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CHAPTER 8AID FOR ENERGY CROPS

SECTION 1Definitions

Article 23Definitions

For the purposes of this Chapter:

(a)

‘applicant’ means any farmer cultivating the areas referred to in Article 88 of Regulation (EC) No 1782/2003 with a view to obtaining the aid provided for in that Article;

(b)

‘first processor’ means any user of agricultural raw materials who undertakes the first processing thereof with a view to obtaining one or more of the products referred to in the second paragraph of Article 88 of Regulation (EC) No 1782/2003.

SECTION 2Contract

Article 24Use of raw material

1.Any agricultural raw material with the exception of sugarbeet may be grown on the areas covered by the aid provided for in Article 88 of Regulation (EC) No 1782/2003 provided that they are intended primarily for use in the production of the energy products referred to in the second paragraph of that Article.

The economic value of the energy products obtained by processing raw materials shall be higher than that of all other products intended for other uses and obtained by such processing, as determined by the valuation method set out in Article 39(3).

2.The raw materials referred to in paragraph 1 shall be covered by a contract in accordance with Article 90 of Regulation (EC) No 1782/2003 under the conditions laid down in this Section.

3.Applicants shall deliver all raw materials harvested to a first processor who shall take delivery of them and ensure that an equivalent quantity of such raw materials is used within the Community for the manufacture of one or more energy products as referred to in the second paragraph of Article 88 of Regulation (EC) No 1782/2003.

Where the first processor uses the raw material actually harvested to manufacture an intermediate product or a by-product, he may use an equivalent quantity of such intermediate products or by-products to manufacture one or more end products as referred to in the first subparagraph.

In the case referred to in the second subparagraph, the first processor shall so inform the competent authority with whom the security is lodged. Where such equivalent quantity is used in a Member State other than that in which the raw material is harvested, the competent authorities of the Member States concerned shall inform each other of the details of such transaction.

4.In accordance with the national provisions governing contractual relations, the first processor may delegate to a third party the collection of the raw material from the farmer applying for the aid. The delegate shall act in the name and on behalf of the processor who remains solely responsible with regard to the obligations laid down by this Chapter.

Article 25Derogations

1.Notwithstanding Article 24(2) and (3), Member States may permit applicants to:

(a)use short rotation forest trees covered by ex 0602 90 41 or all the cereals or the oilseeds covered by CN codes 1201 00 90, 1205 10 90, 1205 90 00, 1206 00 91 and 1206 00 99 harvested:

(i)

as fuel for heating their agricultural holding,

(ii)

for the production on the holding of power or biofuels;

(b)process into biogas covered by CN code 2711 29 00 on their holdings all raw materials harvested.

2.In the cases referred to in paragraph 1, applicants shall:

(a)undertake, by way of a declaration in place of the contract referred to in Article 26, to use or process directly the raw material covered by the declaration; Articles 26 to 40 shall apply mutatis mutandis to those cases.

(b)have all the raw material harvested weighed by a body or an undertaking designated by the Member State and keep separate accounts for the raw material used and the products and by-products resulting from its processing; however, in the case of cereals and oilseeds, and of straw, and where the entire plant is used, weighing may be replaced by volumetric measurement of the raw material.

3.Member States applying paragraph 1 shall introduce adequate control measures to ensure that the raw material is directly used on the holding or is processed into biogas falling within CN code 2711 29 00.

4.Cereals and oilseeds used in accordance with paragraph 1(a) shall be denatured in accordance with the method laid down by the Member State. The Member States may authorise the oil produced by processing oilseeds in accordance with paragraph 1(a)(ii) to be denatured instead of the oilseeds themselves, provided that such denaturing takes place immediately after the seeds are processed into oil and that the use to which the seeds are put is checked.

Article 26Contract

1.In support of their aid applications, applicants shall submit to their competent authorities the contracts they have concluded with a first processor.

2.Applicants shall ensure that the contracts specify the following:

(a)the names and addresses of the parties to the contract;

(b)the duration of the contract;

(c)the species of all raw materials concerned and the area planted with each species;

(d)any conditions applicable to the delivery of the forecast quantities of raw materials;

(e)an undertaking to fulfil their obligations pursuant to Article 24(3);

(f)the intended primary end uses for the raw material, each end use complying with the conditions laid down in Articles 24(1) and 39(3).

