Notice of initiation of an examination procedure concerning an obstacle to trade, within the meaning of Council Regulation (EC) No 3286/94, consisting of subsidies afforded by the United States of America to oilseed production
Date: 2003-03-13
Institutions: European Commission
Subjects: United States, agricultural production, oleaginous plant, restriction on competition, support policy

C 58/4

EN

Official Journal of the European Union

13.3.2003

Notice of initiation of an examination procedure concerning an obstacle to trade, within the
meaning of Council Regulation (EC) No 3286/94, consisting of subsidies afforded by the United
States of America to oilseed production

(2003/C 58/03)

On 10 January 2003, the Commission received a complaint,
pursuant
to Article 3 of Council Regulation (EC) No
3286/94 (1) (hereinafter the Regulation).

rates. In practice however since market prices have been below
the loan rate, the following measures have been applicable.

1. Complainant

The complaint was lodged by the European Oilseed Alliance
(EOA). The EOA is a trade organisation made up of national
associations from Germany, the United Kingdom, Spain, France
and Sweden. These national associations' members include
producers of oilseeds in all cases, as well as other professions
in the sector, in some cases (e.g. grain stockers, processors and
users). The EOA member organisations represent 86 % of
European oilseed production.

The EOA is an association acting on behalf of a Community
industry, oilseed production, within the meaning of Articles
2(5) and 3(1) of the Regulation.

2. Product

afforded

subsidies

concerns

complaint

The
to oilseed
production in the United States of America. Oilseeds are a
group of plants grown for both their oil and proteins. Major
rapeseed and
oilseeds produced worldwide are soybeans,
sunflower. Minor oilseeds
safflower and
linseed,
sesame. Oilseeds are covered by the following codes of the
Combined Nomenclature: 1201, 1204, 1205, 1206 and 1207.

include

3. Subject

The complaint concerns a trade barrier allegedly caused by the
United States of America due to the granting of subsidies to
oilseed production.

The challenged United States subsidies are loan rates and
marketing loan subsidies, direct payments and counter-cyclical
payments. These payments are made under the United States
Food Security and Rural Investment Act 2002 (FSRIA).

the

loan rates

system, producers may take out
Under
‘non-recourse’ loans offered by the government. The collateral
for these loans is the oilseed crop, assessed at a government-set
value. If the farmer can sell the oilseeds at a price higher than
the loan rate, he then repays the loan. If he cannot, he forfeits
the crop but need make no payments on the loan. The system
thus acts as a price guarantee at the government-set loan rate.
The loan rates are alleged to be lower than commercial loan

(1) Council Regulation (EC) No 3286/94 of 22 December 1994 laying
common
down Community procedures
the
commercial policy in order
Community's rights under international trade rules,
in particular
those established under the auspices of the World Trade Organi-
sation (OJ L 349, 31.12.1994, p. 71), as last amended by Council
Regulation (EC) No 356/95 (OJ L 41, 23.2.1995, p. 3).

in the
to ensure

field of
the

exercise of

the

Under the marketing loans system,
in order to prevent the
build-up of public stocks, a marketing loan gains system is
applied. Under this system, where a farmer has taken out a
the prevailing
loan, he may simply reimburse the loan at
market price for oilseeds (where this is below the loan rate).
He therefore receives an aid of the difference between the
market price of the crops and the government-set loan rate.
He is free to sell the crop on the market.

Further, to simplify procedures the instead of taking out a loan,
if the market price of oilseeds is below the loan rate, the farmer
may simply apply for an aid (loan deficiency payment) of
equivalent value to the difference between the prevailing
market price and the loan rate.

These mechanisms are available for a number of agricultural
commodities, including oilseeds. The rates are set differently for
different commodities. The payments of course are specific to
each commodity.

It is claimed in the complaint that there is no limit set on the
volume of subsidy available under these schemes.

Direct payments are made in respect of historical base areas for
a specific range of various crops, including oilseeds. In practice,
there is a freedom to plant a range of crops on the areas
covered, although some products are excluded (e.g. fruits and
vegetables) and the land must be kept in agricultural condition.
The base areas may be updated to cover a 1998 to 2001
reference period.

Counter-cyclical payments are also related to the historical base
areas for various crops. If the price of a particular crop on the
world market drops below a certain level then a payment is
made. Again, this is not dependent on actually planting the
crop concerned on the base area, although growing some
products is excluded (e.g. fruits and vegetables) and the land
must be kept in agricultural condition.

