(1)

Detailed rules for the implementation of Title III of Regulation (EC) No 1782/2003 establishing the single payment scheme for farmers should be laid down.

(2)

For clarity reasons it is appropriate to provide for certain definitions. Where appropriate, definitions which already apply in similar situations and/or which have been already used for years should be used.

(3)

In order to facilitate the calculation of the unit value of the payment entitlements, it should be provided for clear rules on the round up of figures and for the possibility to split existing payment entitlements in case the size of the parcel which is declared or transferred with the entitlement only amounts to a fraction of hectares.

(4)

Specific provisions should be provided for the establishment of the national reserve and in particular the calculation of the reductions of the reference amounts or the payment entitlements, as well as the application of the reduction in cases of full or partial decoupling of the dairy premiums and additional payments referred to in Articles 95 and 96 of Regulation (EC) No 1782/2003.

(5)

Article 42(3) and (5) of Regulation (EC) No 1782/2003 provides for optional cases of allocation of payment entitlements from the national reserve. It is appropriate to provide for rules for the calculation of the number and value of the payment entitlements to be allocated in such a way. In order to allow certain flexibility to Member States which are in a better position to evaluate the situation of each farmer applying for such measures, the maximum number of entitlements to be allocated should not be higher than the number of hectares declared and its value should not be higher than an amount to be fixed by the Member State according to objective criteria. According to article 42(6) of Regulation (EC) No 1782/2003, in case of increase of the unit value of existing payment entitlements, a regional average should be respected. Member States should be allowed to establish that regional value at the appropriate territorial level. However, in no case, due to its nature of aid decoupled from the production, the amount should be differentiated or calculated in function of sectorial productions.

(6)

Under certain circumstances farmers could end up with more entitlements than land to use them, for example in case of common use of a forage area, because of the expiry of a lease or the participation to an afforestation program or by buying, in accordance to national provisions, milk reference quantities which were leased in the reference period with land. Therefore it seems appropriate to provide for a mechanism that should guarantee the farmer’s support by concentrating it on the remaining available hectares. However, in order to avoid abuse of that mechanism, some conditions for the access to that mechanism should be provided for.

(7)

According to Regulation (EC) No 1782/2003 the national reserve shall be replenished via unused entitlements or, on an optional basis, via retention on sales of payments entitlements or on sales that have taken place before a certain date. It is therefore necessary to provide for a date after which the unused entitlements revert to the national reserve. For administrative reasons, it should also be provided that the payment entitlements accompanied by the authorisation to grow fruit and vegetable or table potatoes or set-aside entitlements when reverting to the national reserve should lose the accompanying obligation or authorisation. Moreover, this is also justified by the fact that that obligation or authorisation is established on the basis of historical references and once the single payment scheme is in place it will not be possible to determine who should receive set-aside entitlements of authorisations out of the reserve as the support will be decoupled.

(8)

In case of application of the retention on sale of payment entitlements, maximum percentages and criteria of application should be established and differentiated taking into account the type of transfers and of payment entitlements to be transferred. If speculative risks exist in the first years of application of the single payment scheme, Member State may be allowed to increase the percentage of retention for sales without land. In no case the application of such retentions should result in a substantial obstacle or prohibition of transfer of payment entitlements.

(9)

In order to facilitate the administration of the national reserve, it is appropriate to provide for management of the national reserve at regional level except in cases referred to in Article 42 (3) of Regulation (EC) No 1782/2003, where applicable, and in Article 42 (4) of that Regulation, where Member States are obliged to allocate payment entitlements.

(10)

In order to facilitate the implementation of the single payment scheme, it is appropriate to allow Member States to proceed already in the year preceding the first year of application of the scheme to the identification of the potential beneficiaries of the scheme in particular, in case of modifications in the holding due to inheritance or legal changes and to the provisional establishment of payment entitlements.

(11)

Article 33 of Regulation (EC) No 1782/2003 allows farmers to access to the single payment scheme under specific circumstances. In order to avoid that such circumstances may be used to escape the application of the rules on normal transfers of a holding with the attached reference amounts, some conditions and definitions should be set up for the application of such circumstances.

