PURPOSE: Corrigendum to Council Regulation (EC) No 1260/2007 of 9 October 2007 amending Regulation (EC) No 318/2006 on the common organisation of the markets in the sugar sector (Regulation initially published in the Official Journal of the European Union L 283 of 27 October 2007).

The purpose of the Regulation is to improve the sugar restructuring scheme (sugar reform) aimed at making it more effective and thus reducing European Union sugar production to sustainable levels.

The corrigendum relates to an Annex to the Regulation:

- for: ‘Annex IX calculation of the percentage applicable to undertakings in accordance with the third subparagraph of Article 10(2)’,

- read: ‘Annex IX calculation of the percentage applicable to undertakings in accordance with the second subparagraph of Article 10(2)’.

The European Parliament adopted a resolution drafted by Katerina BATZELI (PES, EL) by 525 votes in favour to 72 against with 69 abstentions and made some amendments to the proposal for a Council regulation amending Regulation (EC) No 318/2006 on the common organisation of the markets in the sugar sector. The amendments were designed chiefly to increase the compensation to producers and to the regions. The main amendments are as follows:

- if a linear reduction of national quotas is needed in 2010, Parliament agreed with its competent committee that this should be carried out in two stages. The first stage should concern only Member States or undertakings which, for 2008/09, would not have made a voluntary renunciation or would have renounced less than 13.5% of their quota. In a second stage, the formula proposed by the Commission would be used, although returned quotas for 2006/2007 and 2007/2008 should be excluded, since they have already benefited from the backdated increase in the structural premium;

- during the first two marketing years (2006/2007 and 2007/2008) Parliament stated that some Member States had sought to use the provisions of Article 11 in order to obstruct those undertakings which declared themselves prepared to take part in the restructuring regime, and accordingly, it inserted a clause aimed at ensuring that this would not continue;

-given the full implementation and entry into force from 2010 of the 'Everything But Arms' initiative (which will allow developing countries to export sugar duty-free to the EU), MEPs believed it is essential to extend up to 2015 the application of the scheme allowing preventive withdrawal of a part of production if there is a surplus on the European market;

- in addition, Parliament wanted the Commission to take any decision on withdrawals for 2008/09 by 4 February 2008 (instead of 16 March, as in other years) so that beet growers can act accordingly before the sowing season;

- restructuring should be stimulated by making it easier to deduct withdrawals from the final cut, so that undertakings which renounce a percentage of their quota in excess of the percentage applied to their Member State when the cut is made, benefit from their voluntary decision. A new provision states that, during the2008/2009 marketing year, if a Member State renounces a percentage of the quota in excess of the withdrawal percentage set on 16 March 2007 in Article 1(1) or Article 1(2) of Regulation EC No 290/2007, the quota tonnage corresponding to the difference between the percentage renounced in 2008/2009 and the percentage of withdrawal shall be deducted in full from the final cut. Within a Member State, this provision shall apply in the same way to the benefit of undertakings which have renounced a percentage of their quota in excess of the withdrawal percentage set on 16 March 2007 in Article 1(1) or Article 1(2) of Regulation (EC) No 290/2007 for their Member State.

Lastly, it should be noted that this report is closely linked to the report on the proposal for a Council regulation amending Regulation (EC) No 320/2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community ( CNS/2007/0085 ).

The Committee on Agriculture and Rural Development adopted by a large majority the report drafted by Katerina BATZELI (PES, EL) on the proposal for a Council regulation amending Regulation (EC) No 318/2006 on the common organisation of the markets in the sugar sector. It adopted a number of amendments designed chiefly to increase the compensation to producers and to the regions. The main amendments are as follows:

if a linear reduction of national quotas is needed in 2010, the Agriculture Committee believes this should be carried out in two stages. The first stage should concern only Member States or undertakings which, for 2008/09, would not have made a voluntary renunciation or would have renounced less than 13.5% of their quota. In a second stage, the formula proposed by the Commission would be used, although the Committee states that returned quotas for 2006/2007 and 2007/2008 should be excluded, since they have already benefited from the backdated increase in the structural premium; during the first two marketing years (2006/2007 and 2007/2008) the Committee stated that some Member States had sought to use the provisions of Article 11 in order to obstruct those undertakings which declared themselves prepared to take part in the restructuring regime, and accordingly, it inserted a clause aimed at ensuring that this would not continue; given the full implementation and entry into force from 2010 of the 'Everything But Arms' initiative (which will allow developing countries to export sugar duty-free to the EU), MEPs believe it is essential to extend up to 2015 the application of the scheme allowing preventive withdrawal of a part of production if there is a surplus on the European market; in addition, the Committee wants the Commission to take any decision on withdrawals for 2008/09 by 4 February 2008 (instead of 16 March, as in other years) so that beet growers can act accordingly before the sowing season; restructuring should be stimulated by making it easier to deduct withdrawals from the final cut, so that undertakings which renounce a percentage of their quota in excess of the percentage applied to their Member State when the cut is made, benefit from their voluntary decision. A new provision states that, during the2008/2009 marketing year, if a Member State renounces a percentage of the quota in excess of the withdrawal percentage set on 16 March 2007 in Article 1(1) or Article 1(2) of Regulation EC No 290/2007, the quota tonnage corresponding to the difference between the percentage renounced in 2008/2009 and the percentage of withdrawal shall be deducted in full from the final cut. Within a Member State, this provision shall apply in the same way to the benefit of undertakings which have renounced a percentage of their quota in excess of the withdrawal percentage set on 16 March 2007 in Article 1(1) or Article 1(2) of Regulation (EC) No 290/2007 for their Member State.

Lastly, it should be noted that this report is closely linked to the report on the proposal for a Council regulation amending Regulation (EC) No 320/2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community ( CNS/2007/0085 ).

The Council held a policy debate on a communication and two proposals for Regulations submitted by the Commission in order to make the restructuring of the Community sugar industry more attractive.

The debate concentrated on the principal measures proposed to increase the effectiveness of the 2005 reform:

make the restructuring fund in the 3rd year of restructuring more attractive, while retaining the principle of voluntary restructuring; enable growers to give up quotas on their own initiative, in order to strengthen the necessary restructuring process; adopt a two-phased approach for restructuring applications in 2008/2009; if a final quota cut is necessary in 2010, take into account restructuring efforts already undertaken at individual undertaking level and at Member State level.

The Commission proposal received the general support of a large number of delegations, subject to certain technical adjustments which the Presidency asked the Special Committee on Agriculture to take care of so that agreement could be reached on this package in September 2007.

PURPOSE: to improve the voluntary restructuring scheme in the sugar sector in order to create a further incentive to participate in the scheme; to preserve structural market balance by refining rules on temporary sugar withdrawal by amending Council Regulation (EC) No 318/2006.

PROPOSED ACT: Council Regulation

BACKGROUND: as well as a 36% price cut and the payment of decoupled aid to farmers, a key element in the EU sugar reform was the establishment of a restructuring fund financed by sugar producers to assist in the restructuring process. The main objective of the sugar reform has been to take out about 6 million tons of quota in order to ensure a better equilibrium of the sugar market.

In the first year of application, about 1.5 million tons of quota were renounced under the restructuring scheme. This means that by the start of the marketing year 2006/2007, on 1 July 2006, quotas were reduced by 1.5 million tons. In the case of a full dismantling of production facilities, each ton of quota renounced was compensated with EUR 730/t from the restructuring fund. For 2007/08 the compensation level remains the same (i.e. EUR 730/t). However, that restructuring aid will then fall to EUR 625/t in 2008/09 and EUR 520 /t in 2009/10, the fourth and final year. Sugar enterprises unable to produce at around 400 €/t should take advantage of the restructuring aid.

Unfortunately, in year two of the scheme, producers only renounced about 0.7 million tons of sugar, well below the target of 5 million tons and way below what is necessary to balance the market. Forecasting an oversupply of about 4 million tons, the Commission decided in March to withdraw at least 13.5 percent of quota sugar, or about 2 million tons.

