According to Brazil, the EC provides, under Council Regulation (EC) No. 1260/2001, export subsidies for sugar and sugar containing products above its reduction commitment levels specified in Section II of Part IV of its Schedule of Concessions. Brazil explained that the EC intervention price system for sugar guarantees a high price for the sugar that is produced within certain production quotas (A and B quotas). Sugar produced in excess of these quotas (so-called C sugar) cannot be sold internally in the year in which it is produced: it must be exported or carried over to fulfil the following year’s production quotas. Under the EC’s common organization of the sugar market and its regulatory framework, exporters of C sugar are able to export C sugar at prices below its total cost of production.