(12)

Article 46(2) of Regulation (EC) No 1782/2003 provides that a farmer may transfer his payment entitlements without land only after he has used, within the meaning of Article 44 of that Regulation, at least 80 % of his payment entitlements during at least one calendar year. In order to take into account the transfers of land that have taken place in the period before the application of the single payment scheme, it is justified to consider the transfer of holding or part of it together with the future payment entitlements as a valid transfer of the payment entitlements with land within the meaning of Article 46 of Regulation (EC) No 1782/2003, subject to certain conditions, in particular the fact that the seller should apply for the establishment of the payment entitlements as far as that Regulation clearly provides that only those who received the direct payment in the reference period have access to the scheme.

(13)

Article 42(4) of Regulation (EC) No 1782/2003 allows the Commission to define the special situations which shall give right to the establishment of reference amounts for certain farmers finding themselves in situations which prevented them, in full or partially, from receiving direct payments in the reference period. It is therefore appropriate to list those special situations by providing for rules in order to avoid cumulating the benefit from the different allocation of payment entitlements on the same farmer without prejudice to the possibility for the Commission to add further cases where the case may be. Moreover, Member States should be given the flexibility to establish the reference amount to be allocated.

(14)

Where a Member State according to national law or well established usual practice includes in the definition of long term lease also lease for 5 years, it is appropriate to allow Member State to apply this shorter term where the case may be.

(15)

Due to the fact that dairy premiums and additional payments will be included in the single payment scheme on the basis of a different reference period than the one referred to in Article 37 of Regulation (EC) No 1782/2003, it is appropriate, for the purpose of establishing the reference amount, to take into account of dairy farmers finding themselves in a situation referred to in Article 40 of Regulation (EC) No 1782/2003 who lease, because of that situation, their individual reference quantity or part of it according to Article 16 of Regulation (EC) No 1788/2003 during the twelve-month period ending on 31 March of the first year of application of the single payment scheme.

(16)

In cases where a farmer retires or dies and provides for transferring his holding or part of it to a member of the family or inheritant who intends to continue the agricultural activity on this holding, it is appropriate to ensure that the transfer of the holding or part of it within a family can easily take place in particular, in the case where the transferred land was leased to a third person during the reference period without prejudging the possibility for the inheritant to continue the agricultural activity.

(17)

Farmers who made investments resulting in a potential increase of the amount in direct payments that they should have been granted if the single payment scheme had not been introduced should also benefit from the allocation of entitlements. Specific rules should be provided for the calculation of the payment entitlements in case a farmer already owns payment entitlements or has no hectares. In the same circumstances, farmers who bought or leased land or participated in national programmes of reconversion of production for which a direct payment under the single payment scheme could have been granted in the reference period would find themselves without payment entitlements whilst they acquired land or participated in such programmes in order to exercise an agricultural activity that could in the future still benefit from certain direct payments. Therefore it is also appropriate to provide for the allocation of payment entitlements in that case.

(18)

For the good administration of the scheme, it is appropriate to provide for rules in case of transfers of payment entitlements.

(19)

Article 46 of Regulation (EC) No 1782/2003 provides that a Member State may decide that payment entitlements may only be transferred or used within one and the same region. In order to avoid practical problems, specific rules should be provided for holdings situated in between two or more regions.

(20)

Article 43(2) of Regulation (EC) No 1782/2003 provides that all forage area in the reference period should be included in the calculation of the payment entitlements. In order to facilitate the task of the national administrations in establishing the number of forage hectares, it is appropriate to give them the possibility to take into account the number of forage area declared in the area aid application before the introduction of the single payment scheme, whilst letting the farmer the possibility to prove that his forage area in the reference period was lower.

(21)

Article 52 of Regulation (EC) No 1782/2003 allows for the production of hemp under certain conditions. It is necessary to establish the list of eligible varieties as well as to provide for the certification of those varieties.

(22)

Specific rules should be provided for the calculation of the livestock unit in case of establishment of entitlements subject to special conditions by referring to the existing conversion table provided for in the beef sector.

(23)

Specific rules are also needed to facilitate the establishment of payment entitlements in case of anticipated decoupling of the payments in the milk sector.

