The particular geographical situation of the outermost regions imposes additional transport costs in supplying products which are essential for human consumption, for processing or as agricultural inputs. In addition, objective factors arising as a result of insularity and remoteness impose further constraints on economic operators and producers in the outermost regions that severely handicap their activities. In certain cases, operators and producers suffer from double insularity. These handicaps can be alleviated by lowering the price of these essential products. It is therefore appropriate to introduce specific supply arrangements to guarantee supply to the outermost regions and compensate for the additional costs arising from their remoteness, insularity and distant location.

To that end, notwithstanding Article 23 of the Treaty, imports of certain agricultural products from third countries should be exempt from the applicable import duties. To take account of their origin and the customs treatment accorded to them under the Community provisions, products which have entered the Community's customs territory under inward processing or customs warehousing arrangements should be considered as direct imports, for the purpose of granting the benefits of the specific supply arrangements.

In order to achieve the goal of lowering prices in the outermost regions and mitigating the additional costs of their remoteness, insularity and distant location while maintaining the competitiveness of Community products, aid should be granted for the supply of products of Community origin to the outermost regions. Such aid should take account of the additional cost of transport to the outermost regions and the prices applied to exports to third countries and, in the case of agricultural inputs and products intended for processing, the additional costs of insularity and distant location.

Since the quantities covered by the specific supply arrangements are limited to the supply requirements of the outermost regions, those arrangements do not impair the proper functioning of the internal market. Nor should the economic advantages of the specific supply arrangements provoke diversions of trade in the products concerned. Dispatching or exportation of those products from the outermost regions should therefore be prohibited. However, dispatch or exportation of those products should be authorised where the advantage resulting from the specific supply arrangements is reimbursed or, in the case of processed products, to permit regional trade or trade between the two Portuguese outermost regions. Account should also be taken of traditional trade flows with third countries in all the outermost regions, and exports of processed products corresponding to traditional exports for all those regions should accordingly be authorised. Nor should the restriction apply to the traditional dispatching of processed products. For the sake of clarity, the reference period for defining those traditionally exported or dispatched quantities should be specified.

However, appropriate measures should be taken to allow for the necessary restructuring of the sugar processing sector in the Azores. These measures should take into account that in order for the sugar sector on the Azores to be viable a certain level of production and processing needs to be ensured. Moreover, Portugal will have the means under this Regulation to support local sugar beet production. Against this background, dispatches of sugar from the Azores to the rest of the Community should be allowed exceptionally to exceed traditional flows for a limited period of four years, subject to progressively reduced annual limits. Given that the quantities that may be re-dispatched will be proportional and limited to the extent strictly necessary for ensuring the viability of local sugar production and processing, the temporary dispatching of sugar from the Azores will not adversely affect the internal market of the Community.

To date the Canary Islands have been supplied under the specific supply arrangements with milk-based preparations falling within CN codes 1901 90 99 and CN codes 2106 90 92 intended for industrial processing. Supply of those products should be allowed to continue for a transitional period, pending restructuring of local industry.

In order to achieve the objectives of the specific supply arrangements, the economic advantages of the arrangements must be in terms of production costs and must cut prices up to the end-user stage. They should therefore be granted only on condition that they are actually passed on, and appropriate checks must be carried out.

Community policy to assist local production in the outermost regions has involved a multitude of products and measures for their production, marketing or processing. These measures have proved effective and ensured that agriculture continues and develops. The Community should continue to support these lines of production, which are a key factor in the environmental, social and economic equilibrium of the outermost regions. Experience has shown that, as in the case of rural development policy, a closer partnership with the local authorities can help to address the particular issues affecting the regions concerned in a more targeted way. Support for local production should thus continue through general programmes at the most appropriate geographical level, to be submitted by the Member State concerned to the Commission.

To help achieve the goals of developing local agricultural production and the supply of agricultural products, the level of programming of supplies to the regions concerned should be harmonised and the approach of partnership between the Commission and the Member States should be systematic. The supply programme should therefore be established by the authorities designated by the Member State and submitted to the Commission for approval.

Farmers in the outermost regions should be encouraged to supply quality products and the marketing of these should be assisted. Use of the graphic symbol introduced by the Community may be useful for that purpose.

