Article 15(2) of Council Regulation (EC) No 1673/2000 of 27 July 2000 on the common organisation of the markets in flax and hemp grown for fibre2 requires the Commission to present a report to the European Parliament and the Council on processing aid, if necessary accompanied by proposals. On the basis of that report, it is appropriate for the current system to remain in force up to and including the marketing year 2007/2008.

The processing aid for short flax fibre and hemp fibre containing not more than 7,5 % impurities and shives applies until the 2005/2006 marketing year. Nevertheless, in view of the favourable trends on the market for this kind of fibre under the current aid scheme and in order to contribute to consolidating innovative products and their market outlets, application of this aid should be extended until the 2007/2008 marketing year.

Regulation (EC) No 1673/2000 provides for an increase in the level of processing aid for long flax fibre from the 2006/2007 marketing year onwards. Since the processing aid for short fibres is maintained until the 2007/2008 marketing year, the processing aid for long flax fibre should be limited to the present level until the 2007/2008 marketing year.

In order to promote the production of high-quality short flax and hemp fibres, the aid is granted to fibres containing a maximum of 7,5 % of impurities and shives. However, Member States may derogate from this limit and grant processing aid for short flax fibre containing a percentage of impurities and shives of between 7,5 % and 15 % and for hemp fibre containing a percentage of impurities and shives of between 7,5 % and 25 %. Since this possibility is open only until the 2005/2006 marketing year, it is necessary to give Member States the possibility to derogate from that limit for two more marketing years.

In order to continue to ensure reasonable production levels in each Member State, it is necessary to extend the period in which the national guaranteed quantities apply.

Additional aid has been supporting the continuation of traditional production of flax in certain regions of the Netherlands, Belgium and France. It is necessary to extend this transitional aid until the 2007/2008 marketing year, in order to continue enabling gradual adaptation of farm structures to the new market conditions.

The Commission should submit a report to the European Parliament and the Council in sufficient time before the beginning of the 2008/2009 marketing year in order to assess whether the present system needs to be adapted or should continue.

Article 52 of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers3 provides that only hemp grown for fibre is eligible for the single payment scheme established under Title III of that Regulation. It is appropriate to make the cultivation of hemp for other industrial uses also eligible.

Taking account of the yearly management of direct payments, it is appropriate that the modifications to the eligibility conditions of the single payment scheme apply from 1 January 2007.

Regulations (EC) No 1673/2000 and (EC) No 1782/2003 should be amended accordingly,