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.

The common agricultural policy pursues the objectives set out in the Treaty. In order to stabilise the markets and ensure a fair standard of living for the agricultural community in the cereals sector, it is necessary to provide for internal market measures comprising, in particular, an intervention system and a common import and export system.

Council Regulation (EEC) No 1766/92 of 30 June 1992 on the common organisation of the market in cereals4 has been substantially amended several times. In consequence of further amendments it should be repealed and replaced in the interests of clarity.

Regulation (EEC) No 1766/92 provides that a decision upon a final reduction in the intervention price for cereals to be applied as from the 2002/2003 marketing year onwards is to be taken in the light of market developments. It is important that prices on the internal market rely less on guaranteed prices. It is therefore appropriate to halve the monthly increment in order to improve market fluidity.

The introduction of a single intervention price for cereals has led to the accumulation of large intervention stocks of rye as a result of the lack of sufficient disposal outlets on internal and external markets. Rye should therefore be excluded from the intervention system.

The intervention agencies should be able, in special circumstances, to take intervention measures suited to those circumstances. In order that the required uniformity of intervention systems may be maintained, those special circumstances should be assessed and the appropriate measures determined at Community level.

In view of the special market situation for cereal and potato starch it may prove necessary to provide for production refund of such a nature that the basic products used by this industry can be made available to it at lower price than that resulting from the application of the common prices

The creation of a single Community market for cereals involves the introduction of a trading system at the external frontiers of the Community. This trading system complementing the intervention system and including import duties and export refunds 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. The export refund system is to be applied to processed products containing cereals to enable them to participate in the world market.

In order to monitor the volume of trade in cereals 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 requested are effected.

For the most part, the customs duties applicable to agricultural products under the World Trade Organisation (WTO) agreements are laid down in the common customs tariff. However, for some cereals, the introduction of additional mechanisms makes it necessary to adopt derogations.

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

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.

Provisions for granting a refund 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 WTO Agreement on agriculture5, should serve to safeguard Community participation in international trade in cereals. Such export refunds should be subject to limits in terms of quantity and value.

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.

Ensuring compliance with the quantity limits requires the introduction of 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 only be permitted in the case of processed products not listed in Annex I to the Treaty, to which volume limits do not apply, and in the case of food-aid operations which are exempt from any limitation. 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 ceilings laid down.

To the extent necessary for its proper working, provision should be made for regulating or, when the situation on the market so requires, prohibiting the use of inward and outward processing arrangements.

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 deficient. 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. All such measures should comply with the obligations arising from the WTO agreements.

Taking into account the influence of the world market price on the internal price, there should be provision for appropriate measures to be taken in order to stabilise the internal market.

The proper working of a 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.

As the common market in cereals is in continuous development, the Member States and the Commission should keep each other supplied with information relevant to these developments.

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 Commission6.

In view of the necessity to solve practical and specific problems, the Commission should be authorised to adopt necessary measures in cases of emergency.

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 policy7.

The common organisation of the market in cereals should take proper and simultaneous account of the objectives set out in Articles 33 and 131 of the Treaty.

The change from the arrangements in Regulation (EEC) No 1766/92 to those provided for in this Regulation 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,