Proposal for a Council Regulation amending Regulation (EC) No 637/2008 as regards the national restructuring programmes for the cotton sector
Date: 2009-02-02
Institutions: European Commission
Subjects: aid for restructuring, aid recipient, aid to agriculture, cotton, production aid

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 2.2.2009 
COM(2009) 37 final 

2009/0008 (CNS) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 637/2008 as regards the national restructuring 
programmes for the cotton sector 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

In  its  conclusions  of  20  November  2008  the  Council  invited  the  Commission  to  propose 
modification of the Regulation (EC) No 637/2008, in order to extend the programming period 
of  restructuring  programmes  in  the  cotton  sector.  Such  modification  would  allow  the 
restructuring process to be carried out in the most effective manner. 

•  General context 

After annulment of the 2004 cotton reform by the Court of Justice on 7 September 2006, the 
Commission  proposed  a  new  support  scheme  for  cotton  on  9  November  2007 
(COM(2007) 701).  On  23  June  2008,  the  Council  adopted  Regulation  (EC)  No 637/2008 
amending Regulation (EC) No 1782/2003 and establishing national restructuring programmes 
for  the  cotton  sector.  The  new  support  scheme  provides  for  area  payments,  for  a  maximum 
guaranteed area of cotton per Member State. 

In  parallel,  the  national  restructuring  programmes  aim  to  aid  the  European  cotton  sector  in 
view  of  the  difficulties  posed  by  the  changed  legal  and  market  context.  Specifically,  the 
cotton ginning industry in some production areas is faced with considerably overcapacity. 

•  Existing provisions in the area of the proposal 

The  current  proposal  concerns  technical  modifications  of  Council  Regulation  (EC) 
No 637/2008 with regard to the application of the national restructuring programmes. 

•  Consistency with the other policies and objectives of the Union 

Not applicable. 

2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

–  Extensive  consultation  of  interested  parties  in  the  cotton  sector  was  carried  out  for  the 
preparation  of  the  new  reform  proposal  for  the  cotton  sector  in  2006  and  2007.  As  the 
current  proposal  modifies  technical  details  of  the  existing  legal  framework,  which  has 
already become applicable in 2009, further consultations were not opportune. 

•  Collection and use of expertise 

There was no need for external expertise. 

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•  Impact assessment 

As the proposal concerns specific modification of the existing legal framework for Member 
States with regard to the execution of their restructuring programmes, no impact assessment 
was carried out. 

Whereas no additional funds are available, the option suggested by Council is considered the 
most feasible, within the constraints of the reform of the cotton sector agreed in June 2008. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

Council  Regulation  (EC)  No  637/2008  foresees  four  year  restructuring  programmes. 
However, in view of the substantial difficulties the sector is facing, Member States should be 
given  the  possibility  to  submit  an  eight  year  programme  instead.  An  eight  year  period  will 
provide the possibility to launch a larger number of measures without increasing the annual 
budgetary envelopes. 

Ginning factories not operated by their owners in the reference marketing year are excluded 
as  beneficiaries  from  the  measures  foreseen  in  Council  Regulation  (EC)  No  637/2008.  The 
proposed  technical  modification  ensures  all  ginning  factories  that  operated  in  the  reference 
period can be eligible. 

•  Legal basis 

Article 37(2) of the Treaty establishing the European Community and Protocol No 4 on cotton 
(annexed to the Act of Accession of 1979). 

•  Subsidiarity principle 

The  subsidiarity  principle  applies  insofar  as  the  proposal  does  not  fall  under  the  exclusive 
competence of the Community. 

In  order  to  assure  a  level  playing  field  in  the  cotton  sector,  a  common  framework  for 
restructuring measures is essential and has been adopted by Council in June 2008. The current 
proposal does not modify this Council Regulation fundamentally. 

Subsidiarity  with  regard  to  these  restructuring  programmes  is  assured  by  allowing  Member 
States  to  select  measures  from  the  menu  in  the  Council  Regulation  that  best  respond  to  the 
challenges in their production regions.  

•  Proportionality principle 

The proposal complies with the proportionality principle because the proposed modifications 
leave  intact  the  general  framework  decided  by  Council  in  June  2008,  while  providing  for 
additional options for Member States. 

•  Choice of instruments 

Proposed instrument: Council Regulation amending Council Regulation (EC) No 637/2008. 

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4. 

BUDGETARY IMPLICATION 

The proposal does not increase the annual budgetary envelope available to the Member States 
for  the  restructuring  programmes,  but  it  does  provide  Member  States  with  the  possibility  to 
submit a programme for a duration of eight years, i.e. for the period 2010 to 2017. The level 
of the annual support to the restructuring programme was already fixed in Council Regulation 
(EC) No 637/2008 and remains unchanged. If Member States choose to submit an eight-year 
programme,  their  annual  budgetary  envelope  shall  be  automatically  transferred  to  their 
national  ceiling  for  direct  payments,  as  determined  in  Annex VIII  to  Regulation  (EC) 
No 1782/2003, in 2018. 