(24)

Pursuant to Article 54 of Regulation (EC) No 1782/2003, any set-aside entitlement accompanied by an hectare eligible for set-aside entitlement shall give right to the payment of the amount fixed by the set-aside entitlement. The minimum period for which land is to be set aside should extend at least over the growing cycle of the arable crops. However, in order to take certain specific circumstances into account, it should be possible for land set aside to be used before the minimum set-aside period expires. Provisions should also be laid down regarding environmental protection and the maintenance and utilisation of the areas set aside.

(25)

Where a Member State decides to make use of the option of regionalising the single payment scheme, specific provisions should be established in order to facilitate the calculation of the regional reference amount for holdings situated in between two or more regions, as well as in order to guarantee a full allocation of the regional amount in the first year of application of the scheme. Some of the provisions provided for by this Regulation, notably on the establishment of the national reserve, initial allocation of payment entitlements and transfer of payment entitlements should be adjusted in order to make them applicable in the regional model.

(26)

Article 69 of Regulation (EC) No 1782/2003 allows Member States, within a budgetary limit, to provide for an additional payment for specific types of farming which are important for the protection or enhancement of the environment or for improving the quality and marketing of agricultural products. It is therefore necessary to define which farmers should be concerned, how this payment should be compatible with existing measures under the rural development and to define which type of farming should be covered by the measure.

(27)

Article 58 of Regulation (EC) No 1782/2003 provides that Member States shall define the regions in accordance with objective criteria and Article 59 of that Regulation provides that Member States may proceed to a regionalisation of the single payment scheme in duly justified cases and in accordance with objective criteria. It is therefore appropriate to provide for the communication of all the necessary data and information to proceed to the assessment of such criteria.

(28)

In order to assess the application of the single payment scheme, it is appropriate to establish the modalities and deadlines for the exchange of information between the Commission and the Member States and to inform the Commission of the areas for which the aid has been paid, at national, and, where the case may be, at regional level.

(29)

The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Direct Payments,

(1)

Regulation (EC) No 1782/2003 introduced the single payment scheme as well as certain other direct payment schemes. At the same time it merged several existing direct payment schemes. Moreover, it establishes a principle according to which direct payments to a farmer who does not comply with certain conditions in the areas of public, animal and plant health, environment and animal welfare (‘cross-compliance’) shall be subject to reductions or exclusions.

(2)

The direct payment schemes first introduced as a result of the reform of the common agricultural policy in 1992 and further developed under the Agenda 2000 measures have been subjected to an integrated administration and control system (hereinafter referred to as ‘integrated system’). That system has proven to be an effective and efficient means for the implementation of direct payment schemes. Regulation (EC) No 1782/2003 builds upon the basis of that integrated system and submits to it the management and control both of the direct payment schemes set up by it and the adherence to the cross-compliance obligations.

(3)

It is therefore appropriate to repeal Commission Regulation (EC) No 2419/2001 of 11 December 2001 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes established by Council Regulation (EEC) No 3508/92 (2) and to base this Regulation on the principles as established by Regulation (EC) No 2419/2001.

(4)

For reasons of clarity, it is appropriate to provide for certain definitions.

(5)

Regulation (EC) No 1782/2003 provides, as part of the cross-compliance conditions, for certain obligations of the Member States on the one hand and individual farmers on the other hand, as regards the maintenance of permanent pasture. It is necessary to lay down the details for the determination of the ratio of permanent pasture and agricultural land that has to be maintained and to provide for the individual obligations at the level of farmers to be respected where it is established that that proportion is decreasing to the detriment of land under permanent pasture.

(6)

For the sake of effective control and to prevent the submission of multiple aid applications to different Paying Agencies within one Member State, the Member States should provide for a single system to record the identity of farmers submitting aid applications subject to the integrated system.

(7)

Detailed rules are needed with regard to the system for the identification of agricultural parcels to be operated by the Member States in accordance with Article 20 of Regulation (EC) No 1782/2003. According to that provision use has to be made of computerised geographic information system techniques (GIS). It is necessary to clarify at which level the system should operate and the level of details of information that has to be available in the GIS.