3.Applicants shall ensure that the contracts are concluded in time to allow the first processor to deposit a copy with the competent authority of the applicant within the time limits laid down in Article 34(1).

4.For the purposes of control, Member States may require each applicant to conclude a single supply contract for each raw material.

SECTION 3Amendment and termination of contracts

Article 27Amendment and termination of contracts

Where the parties to a contract amend or terminate the contract after the applicant has lodged an aid application, the applicant may maintain such aid application only on condition that, with a view to allowing the requisite inspections to be carried out, he informs the competent authority of such amendment or termination, no later than the closing date set in the Member State concerned for amendment of the application.

Article 28Exceptional circumstances

Without prejudice to Article 27, where an applicant informs his competent authority that, owing to exceptional circumstances, he will be unable to supply all or part of the raw materials specified in the contract, the competent authority may, after obtaining sufficient evidence of such exceptional circumstances, authorise such amendments to the contract as appear justified, or may authorise its termination.

Where the land covered by a contract is reduced as a result of amendments thereto or where a contract is terminated, the applicant shall forfeit his right to the aid referred to in this Chapter for the areas withdrawn from the contract.

Article 29Changes in end uses

Without prejudice to Article 27, first processors may alter the intended primary end uses of raw materials, as referred to in Article 26(2)(f), once the raw materials under contract have been delivered to them and once the conditions laid down in Article 31(1) and in the first subparagraph of Article 34(3) have been fulfilled.

Changes in end uses shall be made in compliance with the conditions laid down in the second subparagraph of Article 24(1) and in Article 39(3).

The first processors shall give prior notice to their competent authorities with a view to the requisite controls.

SECTION 4Representative yields and quantities delivered

Article 30Representative yields

Each year the Member States shall establish, using an appropriate procedure, representative yields which must be attained, and shall inform the applicants concerned thereof.

Article 31Quantities to be delivered

1.Applicants shall declare the total quantity of raw materials harvested by species to their competent authorities and shall confirm the quantities of raw materials delivered and the parties to whom such deliveries are made.

2.The actual quantities to be delivered by the applicants to the first processors shall at least correspond to the representative yield.

However, in duly justified cases, the Member States may, by way of an exception, accept a quantity up to 10 % below the representative yield.

Furthermore, where the competent authorities have authorised the amendment or termination of contracts in accordance with Article 28, they may, where it seems justified to do so, reduce the quantities that applicants are required to deliver under the first subparagraph of this paragraph.

SECTION 5Conditions of payment of the aid

Article 32Payment

1.The aid may be paid to applicants before the raw material is processed. However, such payments shall be made only where the requisite quantities of raw materials pursuant to this Chapter have been delivered to the first processor and where:

(a)the declaration provided for in Article 31(1) has been made;

(b)a copy of the contract has been deposited with the first processor's competent authority in accordance with Article 34(1) and the conditions provided for in Article 24(1) have been fulfilled;

(c)the competent authority has received proof that the full security provided for in Article 35(2) has been lodged;

(d)the competent authority responsible for the payment has checked that the conditions laid down in Article 26 have been met in respect of each application.

2.In the case of biennial crops, where the raw materials are harvested, and hence delivered, in the course of the second year of cultivation only, payment shall be made in each of the two years following the date of conclusion of the contract as provided for in Article 26, on condition that the competent authorities establish that:

(a)the obligations referred to in paragraph 1(b), (c) and (d) of this Article are fulfilled as from the first year of cultivation;

(b)the obligations referred to in paragraph 1(a) of this Article are fulfilled, and the information referred to in the first subparagraph of Article 34(3) is communicated, in the second year of cultivation.

In respect of the first year of cultivation, payments shall be made only if the competent authorities have received proof that the security provided for in Article 35(2) has been lodged. In respect of the second year of cultivation, payment may be made without security being lodged.

3.In the case of permanent or multi-annual crops, the payment of the aid shall be made each year from the date of conclusion of the contract. The conditions laid down in paragraph 2 shall be applied mutatis mutandis.

SECTION 6Contract and obligations on applicants and first processors

Article 33Number of processors

Energy products shall be obtained at the most by a second successive processor.

Article 34Contract and obligations on applicants and first processors

1.First processors shall deposit a copy of the contract with their competent authorities under a timetable to be established by the Member State concerned and no later than the closing date for the submission of aid applications for the year in question in the Member State concerned.

