28. 7. 98 Official Journal of the European Communities L 210/23 COUNCIL REGULATION (EC) No 1636/98 of 20 July 1998 amending Regulation (EEC) No 2075/92 on the common organisation of the market in raw tobacco THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Articles 42 and 43 thereof, Having regard to the proposal from the Commission ('), Having regard to the opinion of the European Par- liament (?), (1) Whereas  Article 26 of Regulation (EEC) No 2075/92 (}), requires the Commission to submit proposals on the premium and quota arrangements governing the organisation of the market in raw tobacco; (2) Whereas the present market situation is one of mismatch of supply and demand, largely due to the poor quality of Community production; whereas that situation calls for fundamental reform of the sector to improve its economic position; whereas such reform must entail a variation of Community aid in line with product quality, greater flexibility and simplicity in the setting of quotas, stricter control procedures and improved observance of public health and environmental protection requirements; (3) Whereas the premium for flue-cured, light air-cured and dark air-cured tobaccos grown in Belgium, Germany, France and Austria should be increased; whereas the Council will reduce, in accordance with the procedure set out in Article 43(2) of the Treaty, the guarantee thresholds of these Member States in order to ensure the maintenance of budgetary neut- rality; (4) Whereas, in order to encourage improvement of the quality and value of Community production, and at the same time to provide income support to produ- cers, the payment of part of the premium should be linked to the value of the tobacco produced; whereas the extent of this differentiation may vary by variety and tobacco-growing Member State; whereas, if it is to be effective, differentiation should operate within a certain range; whereas, given the magnitude of the () OJ C 108, 7. 4. 1998, p. 87. ?) OJ C 210, 6. 7. 1998. () OJ L 215, 30. 7. 1992, p. 70. Regulation as last amended by Regulation (EC) No 2595/97 (O] L 351, 23.12. 1997, p. 11). changes made, a transitional period should be set; whereas this system should be established within the producer groups, while permitting a comparison to be made of the market prices obtained by individual producers; (5) Whereas it is essential to reinforce control proced- ures in the tobacco sector; whereas the definitions of ‘producer’, ‘first processor’ and ‘first processing’ should be made more precise and control agencies should be allowed access to all information relevant to their task; (6) Whereas an auction system for cultivation contracts should be established so that contract prices for tobacco truly reflect market conditions; whereas this system should be optional for the Member States, to take account of their different structures; (7) Whereas by participating in determination of the purchase price of the tobacco delivered the processor plays a central role in determination of the premium to be paid to the individual producer; whereas first processors benefit indirectly from Community aid by acquiring a subsidised product; whereas national authorities should be allowed to take appropriate action against any first processors not complying with Community rules; whereas to that end only approved first processors should be able to sign cul- tivation contracts, approval being withdrawn for non-compliance; (8) Whereas to simplify management of the sector, producer groups should be made responsible for paying the variable part of the premium to producers and for allocating production quotas to their members; (9) Whereas transfer of production quotas between producers should be permitted to improve produc- tion structures; whereas quota buy-back arrangements should be introduced to help producers who wish to leave the sector but find no purchasers for their quotas; (10) Whereas due account should be taken of the require- ments of public health and respect for the environ- ment; whereas to that end the premium deduction financing the Community fund for tobacco research and information should be doubled and the specific