(8)

Moreover, the introduction of an area payment for nuts in Chapter 4 of Title IV of Regulation (EC) No 1782/2203 leads to the need for the introduction of a new layer of information in the GIS. However, it is appropriate to release those Member States from this obligation where the maximum guaranteed area is 1 500 ha or less and to provide for a higher control rate for on-the-spot checks instead.

(9)

In order to ensure a proper implementation of the single payment scheme as provided for in Title III of Regulation No 1782/2003, the Member States should establish an identification and registration system according to which the payment entitlements have to be traceable and which allows, inter alia, to cross-check areas declared for the purposes of the single payment scheme with the payment entitlements available to each farmer and between the different payment entitlements as such.

(10)

Monitoring the adherence to the different cross-compliance obligations requires the setting-up of a control system and of appropriate sanctions. For this purpose, different authorities within the Member States need to communicate information on aid applications, control-samples, results of on-the-spot checks etc. Provision should be made for the basic elements of such a system..

(11)

In order to contribute to the protection of the financial interest of the Community it should be foreseen that payments under Regulation (EC) No 1782/2003 may only be made once the checks with regard to the eligibility criteria have been finalised.

(12)

Regulation (EC) No 1782/2003 leaves a choice for the Member States with regard to the application of certain of the aid schemes provided for therein. This Regulation, therefore, has to make provisions for the administration and control needs in view of any possible choice that might be taken. These provisions to be established in this Regulation may, therefore, only apply to the extent as the Member States have taken such choices.

(13)

For the sake of effective controls, any kind of area use and of the aid schemes concerned should be declared at the same time. Provision should, therefore, be made for submission of a single aid application comprising any applications for aid which are in some way related to area.

(14)

A single application form should, moreover, even be submitted by farmers who do not apply for any of the aids subjected to the single application if they have agricultural area at their disposal.

(15)

In accordance with Article 34(2) of Regulation (EC) No 1782/2003, the Member States may not fix a later date than 15 May of a given year for the submission of applications for aid under the Single Payment scheme. All area-related aid applications being subjected to the single application, it is therefore appropriate to apply this rule also with regard to all other area-related aid applications. Due to the particular climatic conditions in Finland and Sweden, these Member States should, on the basis of the second subparagraph of that provision, be allowed to set a later date which should not be later than 15 June. Moreover, case-to-case derogations should be envisaged on that same legal basis should climatic conditions in a given year in the future so require.

(16)

In the single application, the farmer should declare not only the area he is using for agricultural purposes but also his payment entitlements. Moreover, any specific information relating to production of hemp, durum wheat, rice, nuts, energy crops, starch potato and seeds should be requested together with the single application.

(17)

With a view to simplifying the application procedures and in accordance with Article 22(2) of Regulation (EC) No 1782/2003, provision should, in this context, be made for Member States to provide the farmer as far as possible with pre-printed information.

(18)

For the sake of effective monitoring, each Member State should, furthermore, determine the minimum size of agricultural parcels that may be subject to an aid application.

(19)

It should, furthermore, be provided that areas are declared in the single application form for which no aid is being requested. Depending on the kind of use, it may be important to have exact information which is why certain uses should be declared separately whilst other uses may be declared under one heading. However, in case where Member States already receive that kind of information derogation form this rule should be allowed.

(20)

To allow as much flexibility as possible with regard to farmers planning concerning the use of area, they should be allowed to amend their single application until such dates where sowing would normally take place, provided that all the particular requirements under the different aid schemes are respected and that the competent authority has not yet informed the farmer of errors contained in the single application, nor notified an on-the-spot check which reveals errors, in relation to the part affected by the amendment. Following the amendment, the possibility must be given to adjust the corresponding supporting documents or contracts to be submitted.

(21)

In the case where a Member State opts for the application of the various livestock aid schemes common provisions should be made concerning the details to be included in livestock aid applications.

(22)

Regulation (EC) No 1760/2000 of the European Parliament and of the Council of 17 July 2000 establishing a system for the identification and registration of bovine animals and regarding the labelling of beef and beef products and repealing Council Regulation (EC) No 820/97 (3) requires keepers of bovine animals to communicate data concerning these animals to a computerised database. In accordance with Article 138 of Regulation (EC) No 1782/2003, premiums under the bovine aid schemes may only be paid for animals that are properly identified and registered in accordance with Regulation (EC) No 1760/2000. The computerised database has also gained far-reaching importance as far as the management of the aid schemes is concerned. Farmers submitting applications under the aid schemes concerned should therefore be given access to the relevant information in due time.