Where applicants and first processors amend or terminate contracts prior to the date referred to in Article 27 in a given year, the first processors shall deposit with their competent authorities a copy of the amended or terminated contract, no later than that date.

2.First processors shall provide their competent authorities with the requisite information on the processing chain in question, in particular as regards prices and the technical processing coefficients to be used for determining the quantities of end products that may be obtained, as referred to in the second subparagraph of Article 40(1).

3.First processors who have taken over the raw materials from applicants shall inform their competent authorities of the quantities of raw materials received, specifying the species, the name and address of the party to the contract who delivered the raw materials, the place of delivery and the contract reference, within a time limit to be set by the Member States that allows the payments to be made within the period specified in Article 28 of Regulation (EC) No 1782/2003.

Where the Member State of the first processor is not the same Member State in which the raw materials have been grown, the competent authority of the first processor shall inform the competent authority of the applicant of the total quantities of raw materials delivered, within 40 working days of receipt of the information referred to in the first subparagraph.

SECTION 7Securities

Article 35First processors

1.First processors shall lodge a full security as provided for in paragraph 2 with their competent authorities by the closing date for submission of payment applications for the year in question in the Member State concerned.

2.The securities to be lodged in respect of each raw material shall be calculated by multiplying the sum of all areas covered by a contract signed by the first processor concerned and used to produce that raw material, by the rate of EUR 60 per hectare.

3.Where contracts are amended or terminated in accordance with Articles 27 or 28, the securities lodged shall be adjusted accordingly.

4.A percentage of the security shall be released for each raw material on condition that the competent authority of the first processor concerned is in possession of proof that the quantity of raw material in question has been processed in compliance with the requirement laid down in Article 26(2)(f), account being taken, where necessary, of any changes pursuant to the Article 29.

Article 36Primary and subordinate requirements

1.The following obligations shall constitute primary requirements within the meaning of Article 20 of Commission Regulation (EEC) No 2220/85(1):

(a)the obligation to process the quantities of raw materials principally into the end products specified in the contract. The raw materials shall be processed by 31 July of the second year following that of harvest;

(b)the obligation that products be accompanied by a T5 control copy in accordance with Articles 37 and 38 of this Regulation.

2.The following obligations, incumbent on first processors, shall constitute subordinate requirements within the meaning of Article 20 of Regulation (EEC) No 2220/85:

(a)the obligation to take delivery of all raw materials delivered by applicants pursuant to Article 24(3) of this Regulation;

(b)the obligation to deposit copies of contracts in accordance with Article 34(1) of this Regulation;

(c)the obligation to provide the information required in accordance with the first subparagraph of Article 34(3) of this Regulation;

(d)the obligation to lodge a security in accordance with Article 35(1) of this Regulation.

SECTION 8Documents for sale in, transfer to or delivery to another Member State or export

Article 37T5 control copy

Where first processors sell or transfer to second processors in other Member States intermediate products covered by contracts as provided for in Article 26, the products shall be accompanied by T5 control copies issued in accordance with Regulation (EEC) No 2454/93.

One of the following shall be entered under the heading ‘Other’ in box 104 of the T5 control copies:

Article 38Alternatives to the T5 control copy

If the T5 control copy is not returned to the office of departure of the body responsible for control in the Member State in which the first processor is established two months after expiry of the deadline for the processing of raw materials provided for in Article 36(1)(a), as a result of circumstances for which the first processor is not responsible, the following documents may be accepted as alternatives to the T5 control copy:

(a)

purchase invoices for the intermediate products;

(b)

statements by the second processor verifying the final processing of the raw materials into energy products as referred to in Article 88 of Regulation (EC) No 1782/2003;

(c)

certified photocopies from the second processor of accounting documents proving that processing has been carried out.

SECTION 9Checks

Article 39Record keeping

1.The competent authority of the Member State shall specify the records to be kept by processors and the frequency thereof, which shall be at least monthly.

Such records shall comprise at least the following information:

(a)the quantities of different raw materials purchased for processing;

(b)the quantities of raw materials processed and the quantities and types of end products, co-products and by-products obtained therefrom;

(c)wastage during processing;

(d)the quantities destroyed and the reasons for such destruction;

(e)the quantities and types of products sold or transferred by the processor and the prices obtained;

(f)where applicable, the names and addresses of the subsequent processors.

