starch and starch prod-
ucts sector generally, in particular production and export refunds, and measures specific to potato starch,
among them aid to starch factories and production quotas, and

— on the other, to farm incomes and the development of the regions concerned.

The results of the study are expected at the end of 2001. A number of items currently under preparation may
well prove useful in drawing up the report which, as required by Council Regulation (EC) No 1868/94, the
Commission is to present to the Council on or before 31 October 2001. The report is to deal with the alloca-
tion of the potato starch quota within the Community and is, if necessary, to be accompanied by appropriate
proposals.

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PRODUCTION REFUNDS

Management by the Commission

The method for calculating refunds allows for
considerable flexibility

11. All the components used in the calculation of the refund are
notified weekly to the Management Committee. Under the method,
internal prices may be capped in the event of a significant increase,
in particular to avoid a sharper upward trend, thus helping to
curb budget expenditure.

It should be stressed that there is no absolute guarantee that the
method will be applied; the Commission may, under exceptional
circumstances, apply different rules. The Commission takes note
of the industry’s requests but stresses that when fixing refunds it
must take account of budgetary constraints and actual market
conditions.

— on the one hand, to the effectiveness and efficiency of the
measures adopted in the starch and starch products sector
generally, in particular production and export refunds, and
measures specific to potato starch, among them aid to starch
factories and production quotas, and

— on the other, to farm incomes and the development of the

regions concerned.

The results of the study are expected at the end of 2001. A num-
ber of items currently under preparation may well prove useful in
drawing up the report which, as required by Council Regulation
(EC) No 1868/94, the Commission is to present to the Council on
or before 31 October 2001. The report is to deal with the alloca-
tion of the potato starch quota within the Community and is, if
necessary, to be accompanied by appropriate proposals.

Management by Member States

There is a lack of information on the state of the market

Progress in administrative controls by national authorities
but incomplete on-the-spot controls

12. A number of reservations are called for regarding the con-
clusions to be drawn from Diagram 2.

Although there are no representative quotations for cereal starch,
potato starch or derived products, the Commission does not take
the view that there is a systematic price gap disadvantageous to
the European starch industry. The refund, be it a production or an
export refund, is aimed at offsetting differences in the cost of raw
materials and not differences in the cost of starch or potato starch
as a finished product. The production refund covers the difference
between European prices for maize on delivery and cif prices for
maize on world markets (in particular the American market);
internal prices in the United States of America are accordingly
lower, by an amount corresponding in particular to the cost of
transport from the United States of America to Europe. The pur-
pose of the production refund is to ensure that industrial prod-
ucts made from starch obtained from raw materials at the Com-
munity price can compete with imported products made from
raw materials at the world market price; it is not to ensure equal-
ity between starch prices on Community and world markets.

13.
In the context of the systematic evaluation of sectoral agri-
cultural policies, the Agriculture DG included in its programme
for the year 2000 the launch of a study centred on an evaluation
of the Community policy on starch and starch products. The
main evaluation issues relate:

16. By virtue of Article 9 of Regulation (EEC) No 1722/93, Mem-
ber States are not obliged to carry out systematic physical checks.
As the Court points out at point 14, the Regulation provides for
administrative checks, but these should, where necessary, be
backed up by physical checks. It is for the national control depart-
ments to determine when physical checks are necessary.

(a) Under the Regulation, the competent authority must, before
payment, establish that the starch has been used for the
manufacture of the approved products in accordance with the
information stated on the certificate. This will normally be
done by means of administrative checks, but these should,
where necessary, be backed up by physical checks, possibly
including analyses.

(b) The stock records of the large firm in the Netherlands are the
subject of controls in the framework not only of the produc-
tion refunds for starch, but also of Regulation (EEC) No 4045/
89. The Commission will analyse the comments of the Court
of Auditors and will, where appropriate, adopt suitable mea-
sures.