(23)

The Member States should be authorised to make use of the information contained in the computerised database with a view to introducing simplified application procedures provided that the computerised database is reliable. Different options should be provided for, allowing Member States to make use of the information contained in the computerised database for bovine animals for the purpose of the submission and the management of aid applications. However, where such options foresee that the farmer does not have to identify individually the bovine animals with regard to which he claims the premiums it should be made clear that any potentially eligible animal with regard to which irregularities are detected concerning the compliance with the identification and registration system could, for the purpose of applying sanctions, count as an animal claimed for aid.

(24)

The details with regard to the submission and the substance of aid applications for the dairy premium and the related additional payments have to be established.

(25)

The general framework for the introduction of simplified procedures in the context of communications between the farmer and the Member States authorities should be set up. That framework should, in particular, provide for the possibility to make use of electronic means. It has however to be guaranteed that, in particular, the data thus proceeded is fully reliable and that such procedures are operated without any discrimination between farmers.

(26)

Where aid applications contain obvious errors they should be adjustable at any time.

(27)

Respect for the time limits for the submission of aid applications, for the amendment of area aid applications and for any supporting documents, contracts or declarations is indispensable to enable the national administrations to programme and, subsequently, carry out effective checks on the correctness of the aid applications. Provision should, therefore, be made regarding the time limits within which late submissions are acceptable. Moreover, a reduction should be applied to encourage farmers to respect the time limits.

(28)

Farmers should be entitled to withdraw their aid applications or parts thereof at any time provided that the competent authority has not yet informed the farmer of any errors contained in the aid application nor notified an on-the-spot check which reveals errors in relation to the part affected by the withdrawal.

(29)

Compliance with the provisions on the aid schemes managed under the integrated system should be effectively monitored. To this end, and to have a harmonised level of monitoring in all Member States, it is necessary to set out in detail the criteria and technical procedures for carrying out administrative and on-the-spot checks in respect both of the eligibility criteria established for the aid schemes and the cross compliance obligations. Moreover, as regards checks on the compliance with eligibility criteria, on-the-spot checks should, as a general rule, be unannounced. Where appropriate, the Member States should undertake to combine the various controls under this Regulation.

(30)

The minimum number of farmers to be checked on the spot under the various aid schemes should be determined. In the case where Member States opt for the application of the various livestock aid schemes, an integrated holding-based approach should be foreseen in relation to farmers applying for aids under those schemes.

(31)

The determination of significant irregularities should require an increase in the level of the on-the-spot checks during the current and the following year to reach an acceptable level of assurance of the correctness of the aid applications concerned.

(32)

The sample of the minimum rate of on-the-spot checks should be drawn partly on the basis of a risk analysis and partly at random. The main factors to be taken into consideration for the risk analysis should be specified.

(33)

On-the-spot checks of farmers submitting aid applications do not necessarily have to be carried out on each individual animal or agricultural parcel. Checks on a sample basis may, in certain cases, be carried out. However, where this is allowed the sample should be extended to a degree that guarantees a reliable and representative level of assurance. In some cases the sample may have to be extended to a full control. The Member States should establish the criteria for the selection of the sample to be checked.

(34)

In order for the on-the-spot check to be effective it is important for the staff carrying out the checks to be informed of the reason for the selection for the on-the-spot check. The Member States should keep records of such information.

(35)

Moreover, to enable the national authorities as well as any competent Community authority to follow up on-the-spot checks carried out, the details of checks should be recorded in a control report. The farmer or a representative should be given the opportunity to sign the report. However, in the case of checks by means of remote-sensing the Member States should be allowed to provide for this right only in cases where the check reveals irregularities. Irrespective of the kind of on-the-spot check carried out, the farmer should receive a copy of the report if irregularities are found.

