The Integrated Administration And Control System: explanatory booklet

ANNEX 4: AID FOR ENERGY CROPS

An online version of this can be found at www.scotland.gov.uk/SAF07/annex4

Applying for aid

Use of raw material

4.1 Energy crops means crops supplied essentially for the production of the following energy products:

• Those considered bio-fuels (listed in Article 2 Point 2 of Directive 2003/30/EC ( see Annex 5)
• Electric and thermal energy produced from bio-mass; or

Any agricultural raw materials (except sugarbeet) may be grown on areas qualifying for aid provided that they are intended primarily for use in the manufacture of the energy products referred to above. Such crops can be grown on any land EXCEPT set-aside land.

Selling to Processors

4.2 If you are selling to a processor, production must be covered by a contract between you and the processing industry.

4.3 You must 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 listed at paragraph 4.1.

4.4 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. He must inform the competent authority with whom the security is lodged, for example the RPA.

Processing on your Holding

4.5 However, you may undertake processing on your holding, in which case you may:

• 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 90 00 and 1206 00 91 ( see Annex 6) harvested:
  - As fuel for heating your agricultural holding.
  - For the production on the holding of power or bio-fuels.
• Process into bio-gas falling within CN code 2711 29 00 ( see Annex 6) on your holdings, all the raw material harvested.

In these cases, you must provide a declaration, in place of a contract, to use or process directly the raw material covered by your declaration. The declaration should be submitted with your SAF.

4.6 We will need an accurate assessment of the weight delivered. You must 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, where either the straw or the entire plant is used, weighing may be replaced by volumetric measurement of the raw material. If you use the volumetric assessment, you must keep the crop separate from other crops until an accurate weight is confirmed on a weigh bridge approved by the local authority.

4.7 We will apply adequate checks to ensure that the raw material is used directly on the holding or is processed into bio-gas falling within CN code 2711 29 00.

4.8 Cereals and oilseeds used as per the first bullet point of paragraph 4.5 above must be denatured in accordance with the method laid down by SEERAD. We may, however, authorise the oil produced by processing oilseeds in accordance with the second sub-bullet point 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.

4.9 If you are processing on your holding, your declaration should include details as outlined in bullet points 3-8 in paragraph 4.11.

Contract

4.10 In support of your application for aid, you must submit to the RPA the contract you have concluded with a first processor or your declaration if processing on your holding.

4.11 You must ensure that contracts specify the following:

• the names and addresses of the parties to the contract;
• the duration of the contract;
• the variety of all raw materials concerned and the area planted with each variety;
• any conditions applicable to the delivery of the forecast quantities of raw materials;
• the forecast quantities of raw materials, classified by variety, and any conditions governing their delivery. Such quantities must be no less than the representative yield established the previous year for the raw material in question;
• an undertaking to fulfil your obligations;
• the intended primary end uses for the raw material; and
• the field identification number of each field in which you are claiming energy crops aid.

4.12 You must ensure that the contracts are concluded in time to allow the first processor to deposit a copy with RPA by the closing date.

Amendment and termination

4.13 The first processor may delegate to a third party collection of the raw material from the farmer applying for aid.

4.14 When the contract or declaration is amended or the contract terminated after you have lodged an aid application, you may maintain the aid application only on condition that, with a view to allowing the requisite inspections to be carried out, you inform us of such amendment or termination no later than the closing date set for amendment of the application.

Exceptional circumstances

4.15 Where you inform us that, owing to exceptional circumstances, you will not be able to supply all or part of the raw materials specified in the contract or declaration, we may, after obtaining sufficient evidence of such special circumstances, authorise such amendments to contracts or declarations as appear justified, or may authorise their termination.

4.16 Where the land covered by contracts is reduced as a result of their amendments, or where contracts are terminated, you will lose the right to aid in respect of areas struck out of the contracts.

