23.9.2004 Official Journal of the European Union L 298/3 COMMISSION REGULATION (EC) No 1655/2004 of 22 September 2004 laying down rules for the transition from the optional modulation system established by Article 4 of Council Regulation (EC) No 1259/1999 to the mandatory modulation system established by Council Regulation (EC) No 1782/2003 THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to 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 farmers and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC) No 1454/2001, (EC) No 1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001 ("), and in particular Article 155 thereof, Whereas: (1) Regulation (EC) No 1782/2003 has repealed and replaced Council Regulation (EC) No 1259/1999 () as from 1 May 2004. Member States may continue to apply the voluntary modulation provided for in Article 4 of Regulation (EC) No 1259/1999 until 31 December 2004. A system of compulsory modulation introduced under the new scheme starts to apply in 2005. (2)  The rate of compulsory modulation under Article 10 of Regulation (EC) No 1782/2003 will, at the initial stage, be lower than the rate of optional modulation under Article 4 of Regulation (EC) No 1259/1999 for certain Member States. This could create a deficit as regards the funding of accompanying measures under national or regional rural development programmes which are being financed by additional Community support as presently provided for in Article 5(2) of Regulation (EC) No 1259/1999. (3)  The Member States concerned should thus be allowed to continue to apply optional modulation after 31 December 2004, in so far as this is necessary to cover the financial needs arising from accompanying measures approved before 1 January 2006. () OJ L 270, 21.10.2003, p. 1. Regulation as last amended by Regu- lation (EC) No 864/2004 (O] L 161, 30.4.2004, p. 48). (® OJ L 160, 26.6.1999, p. 113. Regulation as last amended by Regu- lation (EC) No 41/2004 (O] L 6, 10.1.2004, p. 19). (4)  Transitional rules are therefore required to facilitate the transition from optional to compulsory modulation. (5)  For the purpose of a harmonious transition between programming periods, the time limits for the availability of amounts resulting from optional modulation should be extended to the end of the fourth financial year following that during which the amounts are withheld. In this context it is appropriate, for reasons of legal clarity, to amend Article 1(1) of Commission Regulation (EC) No 963/2001 of 17 May 2001 on detailed rules for the application of Council Regulation (EC) No 1259/1999 as regards the additional Community support and the transmission of information to the Commission (3). (6)  Taking into account the amendment to Article 1(1) of Regulation (EC) No 963/2001, it is also necessary to amend Article 6 of Commission Regulation (EC) No 296/96 (%) concerning data to be transmitted by the Member States and the monthly booking of expenditure financed under the Guarantee Section of the EAGGF, in order to ensure the full application of this Article to funds resulting from optional modulation. (7 Regulations (EC) No 963/2001 and (EC) No 296/96 should therefore be amended accordingly. (8)  To ensure traceability, the financing source of each multi- annual action should remain the same until the action expires. However, where the funds resulting from optional modulation are exhausted, the Member State must be allowed to finance multiannual actions which are still running by other funds. (99  In order to ensure that the funds resulting from optional modulation are properly managed and supervised, the Member States should keep a separate account for the amounts withheld and their use, in accordance with Regulation (EC) No 296/96. (10) The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for Direct Payments, () O] L 136, 18.5.2001, p. 4. () OJ L 39,17.2.1996, p. 5. Regulation as last amended by Regulation (EC) 2035/2003 (O] L 302, 20.11.2003, p. 6).