(c) According to information in the possession of the Commis-
sion the situation in the Netherlands has, since the Court’s
audit, been corrected by the Member State concerned.

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The follow-up of modified starch should be reviewed

Greater flexibility in the arrangements could well lead to an
increase in potato starch production, especially in the first year,
with a consequential increase in budget expenditure.

17 and 18.
In 1987 the security to be lodged (105 % of the
refund — released only after proof has been submitted that the
applicable requirements have been fulfilled) was increased and,
in 1988, a control system based on the T5 form was introduced
for products in intra-Community trade. By virtue of Regulation
(EEC) No 1722/93 these arrangements were replaced by a system
of proof based on quarterly declarations (see point 18 of the Court
of Auditors’ report), except in the case of intra-Community trade
and exports via a Member State. Lastly, in 1998, the conditions
for the release of the special security were made more detailed
(definition of the principal requirement and specification of the
time allowed for processing/export).

The issue of reprocessing of modified starch is referred to in the
report on the Clearance of accounts department mission to France
of 30 June 1995. It emerged that control procedures in France did
not provide sufficient guarantees as regards the avoidance of
duplicate aid payments. In the absence of any evidence that such
payments had actually occurred, however, no financial correc-
tions were proposed.

19. Aware of the possibility of abuse and irregularities, the Com-
mission has, jointly with the Member States and the trade, regu-
larly reviewed the application of the special measures for modi-
fied starch. A number of rules have been adjusted, including the
introduction of declarations whereby manufacturers give an under-
taking, which Member States are required to comply with and
verify, regarding the correct use of the product.

20. The Commission recognises that there is currently less of a
risk of fraudulent use of modified starch, given that production
refunds are low. The Commission is prepared to look at the con-
ditions applicable and, if necessary, the provisions of Regulation
(EEC) No 1722/93.

DIRECT AID FOR POTATO STARCH

Management by the Commission

The management of quotas is not consistent

24. At the Council meeting which adopted the starch regime
Spain reported modest domestic potato starch production; the
Council accordingly allocated a 2 000 tonne quota which in effect
is not produced under that regime.

There is an inherent risk in the quota system

26.
In 1998/99 UCLAF/OLAF investigated illicit transfers of
quotas in the potato starch sector, checks having shown that pota-
toes grown in the Netherlands were, in breach of the regulations,
being sold in Germany via middlemen. The total amount to be
recovered
sanctions
the
is EUR 6,2 million. The matter is still being looked into.

application

following

of

Starch quantities are determined on the basis of an
outdated conversion table

28. The minimum price, the amount payable to the producer
and the starch industry premium (starch scale) are determined by
means of the conversion table used to calculate the starch content
of the potatoes. The table was drawn up in 1975 and amended
in 1982. While it is true that some differences may emerge as a
result of the actual starch content of the potatoes or the percent-
age of starch extracted thanks in particular to technological
advances not yet taken into account, the scale has been regularly
updated in the light of the data applicable (minimum price, com-
pensatory payment, etc.). Moreover, additional quantities do not
qualify for support under the potato starch regime (no premium
or payment to the producer). These factors are covered by the
evaluation now under way (see point 13).

The impact of the direct aid paid to farmers has never
been evaluated

22. The prime purpose of a quota system is to limit production.
The Council has, however, decided to allow a 5 % flexibility mar-
gin over and above the quota allocated, subject to the subsequent
quota being reduced accordingly.

29.
In the Member States in which potato starch is produced, the
crop concerned is regarded as being of major importance in pro-
duction regions; the current regime is expected to provide farm-
ers with a fair income, an evaluation of which will be provided in
the course of the current study (see point 13).

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Aid for potato starch mills is not based on sufficiently
reliable management information

ery charge in Germany might not be acceptable and the Com-
mission will look further into this matter.