2.The competent authority of the first processor shall check that the contract submitted complies with the conditions laid down in Article 24(1). Where those conditions are not met, the applicants' competent authorities shall be notified.

3.With a view to calculating the economic value of the products referred to in Article 24(1), the competent authorities concerned shall, on the basis of the information referred to in Article 34(2), compare the sum of the values of all energy products with the sum of the values of all other products intended for other uses and obtained from the same processing operation. Each value shall equal the relevant quantity multiplied by the average of the ex-factory prices recorded during the previous marketing year. Where such prices are not available, the competent authorities shall determine the relevant prices, in particular on the basis of the information referred to in Article 34(2).

Article 40Checks at the premises of processors

1.The competent authorities of the Member States in which processing takes place shall verify compliance with Article 24(1) at the premises of at least 25 % of the processors located in their territory, selected on the basis of a risk analysis. Such checks shall involve at least:

(a)a comparison of the sum of the values of all the energy products with the sum of the values of all other products intended for other uses and obtained from the same processing operation;

(b)analysis of the processor's production system, comprising physical checks and inspections of commercial documents, with a view to verifying, in the case of processors, that deliveries of raw materials, end products, co-products and by-products tally.

For the purpose of the checks referred to in point (b) of the first subparagraph, the competent authorities shall base themselves in particular on the technical processing coefficients for the raw materials concerned. Where such coefficients exist for exports in Community legislation, they shall be applied. Where they do not but other coefficients do exist in Community legislation, they shall be applied. In all other cases, inspection shall rely mainly on the coefficients generally accepted by the processing industry.

2.For the processing operations referred to in Article 25, checks shall be carried out on 10 % of applicants selected on the basis of a risk analysis taking account of:

(a)aid amounts;

(b)the number of agricultural parcels and the area covered by an aid application;

(c)developments since the previous year;

(d)the findings of checks made in past years;

(e)other parameters to be defined by the Member States, based on the representativeness of the declarations submitted.

3.Where the checks referred to in paragraph 2 reveal irregularities in at least 3 % of cases, the competent authority shall carry out additional checks during the year and shall consequently increase the percentage of farmers to be subject to an on-the-spot check the following year.

4.If it has been provided that certain elements of the checks referred to in paragraphs 1 and 2 may be carried out on the basis of a sample, that sample shall guarantee a reliable and representative level of inspection.

5.Every on-the-spot check shall be the subject of an inspection report signed by the inspector giving the details of the checks carried out. The report shall indicate in particular:

(a)the date of the check;

(b)the persons present;

(c)the period checked;

(d)the checking techniques used including, where applicable, reference to sampling methods;

(e)results of the check.

Article 41Hemp production

The provisions relating to hemp referred to in Article 29 of Commission Regulation (EC) No 795/2004(2) and in Article 33 of Regulation (EC) No 796/2004 shall apply.

Article 42Additional measures and mutual assistance

1.The Member States shall take all further measures required for the proper application of this Chapter and shall give the mutual assistance needed for the purposes of checks required pursuant to this Chapter. Where this Chapter does not provide for appropriate reductions and exclusions, the Member States may apply appropriate national sanctions against market participants involved in the procedure for granting aid.

2.As far as necessary or as required by this Chapter, the Member States shall assist one another mutually to ensure effective controls, and enable the authenticity of documents submitted and the accuracy of the data exchanged to be verified.

SECTION 10Exclusion from the aid for energy crops and evaluation

Article 43Exclusion of raw materials from aid for energy crops and minimal cultivated area

1.The Member States may exclude any agricultural raw material from aid for energy crops where such materials raise difficulties from the viewpoint of controls, public health, the environment, criminal law, or a reduced rate of final energy products.

2.For any raw material referred to in Article 24, the Member States may set a minimum cultivated area.

Article 44Evaluation

Before 15 October following the end of the year in respect of which the aid is granted, the Member States shall forward to the Commission all the information needed to evaluate the aid for energy crops.

Such information shall include, in particular:

(a)

the areas corresponding to each species of raw material;

(b)

the quantities of each type of raw material, end product, by-product and co-product obtained, with details of the type of raw material used;

(c)

the measures taken under Article 25;

(d)

the raw materials excluded from the aid for energy crops pursuant to Article 43(1) and the minimal cultivated areas referred to in Article 43(2).