(36)

On-the-spot checks of areas, as a general rule, consist of two parts, the first of which relates to verifications and measurements of declared agricultural parcels on the basis of graphic material, aerial photography and so forth. The second part consists of a physical inspection of the parcels to verify the actual size of the agricultural parcels declared and, depending on the aid scheme in question, the declared crop and its quality. Where necessary, measurements should be carried out. The physical inspection in the field may be carried out on the basis of a sample.

(37)

Detailed rules regarding the determination of areas and the measurement methods to be used should be laid down. Where aid is paid for the production of certain crops, experience has shown that, in relation to the determination of the area of agricultural parcels eligible for area payments, it is necessary to define the acceptable width of certain features of the fields, in particular hedges, ditches and walls. In view of specific environmental needs, it is appropriate to provide some flexibility within the limits taken into account when the regional yields were fixed.

(38)

With regard to areas declared for the purpose of receiving aid under the Single Payment scheme, a differentiated approach should, however, be taken given the fact that such payments are no more connected to an obligation to produce.

(39)

Given the particularities of the aid scheme for seed in accordance with Article 99 of Regulation (EC) No 1782/2003, special control provisions should be established.

(40)

The conditions for the use of remote sensing for on-the-spot checks should be laid down and provision should be made for physical checks to be carried out in cases where photo-interpretation does not lead to clear results.

(41)

Article 52 of Regulation (EC) No 1782/2003 provides for particular controls on the tetrahydrocannabinol (THC) content in the case where a farmer grows hemp on parcels declared for the purposes of the Single Payment scheme. The details concerning such controls need to be established.

(42)

In the case where a Member State opts for the application of the various livestock aid schemes, where aid is being applied for under those aid schemes, the timing and the minimum content of on-the-spot checks should be specified. In order to check effectively the correctness of declarations in aid applications and notifications to the computerised database for bovine animals it is essential to carry out a major part of such on-the-spot checks whilst animals still have to be kept on farm under the retention obligation.

(43)

In the case where a Member State opts for the application of the various aid schemes for bovine animals, the proper identification and registration of bovine animals being an eligibility condition pursuant to Article 138 of Regulation (EC) No 1782/2003, it should be ensured that Community aid is granted only for bovines properly identified and registered. Such checks should also be carried out in respect of bovine animals not yet claimed but which could be subject to an aid application in the future because such animals, due to the set-up of several of the bovine aid schemes, are, in many cases, only claimed for aid after they have already left the holding.

(44)

In the case where a Member State opts for the application of the slaughter premium, special provision should be made for checks to be carried out in slaughterhouses in order to check that animals claimed for aid are eligible and that the information contained in the computerised database is correct. The Member States should be authorised to apply two different bases for selecting slaughterhouses for such checks.

(45)

In that case, as far as the slaughter premium granted after export of bovine animals is concerned, special provisions are necessary along with Community control provisions relating to export in general because of the differences in the control purposes.

(46)

The control provisions foreseen in relation to the livestock aid should also, where appropriate, apply as regards additional payments pursuant to Article 133 of Regulation (EC) No 1782/2003.

(47)

Special control provisions have been established on the basis of Commission Regulation (EC) No 1082/2003 of 23 June 2003 laying down detailed rules for the implementation of Regulation (EC) No 1760/2000 of the European Parliament and of the Council as regards the minimum level of controls to be carried out in the framework of the system for the identification and registration of bovine animals (4). Where such checks under that Regulation are carried out, the results should be contained in the control report for the purposes of the integrated system.

(48)

With regard to aid applications for the dairy premium and the related additional payment, the main eligibility criteria are the amount of milk that may be produced within the reference quantity available to the farmer and whether the farmer is actually a producer of milk. The reference quantity is already known to the competent authorities of the Member States. The main condition to be checked on-the-spot is, therefore, whether the farmer is a producer of milk. Such checks may be carried out in particular on the basis of the farmers accounting or other registers.

(49)

Regulation (EC) No 1782/2003 introduces cross compliance obligations for farmers receiving aid-payments under all direct payment schemes listed in Annex I to that Regulation. It provides for a system of reductions and exclusions where such obligations are not adhered to. The details for that system should be established.

(50)

The details concerning the question which authorities in the Member States carry out controls on cross compliance obligations should be established.

(51)

In certain cases it might be useful for the Member States to carry out administrative checks on cross compliance obligations. However, that control-tool should not be made compulsory on the Member States whilst it is useful to envisage its use on a discretionary basis.

