Council Regulation (EC) No 318/2006 of 20 February 2006 on the common organisation of the markets in the sugar sector

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 36 and the third subparagraph of Article 37(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the Opinion from the European Parliament⁽¹⁾,

Having regard to the Opinion from the European Economic and Social Committee⁽²⁾,

Whereas:

1. The operation and development of the common market for agricultural products should be accompanied by the establishment of a common agricultural policy to include, in particular, a common organisation of agricultural markets which may take various forms depending on the product.

2. The sugar market in the Community is based on principles which for other common market organisations have been substantially reformed in the past. In order to pursue the objectives set out in Article 33 of the Treaty, and notably in order to stabilise the markets and to ensure a fair standard of living for the agricultural community within the sugar sector, it is necessary to fundamentally review the common organisation of the market in the sugar sector.

3. In the light of these developments, Council Regulation (EC) No 1260/2001 of 19 June 2001 on the common organisation of the markets in the sugar sector⁽³⁾ should be repealed and replaced by a new Regulation.

4. Reference prices should be fixed for standard qualities of white sugar and raw sugar. Such standard qualities should be average qualities representative of sugar produced in the Community and defined on the basis of criteria used by the sugar trade. It should also be possible to review the standard qualities to take account, in particular, of commercial requirements and developments in technical analysis.

5. In order to achieve reliable information on Community market prices for sugar, a price reporting system should be set up on the basis of which market price levels for white sugar should be determined.

6. A minimum price should be fixed for quota beet corresponding to a standard quality which should be defined, in order to ensure a fair standard of living for the Community growers of sugar beet and sugar cane.

7. Specific instruments are needed to ensure a fair balance of rights and obligations between sugar undertakings and sugar beet growers. Therefore, standard provisions should be laid down to govern the contractual relations between buyers and sellers of sugar beet. The diversity of natural, economic and technical situations makes it difficult to provide for uniform purchase terms for sugar beet throughout the Community. Agreements within the trade already exist between associations of sugar beet growers and sugar undertakings. Therefore, framework provisions should only define the minimum guarantees required by both sugar beet growers and the sugar industry to ensure a smooth functioning of the sugar market with the possibility to derogate from some rules in the context of an agreement within the trade.

8. The reasons which in the past led the Community to adopt a production quota system for sugar, isoglucose and inulin syrup still remain valid. However, due to developments within the Community and internationally, it is necessary to adjust the production system in order to provide for new arrangements and reductions of the quotas. In line with the previous quota system, a Member State should allocate quotas to the undertakings established within its territory. The new common organisation of the markets in the sugar sector should maintain the legal status of the quotas in so far as, according to the case-law of the Court of Justice, the system of quotas constitutes a mechanism for regulating the market in the sugar sector which aims to ensure the attainment of public interest objectives.

9. Following the recent decisions on export subsidies of the World Trade Organisation Panel and the Appellate Body on EU export subsidies for sugar and in order for Community operators to ensure a smooth change-over from the previous quota system to the present system, it should be possible during the marketing year 2006/2007 for sugar undertakings to be allocated an additional quota under conditions that take into account the lower value of C sugar.

10. To counterbalance the effects on isoglucose of the fall in sugar prices, as well as to avoid penalizing the production of some isoglucose qualities, additional quotas should be allocated to the current isoglucose beneficiaries. Moreover, supplementary quotas should be available for adjustments of the sweeteners sector of some Member States under the conditions provided for granting additional sugar quota.

11. To ensure that the Community's production of sugar, isoglucose and inulin syrup is reduced sufficiently, the Commission should be entitled to adjust the quotas to a sustainable level after the termination of the restructuring fund in 2010.

12. Given the need to allow for a certain national flexibility in relation to the structural adjustment of the processing industry and of beet and cane growing during the period in which the quotas are to be applied, Member States should be allowed to alter the quotas of undertakings within certain limits whilst not restricting the operation of the restructuring fund established by Council Regulation (EC) No 320/2006 of 20 February 2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community⁽⁴⁾ as an instrument.