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2009/0008 (CNS) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 637/2008 as regards the national restructuring 
programmes for the cotton sector 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular the third 
subparagraph of Article 37(2) thereof, 

Having regard to the Act of Accession of 1979, and in particular paragraph 6 of Protocol No 4 
on cotton1 annexed thereto, 

Having regard to the proposal from the Commission2, 

Having regard to the opinion of the European Parliament3, 

Whereas: 

(1) 

(2) 

Chapter  2  of  Council  Regulation  (EC)  No  637/2008  of  23  June  2008  amending 
Regulation (EC) No 1782/2003 and establishing national restructuring programmes for 
the  cotton  sector4  contains  provisions  on  four-year  restructuring  programmes  to  be 
decided at Member State level to finance, among others, specific measures to assist the 
ginning industry. 

The economic situation of the cotton sector in the Community, and the need to carry 
out  substantial  restructuring  operations  immediately  including  all  ginning  companies 
concerned,  justifies  the  introduction  of  an  eight-year  programming  period.  However, 
in  case  a  more  substantial  eight-year  programme  is  carried  out,  the  transfer  to  the 
national  ceiling  as  determined 
to  Council  Regulation  (EC) 
in  Annex VIII 
No 1782/2003  of  29  September  2003  establishing  common  rules  for  direct  support 
schemes  under  the  common  agricultural  policy  and  establishing  certain  support 
schemes for farmers5

 should follow without further delay. 

(3) 

Article 7(2)(a) of Regulation (EC) No 637/2008 lays down that the beneficiaries of the 
aid under Chapter IV of Council Regulation (EC) No 1051/2001 of 22 May 2001 on 
production aid for cotton6 in the marketing year 2005/2006 are the beneficiaries of the 

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OJ L 291, 19.11.1979, p. 174. 
OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
OJ L 178, 5.7.2008, p. 1. 
OJ L 270, 21.10.2003, p. 1. 
OJ L 148, 1.6.2001, p. 3. Regulation repealed by Regulation (EC) No 1782/2003. 

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measures  referred  to  in  Article 7(1)(a),  (b)  and  (d)  of  Regulation  (EC)  No 637/2008. 
Some ginning factories were not operated by their owners in the reference marketing 
year  and  those  owners  were  not  beneficiaries  under  Chapter  IV  of  Regulation  (EC) 
No 1051/2001  and  thus  are  excluded  from  participating  in  the  restructuring  process. 
For  the  national  restructuring  programmes  to  be  effective  all  ginning  factories  that 
were active in the reference marketing year 2005/2006 and eligible for support under 
Chapter IV  of  Regulation  (EC)  No 1051/2001  should  be  covered  by  the  measures 
under  Article 7(1)(a),  (b)  and  (d)  of  Regulation  (EC)  No 637/2008.  Therefore,  it  is 
appropriate  that  the  owner  of  the  factory  should  qualify  as  the  beneficiary  under  the 
restructuring programmes with reference to the above mentioned measures. 

(4) 

Regulation (EC) No 637/2008 should therefore be amended accordingly, 

HAS ADOPTED THIS REGULATION: 

Regulation (EC) No 637/2008 is amended as follows: 

Article 1 

(1) 

In  Article  4(1)  the  following  subparagraph  shall  be  inserted  after  the  first 
subparagraph: 

"By  way  of  derogation  from  the  first  subparagraph,  Member  States  may  opt  to 
submit  to  the  Commission,  before  31  December  2009,  a  single  draft  modified 
restructuring programme for a duration of eight years." 

(2) 

In Article 5(2), the following subparagraph shall be added: 

"However,  if  a  Member  States  opts  to  submit  a  draft  modified  restructuring 
programme for a duration of eight years, as provided for in the second subparagraph 
of Article 4(1), its annual budget as referred to in paragraph 1 of this Article shall be 
transferred  to  its  national  ceiling  as  determined  in  Annex VIII  to  Regulation  (EC) 
No 1782/2003 in the financial year 2018 and shall be applicable to direct payments 
paid in that year. The Member State concerned shall submit a communication on the 
implementation of the restructuring programme and the achievement of its objectives 
by 1 January 2018." 

(3) 

In Article 7(2), point (a) shall be replaced by the following: 

"(a) 

the owners of the ginning facilities in respect of which aid under Chapter IV of 
Council Regulation (EC) No 1051/2001(*) was granted in the marketing year 
2005/2006, for aid under the measures referred to in paragraph 1(a), (b) and (d) 
of this Article;  

(*)  OJ L 148, 1.6.2001, p.3". 

Article 2 

This Regulation shall enter into force on the seventh day following that of its publication in 
the Official Journal of the European Union. 

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

Done at Brussels,  

For the Council 
The President 

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