Article 29(3) of Regulation (EC) No 1257/1999 restricts the grant of forestry support to forests and wooded areas belonging to private owners and municipalities and associations thereof. Parts of the forests and wooded areas located in the outermost regions belong to public authorities other than municipalities. Under these circumstances, the conditions laid down in the said Article should be made more flexible.

Article 24(2) of Regulation (EC) No 1257/1999 and the Annex thereto determine the maximum amounts per year eligible for Community agri-environmental aid. To take into account the specific environmental situation of certain very sensitive pasture areas in the Azores and the preservation of the landscape and traditional features of agricultural land, in particular the areas of terrace cultivation in Madeira, provision should be made for the possibility, in the case of certain specific measures, of increasing those amounts up to twofold.

A derogation may be granted from the Commission's consistent policy of not authorising State operating aid for the production, processing and marketing of agricultural products covered by Annex I to the Treaty in order to mitigate the specific constraints on farming in the outermost regions as a result of their remoteness, insularity and distant location, small area, mountainous terrain and climate and their economic dependency on a small number of products.

The plant health of agricultural crops in the outermost regions is subject to particular problems associated with the climate and the inadequacy of the control measures hitherto applied there. Programmes should therefore be implemented to combat harmful organisms, including by organic methods. The Community's financial contribution towards such programmes should be specified.

The maintenance of vineyards, which are the most widespread type of cultivation in the regions of Madeira and the Canary Islands and a very important one for the Azores, is an economic and environmental imperative. To help support production, neither abandonment premiums nor market mechanisms should be applicable in these regions, but nonetheless, in the Canary Islands, it should be possible to apply crisis distillation measures in the event of exceptional market disturbance arising from quality problems. Similarly, technical and socio-economic difficulties have prevented the complete conversion within the time limits set of the areas in the regions of Madeira and the Azores under vines of hybrid varieties prohibited by the common organisation of the market in wine. The wine produced by such vineyards is intended solely for traditional local consumption. Additional time will allow such vineyards to be converted while preserving a regional economic fabric very heavily reliant upon wine-growing. Portugal should notify the Commission, each year, of the progress made in converting the areas concerned.

Support for the production of cow's milk in Madeira has not succeeded in maintaining the balance between domestic and external supply, chiefly because of the serious structural difficulties affecting the sector and its poor capacity to adapt to new economic environments. Consequently, authorisation to produce reconstituted UHT milk from milk powder of Community origin should continue, with a view to covering local consumption more fully.

The need to maintain local production by means of incentives justifies not applying Regulation (EC) No 1788/2003 in the French overseas departments and Madeira. For Madeira this exemption should be subject to a limit of 4 000 tonnes, corresponding to the current production of 2 000 tonnes and allowing for a reasonable possibility of increased production, estimated at present at a maximum of 2 000 tonnes.

Tobacco growing is of historical importance in the Canary Islands. Economically speaking, tobacco preparation continues to be one of the chief industrial activities in the region. In social terms, tobacco cultivation is very labour-intensive and carried out by small farms. Since the crop is not sufficiently profitable, however, it is in danger of dying out. Tobacco is currently cultivated on only a small area on the island of La Palma, for the small-scale manufacture of cigars. Spain should therefore be authorised to continue to grant aid in addition to Community aid so that this traditional crop can be maintained with a view to supporting the artisanal activity associated with it. In addition, to maintain the manufacture of tobacco products, imports into the Canary Islands of raw and semi-manufactured tobacco should continue to be exempt from customs duty, up to an annual limit of 20 000 tonnes of stripped raw tobacco equivalent.

Regulations (EC) No 1452/2001, (EC) No 1453/2001 and (EC) No 1454/2001 should be repealed. Regulation (EC) No 1782/2003 and Regulation (EC) No 1785/2003 should also be amended to ensure coordination of the respective arrangements.

The programmes provided for by this Regulation should start to apply upon notification of their approval by the Commission. To enable the programmes to start at this time, the Member States and the Commission should be permitted to take all the preparatory measures between the date of entry into force of this Regulation and that of the application of the programmes,