13. The sugar quotas are allocated or reduced following a merger or transfer of undertakings, the transfer of a factory, or the lease of a factory. The conditions for adjustment by the Member States of the quotas of the undertakings in question should be established while ensuring that changes to the quotas of sugar undertakings are not detrimental to the interests of the beet growers or cane growers concerned.

14. Since allocating quota production to undertakings is a way of ensuring that sugar beet and cane growers are paid Community prices and have an outlet for their production, the interests of all parties concerned, in particular beet and cane growers, should be taken into consideration when quotas are transferred inside production regions.

15. To expand the outlets for sugar, isoglucose and inulin syrup on the Community's internal market, it should be possible to consider sugar, isoglucose and inulin syrup used for manufacture in the Community of certain products such as chemical, pharmaceutical, alcohol or rum, as out-of-quota production under conditions to be laid down.

16. A part of the out of quota production should be used to ensure the adequate supply to the outermost regions or could be exported under the Community's WTO commitments.

17. Should the production of sugar, isoglucose or inulin syrup exceed the quotas, it should be possible to provide for a mechanism to carry forward the surplus sugar, isoglucose or inulin syrup to be treated as quota production of the following marketing year, in order to avoid the surplus sugar distorting the sugar market.

18. Certain mechanisms are available for out of quota production. If, for certain quantities, the applicable conditions are not met, a levy on the surplus should be imposed in order to avoid the accumulation of these quantities threatening the market situation.

19. A production charge should be introduced to contribute to the financing of the expenditure occurring under the common organisation of the markets in the sugar sector.

20. In order to provide for an efficient control of the production of operators producing sugar, isoglucose or inulin syrup, an approval system for operators should be established and detailed information in relation to their production should be submitted to the Member State concerned.

21. A temporary and limited buying-in intervention system should be kept in place in order to contribute to stabilising the market for cases where market prices in a given marketing year would fall below the reference price fixed for the following marketing year.

22. New market tools to be managed by the Commission should be introduced. Firstly, if market prices fall below the reference price for white sugar, it should be possible for operators, under conditions to be determined by the Commission, to benefit from a private storage scheme. Secondly, to maintain the structural balance of the markets in sugar at a price level close to the reference price, it should be possible for the Commission to decide to withdraw sugar from the market for as long as it takes for the market to rebalance.

23. The creation of a single Community market for sugar involves the introduction of a trading system at the external borders of the Community. That trading system should include import duties and export refunds and should, in principle, stabilise the Community market. The trading system should be based on the undertakings accepted under the Uruguay Round of multilateral trade negotiations.

24. In order to monitor the volume in trade in sugar with third countries, provision should be made for an import and export licence scheme with the lodging of a security to ensure that the transactions for which such licences are issued are actually carried out.

25. To ensure that those trading arrangements can function properly, provision should be made for regulating or, when the situation on the market so requires, prohibiting the use of inward processing arrangements.

26. The customs duty system makes it possible to dispense with all other protective measures at the external frontiers of the Community. The internal market and duty mechanism could, in exceptional circumstances, prove to be inadequate. In such cases, in order not to leave the Community market without defence against disturbances that might ensue, the Community should be able to take all necessary measures without delay. Such measures should comply with the international commitments of the Community.

27. For the most part, the customs duties applicable to agricultural products under the WTO agreements are laid down in the common customs tariff. However, for some products falling within the scope of this Regulation, the introduction of additional mechanisms makes it necessary to provide for the possibility to adopt derogations.

28. In order to prevent or counteract adverse effects on the Community market which could result from imports of certain agricultural products, imports of such products should be subject to payment of an additional duty, if certain conditions are fulfilled.

29. It is appropriate, under certain conditions, to confer on the Commission the power to open and administer tariff quotas resulting from international agreements concluded in accordance with the Treaty or from other acts of the Council.

30. The Community has several preferential market access arrangements with third countries which allow those countries to export cane sugar to the Community under favourable conditions. Therefore, it is necessary to evaluate refiners' need for sugar for refining and, under certain conditions, to reserve import licences to specialised users of notable quantities of imported raw cane sugar, deemed as being full-time refiners in the Community.