Because of the phase-in of the price cuts in the reform, the effects are yet to be felt by growers and are only moderate for processors. Processors have been insecure because, under the current system, Member States can fix the percentage of aid to be given to farmers above the 10 % minimum. They therefore have to decide if an application to the restructuring fund is appropriate for them without knowing exactly how much aid they will get.

CONTENT: in a bid to meet the challenges outlined above, the Commission is presenting two related proposals the purpose of which is to amend the Regulations governing the reform of the sugar sector. The Regulations, and proposals, concerned are:

Council Regulation (EC) No 320/2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community; (See: CNS/2005/0120 and CNS/2007/0085 ) ; and Council Regulation (EC) No 318/2006 on the common organisation of the markets in the sugar sector. (See CNS/2005/0118 ).

To recall, Council Regulation (EC) No 318/2006 governs the instrument of withdrawal . This includes integrating a possible further withdrawal in autumn 2007. T he purpose of this proposal is to abolish the provision according to which traditional supply needs for refiners will be reduced in case of a withdrawal. It will apply as from the marketing year 2007/2008. In other measures the proposal seeks:

- to introduce a system of thresholds – moving away from a system which reduces the level of sugar effectively produced under quota;

- to conclude a first decision before sowing takes place, possibly completed by a further withdrawal in October, based on updated data;

- to take account of those Member States who have participated in the restructuring regime. The threshold in those Member States should be adapted in proportion to the quota renounced, with a modulation between undertaking according to their individual restructuring effort;

- not to reduce the traditional supply needs in relation to the withdrawal.

The purpose of the second proposal is to improve the efficiency of the restructuring scheme and to increase the renunciation of quotas under that scheme. It also seeks to remove any uncertainty vis-à-vis the amount of aid to be reserved to growers and machinery contractors.

The proposal intends to achieve these objectives by:

- fixing the amount of aid to be reserved to growers and machinery contracts at 10% of the aid to be granted to sugar undertakings;

- granting growers an additional payment for the 2008/2009 marketing year (EUR 237.5 per tonne of quota renounced);

- paying, retroactively, the difference between the aid amount granted for the marketing years 2006/2007 and 2007/2008 with the amount paid in 2008/2009. This is being proposed in order not to penalise undertakings and growers who took part in the restructuring scheme before the amendments come into force;

- giving the Commission the power to prolong the deadline for applications in order to accelerate the restructuring process, if it has reliable indications that the aim of the restructuring fund (i.e. the renunciation of 3.8 million tons of quota) is nearly reached in the 2008/2009 marketing year;

- giving growers the possibility to apply directly for restructuring aid (Article 3 (6)) on condition that they cease to deliver sugar beet or cane to undertakings to which they were bound by delivery contracts in the previous marketing year;

- limiting the quota reduction to 10% of the quota allocated to each undertaking, which corresponds to the percentage of quota which the Member State can re-allocated each marketing year;

- giving sugar undertakings, who are affected by a growers aid application, the right to submit an application for restructuring aid – provided that it too renounces a quota corresponding to at least the same level of quota reduction that would have resulted from the applications for aid lodged by growers. In such as case the sugar undertaking’s aid application should replace that of the sugar grower;

- providing an exemption of a part of the temporary restructuring amount that needs to be paid in accordance with Article 11 of the Regulation. The amount to be exempted should be proportional to this withdrawal percentage.

PURPOSE: to improve the voluntary restructuring scheme in the sugar sector in order to create a further incentive to participate in the scheme; to preserve structural market balance by refining rules on temporary sugar withdrawal by amending Council Regulation (EC) No 318/2006.

PROPOSED ACT: Council Regulation

BACKGROUND: as well as a 36% price cut and the payment of decoupled aid to farmers, a key element in the EU sugar reform was the establishment of a restructuring fund financed by sugar producers to assist in the restructuring process. The main objective of the sugar reform has been to take out about 6 million tons of quota in order to ensure a better equilibrium of the sugar market.

