The DOMESTIC PRICE is partly maintained by various protective devices. These prevent cheaper world imports from influencing the EU domestic price level.
The basic features of the system can be represented by that originally devised for cereals, the first agricultural product for which a common policy was established.

A ´target´ price is set on an annual basis and is maintained at a level, which the product is expected to achieve on the market in the area where cereal is in shortest supply (Duisburg). The target price is not a producer price since it includes the costs of transport to dealers and stores. The target price is variable, in that it is allowed to increase on a monthly basis from August to July in order to allow for storage costs throughout the year. The `threshold price´ is calculated in such a way that when transport cost incurred within the EU are added, cereals collected at Rotterdam should sell at Duisburg at a price equal to or slightly higher than the target price, the consequence being that adding the levy and transport costs to Duisburg would make it unprofitable to sell cereals anywhere in the EU at less than the target price. An import levy is calculated on a daily basis and is equal to the margin between the lowest priced consignment entering the EU on the day and the threshold price. This levy is then charged on all imports allowed into the EU on that day ( this information we can see in the next figure).
The EU is experiencing excess demand for this product, the market price is held above the target price by the imposition of import levies. Moreover, import levies would be unnecessary if world price happened to be above the threshold price since in this case the market price might exceed the target price.
If target prices result in an excess supply of the product in the EC (see figure), the threshold price becomes ineffective in terms of the objective of a constant annual target price and support buying becomes necessary. A ´basic intervention price´ is then introduced for this purpose. This is fixed for Duisburg at about 7% or 8% below the target price. Similar prices are then calculated locations within the EU on the basis of costs of transport to Duisburg. National intervention agencies are then compelled to buy whatever is offered to them of the ´proper´ product at the relevant intervention price. The intervention price is therefore a minimum guaranteed price. Moreover, an export subsidy or restitution is paid to EU exporters.