31. Provisions for granting refunds on exports to third countries, based on the difference between prices within the Community and on the world market, and falling within the limits set by the EC's commitments in the WTO, should serve to safeguard the possible Community participation in international trade in sugar. Subsidised exports should be subject to limits in terms of quantity and budgetary outlay.

32. Compliance with the limits in terms of value should be ensured at the time when the export refunds are fixed through the monitoring of payments under the rules relating to the European Agricultural Guidance and Guarantee Fund. Monitoring can be facilitated by the compulsory advance fixing of export refunds, while allowing the possibility, in the case of differentiated refunds, of changing the specified destination within a geographical area to which a single export refund rate applies. In the case of a change of destination, the export refund applicable to the actual destination should be paid, with a ceiling of the amount applicable to the destination fixed in advance.

33. Compliance with the quantity limits should be ensured by a reliable and effective system of monitoring. To that end, the granting of export refunds should be made subject to an export licence. Export refunds should be granted up to the limits available, depending on the particular situation of each product concerned. Exceptions to that rule should be permitted only for processed products not listed in Annex I to the Treaty, to which volume limits do not apply. Provision should be made for derogating from strict compliance with management rules where exports benefiting from export refunds are not likely to exceed the quantity laid down.

34. The proper working of the single market based on common prices would be jeopardised by the granting of national aid. Therefore, the provisions of the Treaty governing State aid should apply to the products covered by this common market organisation. However, with a view to attenuating the effects the reform of the sugar sector is expected to have in certain circumstances the granting of certain State aid should be allowed.

35. In Member States with a significant reduction of sugar quota sugar beet producers will face particularly severe adaptation problems. In such cases the transitional Community aid to sugar beet growers will not suffice to fully address the beet growers' difficulties. Therefore, Member States having reduced their quota by more than 50 % should be authorised to grant State aid to sugar beet growers during the application period of the transitional Community aid. To avoid Member States granting State aid exceeding the needs of their sugar beet growers the determination of the total amount of the State aid concerned should be made subject to Commission approval, except in the case of Italy where the maximum need for most productive sugar beet to adapt to the market conditions after the reform can be estimated at EUR 11 per tonne of sugar beet produced. Moreover, due to the particular problems expected to arise in Italy provision should be made for arrangements allowing sugar beet growers to benefit directly or indirectly from the State aid granted.

36. In Finland sugar beet growing is subject to particular geographical and climatic conditions which will adversely affect the growing beyond the general effects of the sugar reform. For this reason provision should be made for authorising that Member State on a permanent basis to grant its sugar beet growers an adequate amount of State aid.

37. It is appropriate to provide for measures to be taken when a substantial rise or fall in prices disturbs or threatens to disturb the Community market. These measures may include the opening of a quota at reduced tariff for imports of sugar from the world market for the time necessary.

38. Since the common market in sugar is continuously evolving, the Member States and the Commission should keep each informed of relevant developments.

39. 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⁽⁵⁾.

40. The Commission should be authorised to adopt necessary measures to solve specific practical problems in case of emergency.

41. The characteristics of sugar production in the outermost regions of the Community distinguish that production from sugar production in the rest of the Community. Financial support should therefore be given to the sector by allocating resources to farmers in those regions after the entry into force of the support programmes to assist local production which Member States draw up under Council Regulation (EC) No 247/2006 of 30 January 2006 laying down specific measures for agriculture in the outermost regions of the Union⁽⁶⁾. For the same reason, France should be authorised to grant a fixed amount of State aid to its outermost regions.

42. Expenditure incurred by the Member States as a result of the obligations arising from the application of this Regulation should be financed by the Community in accordance with Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy⁽⁷⁾, and, as from 1 January 2007 in accordance with Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy.

43. The change-over from the arrangements in Regulation (EC) No 1260/2001 to those provided for in this Regulation as well as the change-over from the market situation in the marketing year 2005/2006 to the market situation in the marketing year 2006/2007 and in order to ensure compliance by the Community with its international commitments with regard to C sugar referred to in Article 13 of Regulation (EC) No 1260/2001 could give rise to difficulties which are not dealt with in this Regulation. In order to deal with such difficulties, the Commission should be enabled to adopt transitional measures,

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