The complaint also cites subsidies paid under previous United
States Federal Agricultural Improvement and Reform Act 1996
(FAIR Act) which are now superseded by the FSRIA subsidies.
Loan rates and marketing loan subsidies were granted similarly
as under the FSRIA.

13.3.2003

EN

Official Journal of the European Union

C 58/5

Direct payments known as ‘flexibility’ or ‘AMTA’ payments as
well as ‘emergency’ aid (paid in 1999, 2000 and 2001) were
also made on the basis of historical reference areas. These
reference areas included both oilseeds reference areas and
those for certain other arable crops.

Community oilseed production of 14 million tonnes on
average over the 1999 to 2002 period represents a value of
current prices. Significant price
over EUR 3 billion at
depression could therefore
to
Community producers.

represent

sizeable

injury

Expenditure under these measures to oilseeds is alleged to have
been USD 1,2 billion in 1998, USD 2,5 billion in 1999,
USD 2,8 billion in 2000 and USD 3,5 billion in 2001.

The complainant has provided sufficient prima facie evidence
of injury as defined in Article 2(3) of the Regulation to justify
initiating an examination procedure.

4. Allegation of obstacles to trade

6. Community interest

complainant

The
measures maintained by the United States of America:

abovementioned trade

claims

that

the

— constitute

subsidies

as defined in Article 1 of

the
Agreement on Subsidies and Countervailing Measures
(SCM), and that
these subsidies are specific within the
meaning of Article 2 SCM,

— are not exempted from a right of action under Articles 5
and 6 SCM by virtue of Article 13 of the Agreement on
Agriculture (A on A) since the measures grant support to
the specific commodity, oilseeds, in excess of that decided
during the 1992 marketing year which is alleged to be
practically nil,

— have

effects

to the

interests of

caused adverse

the
Community as set out
in Article 5 SCM by causing
serious prejudice to its interests in particular as set out in
is
Article 6(3)(c) SCM as
significant price depression on the world market, and by
consequence the Community market since Community
oilseed tariffs are low or zero, based in part on an econo-
metric model, and

the effect of

the subsidies

— thus give rise to a right of action for the Community under

Article 7 SCM.

The complainant has provided sufficient prima facie evidence
the
to justify initiating an examination procedure
contested measures are inconsistent with the obligations of
the United States of America under the WTO Agreement, in
particular with Articles 5 and 6 of the SCM, and that they
thereby constitute an obstacle to trade within the meaning of
Article 2(1) of the TBR.

that

The Community has a systemic interest in the application of
WTO rules in the agricultural sector. The negotiations of such
rules was a key element in the successful conclusion of the
Uruguay Round. Support for oilseeds was itself an key element
covered in the negotiations on the Agreement on Agriculture.

Further negotiations are underway in the WTO in the context
of the Doha Development Agenda. Agriculture is again an
element of these negotiations.

Given the above circumstances, it is considered to be in the
Community's interest to initiate an examination procedure.

7. Procedure

Having decided, after consultation of the Advisory Committee
established by the Regulation, that there is sufficient evidence
to justify initiating an examination procedure for the purpose
of considering the legal and factual issues involved, and that
this is in the interest of the Community, the Commission has
commenced an examination in accordance with Article 8 of
the Regulation.

Interested parties may make themselves known and make
known their views in writing, in particular by addressing the
specific issues raised in the complaint, and by providing
supporting evidence.

Furthermore, the Commission will hear parties who so request
in writing when making themselves known, provided that they
are a party primarily concerned by the result of the procedure.

This notice is published in accordance with Article 8(1)(a) of
the Regulation.

5. Allegation of injury

8. Time limit

The complainant contends that it has suffered injury within the
meaning of Article 2(3) of the Regulation.

Any information relating to the matter and any requests for
hearings should be sent in writing to:

In particular the complaint alleges that the existence of serious
prejudice to the EC under Article 6(3)(c) SCM due to significant
price depression on the world market, and by consequence the
EC market, is in itself sufficient evidence of injury.

In addition to the allegation of price depression, the complaint
also alleges that import volumes have risen as compared to
Community production and that EC oilseed producer revenue
has dropped. This analysis is in part based on an econometric
model.

European Commission
Directorate-General for Trade
Mr. Ignacio Garcia Bercero, DG Trade D/3
CHAR 9/74
B-1049 Brussels
Fax (32-2) 299 32 64

Any such information or request for a hearing should reach the
Commission not later than 30 days following the publication
of this notice.