(52)

The minimum control-rate for the respect of the cross compliance obligations has to be established. That control-rate should be fixed at 1 % of farmers falling under the area of competence of each control authority to be selected on the basis of an appropriate risk analysis. The sample should either be drawn on the basis of the samples of farmers that are selected for an on-the-spot check as regards eligibility criteria, or from the overall population of farmers submitting aid applications for direct payments. In the latter case certain sub-options should be allowed.

(53)

As a general rule, taking into account the different natures of the cross compliance obligations, on-the-spot checks should focus on all obligations the compliance with which may be checked at the time of that visit. In addition, as regards requirements and standards for which infringements could not be clearly established at the time of the visit, the controller should identify cases to be submitted for further checks if necessary.

(54)

Rules for the setting-up of detailed and specific control reports have to be established. The specialised controllers in the field should indicate any findings and also the degree of seriousness of such findings in order to enable the Paying Agency to fix the related reductions or, as the case may be, to decide on exclusions from receiving direct payments.

(55)

To protect the Community's financial interests effectively adequate measures should be adopted to combat irregularities and fraud. Separate provisions should be made in cases of irregularities found with regard to eligibility criteria for the different aid schemes concerned.

(56)

The system of reductions and exclusions envisaged in Regulation (EC) No 1782/2003 with regard to cross compliance obligations however targets at a different aim, namely to set an incentive for farmers to respect the, already existing, legislation in the different fields of cross compliance.

(57)

Reductions and exclusions should be established having regard to the principle of proportionality and, in the case of eligibility criteria, the special problems linked to cases of force majeure as well as exceptional and natural circumstances. In the case of cross compliance obligations reductions and exclusions may only be applied where the farmer acted negligently or intentionally. Reductions and exclusions should be graded according to the gravity of the irregularity committed and should go as far as the total exclusion from one or several aid schemes for a specified period. They should, with regard to the eligibility criteria, take into account the particularities of the various aid schemes.

(58)

In relation to area aid applications, irregularities normally affect parts of areas. Overdeclarations in respect of one parcel may, therefore, be off-set against underdeclarations of other parcels of the same crop-group. Within a certain margin of tolerance it should be foreseen that aid applications are only adjusted to the area actually determined and reductions only start to apply once this margin has been exceeded.

(59)

It is therefore necessary to define the areas falling within the same crop-group. Areas declared for the purposes of the Single Payment scheme should, in principle, fall within the same crop-group. However, special rules need to be established in view of determining which of the related payment entitlements have been activated in case that a discrepancy is established between the area declared and the area determined. Moreover, in accordance with Article 54(6) of Regulation (EC) No 1782/2003, set-aside entitlements have to be activated before any other entitlements. Provisions have to be made in this context with regard to two situations. Firstly, area declared as being set-aside for the purpose of activating set-aside entitlements and being found not to be set-aside in reality, has to be deducted from the overall area declared for the purpose of the Single Payment scheme as area not determined. Secondly, the same should be the case, on a fictional basis, in respect of the area corresponding to set-aside entitlements which are not being activated if, at the same time, other entitlements are being activated along with the corresponding area.

(60)

Special provisions are necessary to take into account the particularities of aid applications under the aid schemes for starch potato and seed. In the case where a Member State opts for the application of the various livestock aid schemes, where farmers apply for livestock aid and declare forage area for that purpose, and where an overdeclaration of such areas does not lead to a higher payment for livestock, no penalties should be foreseen.

(61)

As far as livestock aid applications are concerned, irregularities lead to the ineligibility of the animal concerned. Reductions should be foreseen as from the first animal found with irregularities but, irrespective of the level of the reduction, there should be a less harsh sanction where three animals or less are found with irregularities. In all other cases the severity of the sanction should depend on the percentage of animals found with irregularities.

(62)

Farmers should be allowed to replace the bovine and ovine/caprine animals within the limits allowed under the relevant sectoral rules. Where, due to natural circumstances, a farmer is unable to fulfil the retention obligations under the sectoral rules, reductions and exclusions should not be applied.

