Special Preferential Sugar (SPS)

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At the time of the accession of Portugal and Spain to the EU in 1986, the ACP formulated a request to supply the raw sugar deficit of the Portuguese sugar refineries, and in August 1992, the Commission's services drafted a proposal for a regulation on supplies to the Portuguese sugar refineries in what became known as the 'non-paper'.

The non-paper first brought to light the idea of maximum supply needs (MSNs), for the Community's refineries. It also introduced the idea of a 'hierarchy of preference': from domestic (DOM and EU beet raws) suppliers, to ACP under the Protocol, third country suppliers, for example Cuba and Brazil, and finally additional ACP quantities.

The non-paper also envisaged that third country suppliers to Portugal, if required to meet the deficit, would receive no preference. New EU legislation on raw cane sugar for refining was enacted as part of the 1995 reform of the sugar régime and it:

provided the legal basis for the Community to negotiate with the ACP sugar supplying states, India and other states, on conditions for importing SPS notably the minimum purchase price to be paid by refiners;
established the MSNs of the refining industries in Finland, France, Portugal and the United Kingdom, the penalty for exceeding the MSNs and the formula for reducing MSNs if the Uruguay Round Agreement constraints dictate;
provided for the establishment of the shortfall quantity to be covered by additional supplies, SPS, by means of a Community forecast supply balance for raw sugar ("bilan");
prolonged the adjustment aid mechanism until 2000/01; the adjustment aid is paid to refiners from Community funds on sugar imported from the DOMs and under the Sugar Protocol, but it is paid to refiners by ACP and other suppliers on SPS sugar and MFN sugar.

The SPS agreement with ACP states was reached on 1 June 1995, and, like the ACP/EU Sugar Protocol, it is a government-to-government agreement, but unlike the Protocol, it is of a fixed duration and the ACP states are jointly and severally liable to supply the quantities of sugar covered by the SPS agreement. The SPS agreement is for an initial period of six years, matching the duration of the new sugar régime and the refiners rights to refine raw sugar.

During the period 1 July 1995 to 30 June 2001:

'the European Community undertakes to open annually a special tariff quota for the import of raw cane sugar for refining which originates in ACP states, on the basis of the needs determined by the Commission in accordance with paragraph 3 ("bilan"), and

the ACP states undertake to supply the said quantities under conditions fixed by this agreement and by the measures taken by the Commission for the application of this agreement within the framework of the management of the common organization of the markets in the sugar sector.' - Paragraph 1 of the SPS Agreement.

At the 55th session of the ACP Council of Ministers, a formula was established to allocate amongst the ACP States signatory to the Protocol all quantities of SPS allocated to the ACP.

The conditions of the SPS agreement include a minimum delivered price to be paid by EU refiners, equivalent to approximately 85% of the ACP guaranteed price for raw sugar. The minimum delivered price is calculated by deducting 8.1 euros per 100kg from the ACP guaranteed price for raw sugar fixed under the ACP/EU Sugar Protocol. The quantities of SPS for each marketing year (July/June) are determined by means of the bilan which is provisionally agreed in May and finalized the following February.

The SPS deduction of 8.1 euros/100kg is made up of a special reduced duty and the adjustment aid. The adjustment aid was introduced in 1987 further to EU price changes in the early 1980's when raw sugar and white sugar prices did not move in parallel and when ACP raw cane sugar was removed from the storage costs equalization scheme. It is therefore a technical adjustment designed to ensure equal treatment for beet and cane sugar in the EU market. Until the SPS agreement of 1995, the adjustment aid was paid exclusively from Community funds (FEOGA), however, the adjustment aid is now paid for by the ACP to EU refineries.