30. The premium to the potato starch industry applies to pro-
duction under the quota regime. It is provided for in Article 5 of
Council Regulation (EC) No 1868/94 and is intended to take
account of structural constraints that are specific to the potato
starch sector, namely a short production season, few by-products
whose value can be enhanced and the cost of disposing of liquid
waste. The Commission has already recognised in the past that it
is difficult to set a suitable level for the premium and that the data
in its possession varies greatly according to the region and the
structure of the factories. It is generally accepted, however, that
there has been no fundamental change in the economic link with
the cereal starch sector. The Commission will look into these fac-
tors in the context of the evaluation study now underway (see-
point 13).

(b) the Commission will look into the conformity of this observed

practice.

The Commission’s work in the context of the clearance of
accounts

37. Concerning the Netherlands, the Clearance of accounts
department raised the matter in its control report of 1996 and
concluded that the situation was, at the time, acceptable.

It should be noted that the premium of EUR 22,25 per tonne

31.
of potato starch was approved by the Council.

CONCLUSION

The Commission does not, at this stage, wish to comment on the
validity of the study referred to. The amount of the premium is
covered by the evaluation underway (see point 13).

Management by the Member States

Member States’ on-the-spot controls show some
weaknesses

38. From the comments of the Court, especially in the conclu-
sion, the Commission concludes that the Court is generally of the
opinion that this scheme does not give rise to major difficulties
in terms of implementation. The Court points to certain short-
comings but, apart from the problem in Germany, these do not
appear to be of a serious nature. Every system can be improved,
however, and the Commission will of course draw the attention
of the Member States to the conclusion of the Court in the report.

33. The percentage to be checked is specified in Article 13 of
Commission Regulation (EC) No 97/95 and so is the general
objective of the checks. Once again, it is left to the national
authorities to determine the control method. Differences are pos-
sible, but cannot be evaluated, given that the scheme has not been
checked by the Clearance of accounts department since 1996.

RECOMMENDATIONS

40.

34. The Commission agrees with the Court that the yields have
to be evaluated to determine deliveries over and above the sub-
quota allocated to the starch-producing undertaking. This point
is currently being examined by the Commission departments
concerned.

The minimum price is not always fully adhered to

36 and 37.

(a) The Commission will look into the possibility of simplifying

the mechanism if such simplification is warranted.

(b) The Commission will continue to scrutinise the method used
for calculating the refunds in the absence of representative
prices for cereal starch, potato starch and derived products.
This item is covered by the evaluation study referred to at point
13.

(c) The Commission refers to the observations made under point
16, but will inform the Member States about the concerns of
the Court.

(a) The application of the minimum price to be paid to the pro-
ducer of starch potatoes by the industry is considered a key
control. The reduction of the minimum price by a 4 % deliv-

(d) The Commission recognises that there is currently less of a
risk of fraudulent use of modified starch, given that produc-
tion refunds are lower. The Commission is willing to look into
the conditions applicable.

19.10.2001

EN

Official Journal of the European Communities

C 294/19

41.

(a) The 5 % flexibility margin was introduced by the Council after
much discussion. The Commission does not currently intend
to propose increasing it, for budgetary reasons and because
production might well increase as a result.

(b) This item will be looked at in the context of the current evalu-
ation and in the light of the potential impact (see point 13); it
is being discussed by the Commission departments con-
cerned.

(c) The Commission seeks to ensure a fair level of income for
farmers. The evaluation study currently underway is expected
to shed some light on the subject (see point 13).

structural disadvantage of potato starch factories in relation to
their cereal starch counterparts. Premiums to potato starch
factories are dealt with in the current evaluation study (see-
point 13).

(e) It is for the national authorities to determine the control
method, although the framework is set by Regulation (EC)
No 97/95 (see point 33).

The Commission agrees with the Court that the yields have to
be evaluated to determine deliveries over and above the sub-
quota allocated to the starch-producing undertaking. This
point is currently being examined by the Commission depart-
ments concerned.

(f) The 4 % price reduction in respect of a delivery charge needs

(d) The Commission endeavours to collect information on the

to be investigated further.