In the first year of application, about 1.5 million tons of quota were renounced under the restructuring scheme. This means that by the start of the marketing year 2006/2007, on 1 July 2006, quotas were reduced by 1.5 million tons. In the case of a full dismantling of production facilities, each ton of quota renounced was compensated with EUR 730/t from the restructuring fund. For 2007/08 the compensation level remains the same (i.e. EUR 730/t). However, that restructuring aid will then fall to EUR 625/t in 2008/09 and EUR 520 /t in 2009/10, the fourth and final year. Sugar enterprises unable to produce at around 400 €/t should take advantage of the restructuring aid.

Unfortunately, in year two of the scheme, producers only renounced about 0.7 million tons of sugar, well below the target of 5 million tons and way below what is necessary to balance the market. Forecasting an oversupply of about 4 million tons, the Commission decided in March to withdraw at least 13.5 percent of quota sugar, or about 2 million tons.

Because of the phase-in of the price cuts in the reform, the effects are yet to be felt by growers and are only moderate for processors. Processors have been insecure because, under the current system, Member States can fix the percentage of aid to be given to farmers above the 10 % minimum. They therefore have to decide if an application to the restructuring fund is appropriate for them without knowing exactly how much aid they will get.

CONTENT: in a bid to meet the challenges outlined above, the Commission is presenting two related proposals the purpose of which is to amend the Regulations governing the reform of the sugar sector. The Regulations, and proposals, concerned are:

Council Regulation (EC) No 320/2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community; (See: CNS/2005/0120 and CNS/2007/0085 ) ; and Council Regulation (EC) No 318/2006 on the common organisation of the markets in the sugar sector. (See CNS/2005/0118 ).

To recall, Council Regulation (EC) No 318/2006 governs the instrument of withdrawal . This includes integrating a possible further withdrawal in autumn 2007. T he purpose of this proposal is to abolish the provision according to which traditional supply needs for refiners will be reduced in case of a withdrawal. It will apply as from the marketing year 2007/2008. In other measures the proposal seeks:

- to introduce a system of thresholds – moving away from a system which reduces the level of sugar effectively produced under quota;

- to conclude a first decision before sowing takes place, possibly completed by a further withdrawal in October, based on updated data;

- to take account of those Member States who have participated in the restructuring regime. The threshold in those Member States should be adapted in proportion to the quota renounced, with a modulation between undertaking according to their individual restructuring effort;

- not to reduce the traditional supply needs in relation to the withdrawal.

The purpose of the second proposal is to improve the efficiency of the restructuring scheme and to increase the renunciation of quotas under that scheme. It also seeks to remove any uncertainty vis-à-vis the amount of aid to be reserved to growers and machinery contractors.

The proposal intends to achieve these objectives by:

- fixing the amount of aid to be reserved to growers and machinery contracts at 10% of the aid to be granted to sugar undertakings;

- granting growers an additional payment for the 2008/2009 marketing year (EUR 237.5 per tonne of quota renounced);

- paying, retroactively, the difference between the aid amount granted for the marketing years 2006/2007 and 2007/2008 with the amount paid in 2008/2009. This is being proposed in order not to penalise undertakings and growers who took part in the restructuring scheme before the amendments come into force;

- giving the Commission the power to prolong the deadline for applications in order to accelerate the restructuring process, if it has reliable indications that the aim of the restructuring fund (i.e. the renunciation of 3.8 million tons of quota) is nearly reached in the 2008/2009 marketing year;

- giving growers the possibility to apply directly for restructuring aid (Article 3 (6)) on condition that they cease to deliver sugar beet or cane to undertakings to which they were bound by delivery contracts in the previous marketing year;

- limiting the quota reduction to 10% of the quota allocated to each undertaking, which corresponds to the percentage of quota which the Member State can re-allocated each marketing year;

- giving sugar undertakings, who are affected by a growers aid application, the right to submit an application for restructuring aid – provided that it too renounces a quota corresponding to at least the same level of quota reduction that would have resulted from the applications for aid lodged by growers. In such as case the sugar undertaking’s aid application should replace that of the sugar grower;

- providing an exemption of a part of the temporary restructuring amount that needs to be paid in accordance with Article 11 of the Regulation. The amount to be exempted should be proportional to this withdrawal percentage.