Alterations to end uses

4.17 First processors may alter the intended primary end uses of raw materials, once the raw materials under contract have been delivered to the first processor and once the specified conditions have been fulfilled. The first processor must give prior notice to allow for appropriate controls.

Representative yields and quantities delivered

Representative yields

4.18 Each year before the harvest we will establish and advise you of the representative yields which will have to be attained.

Quantities delivered

4.19 You must declare the total quantity of raw materials harvested by variety to us and must confirm the quantities of raw materials delivered and the parties to whom such deliveries are made. The actual quantities to be delivered by you must at least correspond to the representative yield. In duly justified cases, we may, by way of exception, allow a shortfall of up to 10% in the yield. Where we have authorised amendments or termination of contracts we may, where it seems justified to do so, reduce the quantities that you are required to deliver.

Payment

4.20 Payments of aid may be made to you before the raw materials are processed. However, such payments will only be made where the requisite quantities of raw materials have been delivered to the first processor and where:

• the appropriate declaration referred to in paragraph 4.19 has been made;
• a copy of the contract has been deposited with the RPA and the conditions referred to in paragraph 4.1 have been fulfilled and the appropriate information has been forwarded by the first processor;
• the RPA has received proof that the full security has been lodged (see paragraphs 4.31-4.34); and
• we have checked that the relevant conditions detailed in paragraphs 4.10, 4.11 and 4.12 have been met in respect of each application.

4.21 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 will be made in each of the two years following the conclusion of the contract, on condition that:

• the obligations laid down in the second, third and fourth bullet points of paragraph 4.20 are fulfilled as from the first year of cultivation; and
• the obligations laid down in the first bullet point of paragraph 4.20 are fulfilled, and the information referred to at paragraph 4.30 is communicated in the second year of cultivation.

4.22 Payments will only be made in respect of the first year of cultivation if we receive proof that the security has been lodged. In the second year of cultivation, a new security is not required in order for payment to be made.

4.23 In the case of permanent or multi-annual crops, payment of the aid will be made in each of the years following the conclusion of the contract, from the first year.

Number of processors

4.24 Energy products must be produced, at the most, by a second processor, so that raw materials and semi-processed products are sold no more than twice before final processing. This means that processing can only be a 2 stage process at most.

Contract and obligations on applicant and first processor

4.25 First processors shall deposit copies of the contracts with the RPA before the closing date for the submission of SAFs for the year in question (15 May for 2007).

4.26 Where applicants and first processors amend or terminate contracts prior to the closing date for amendments in a given year, the first processors will deposit with the RPA a copy of the amended or terminated contract no later than that date.

4.27 First processors must provide the RPA 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.

4.28 First processors who have taken over the raw materials from you will inform the RPA of the quantities of raw materials received, specifying the variety, the name and address of the party to the contract who delivered the raw materials, the place of delivery and the contract reference, within the time limit set.

4.29 Where processors sell or transfer to second processors in other Member States they should contact the local authority for advice.

4.30 Processing into the end products must take place by 31 July of the second year following the year in which the raw material is harvested.

First processors' securities

4.31 First processors must lodge a full security as detailed in paragraph 4.20 with the RPA by the closing date for submission of payment applications for the year in question.

4.32 The securities to be lodged in respect of each raw material will be calculated by multiplying the sum of all areas cultivated under this scheme, covered by a contract signed by the first processor concerned and used to produce that raw material, by the rate of 60 euros per hectare.

4.33 Where contracts are amended or terminated, the securities lodged will be adjusted accordingly.

4.34 A percentage of the security will be released for each raw material on condition that the RPA of the first processor is in possession of proof that the quantity of raw material in question has been processed in compliance with the requirements laid down.

Land Eligibility

4.35 Land used to produce raw materials grown under this scheme is not eligible for aid for forestry (except the planting costs of short rotation coppice).

Sale, Transfer or Delivery to another Member State

4.36 Where first processors sell or transfer intermediate goods to second processors in other Member States, the products must be accompanied by T5 control copies (contact your SEERAD Area Office for further details).