(63)

In the case where a Member State opts for the application of the slaughter premium, due to the importance of slaughterhouses for the proper functioning of some of the bovine aid schemes, provision should also be made for cases where slaughterhouses, gross negligently or intentionally, issue false certificates or declarations.

(64)

As far as irregularities are concerned as regards the additional payments provided for in Article 133 of Regulation (EC) No 1782/2003, the Member States should provide for sanctions which should be equivalent to those provided for in relation to the area and livestock aid schemes unless this is inappropriate. In this latter case the Member States should provide for suitable equivalent sanctions.

(65)

Reductions and sanctions should be established as regards dairy premium and additional payments in case a farmer who applies for aid is not complying with its obligation of producing milk.

(66)

With regard to cross compliance obligations, apart from grading reductions or exclusions in view of the principle of proportionality, it should be provided that as of a certain moment repeated infringements of the same cross compliance obligation should, after a prior warning to the farmer, be treated as an intentional non-compliance.

(67)

Reductions and exclusions with regard to eligibility criteria should, as a general rule, not apply where the farmer submitted factually correct information or where he can show otherwise that he is not at fault.

(68)

Farmers who give notice to the competent national authorities at any time of incorrect aid applications should not be subject to any reductions or exclusions irrespective of the reason of the incorrectness, provided that the farmer has not been informed of the competent authority's intention to carry out an on-the-spot check and the authority has not already informed the farmer of any irregularity in the application. The same should apply in relation to incorrect data contained in the computerised database both in respect of claimed bovine animals for which such irregularities not only constitutes a non-respect of a cross compliance obligation but also a breach of an eligibility-criterion, and in respect of unclaimed bovine animals where such irregularities are relevant only under the cross compliance obligations.

(69)

The management of small amounts is a burdensome task for the competent authorities of the Member States. It is therefore appropriate to authorise the Member States not to pay amounts of aid that are below a certain minimum limit and not to request reimbursement of incorrectly paid amounts when the sums involved are minimal.

(70)

Specific and detailed provisions have to be laid down in order to ensure the equitable application of various reductions to be applied in respect of one or several aid applications by the same farmer. The reductions and exclusions provided for under this Regulation should apply without prejudice to additional sanctions under any other provisions of Community or national law.

(71)

Where, as a consequence of force majeure or exceptional circumstances, a farmer is not able to fulfil the obligations provided for under the sectoral rules, he should not lose his right to the aid payment. It should be specified which cases may, in particular, be recognized by the competent authorities as cases of exceptional circumstances.

(72)

In order to ensure uniform application of the principle of good faith throughout the Community, where amounts unduly paid are recovered, the conditions under which that principle may be invoked should be laid down without prejudice to the treatment of the expenditure concerned in the context of the clearance of accounts under Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (5).

(73)

Rules should be established laying down the consequences of transfers of entire holdings which are under certain obligations in accordance with the direct payment schemes subject to the integrated system.

(74)

As a general rule the Member States should take any further measures necessary to ensure a proper functioning of this Regulation. The Member States should give each other mutual assistance where necessary.

(75)

The Commission should, where appropriate, be informed of any measures taken by the Member States to introduce changes to their implementation of the integrated system. In order to enable the Commission to monitor the integrated system effectively, the Member States should send it certain annual control statistics. The Member States should, moreover, inform the Commission of any measures they are taking with regard to the maintenance of land under permanent pasture.

(76)

Rules have to be established with regard to the basis for the calculation of the reductions to be applied under modulation in accordance with Article 10 of Regulation (EC) No 1782/2003, the subsequent allocation key of the financial means thus becoming available, as well as the calculation of the additional amount of aid provided for in Article 12 of that Regulation in order to fix the rules to determine whether the threshold of EUR 5 000 referred to in that Article has been reached.

(77)

The present Regulation should start to apply as of 1 January 2005. As of that same date, Regulation (EC) No 2419/2001 should be repealed. However, with regard to aid applications relating to marketing years or premium periods which start before 1 January 2005, that Regulation should continue to apply. Special provisions are necessary to ensure that reductions to be applied as a consequence of the rules established in Regulation (EC) No 2419/2001 would not be emptied by the transfer to this new regime.

(78)

The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Direct Payments,