C-14/69

By 'customs duty... bound under ence, the first paragraph of Article 16 of GATT' and in respect of tariff headings Regulation No 160/66/EEC of the Nos 17.04-C and 18.06-B appearing in Council includes not only the 27% duty Schedule XL of Annex B to the Proto­ provided for by the aforementioned pro­ col to the General Agreement on Cus­ visions of that Protocol, but also the toms Tariffs and Trade embodying the 'additional duty on sugar' mentioned in results of the 1960-61 Tariff Confer- footnote (a) to the said headings.

In Case 14/69

Reference to the Court under Article 177 of the EEC Treaty by the Finanz­ gericht (Finance Court), Hamburg, for a preliminary ruling in the action pending before that court between

Markus & Walsh , a limited partnership, Hamburg,

and

Hauptzollamt (Principal Customs Office) Hamburg-Jonas,

gives the following

JUDGMENT

Issues of fact and of law

MARKUS v HAUPTZOLLAMT

with the procedure laid down in fixed component is to be fixed by the Article 2(4), the difference between Council in a uniform manner for all the the prices of those products in the Member States. This rate was fixed by importing Member State on the one Regulation No 83/67/EEC of the Coun­ hand, and the prices of imports from cil, adopted by virtue of Regulation No third countries on the other, when 160/66/EEC (Official Journal of 26 the total cost of those quantities of April 1967, p. 1597/67 et seq.). In ac­ basic products is higher in the im­ cordance with Annex I to Regulation porting Member State'. No 83/67/EEC, the rates of the duties According to Article 11 or the regula­ imposed on the goods in question are tion, the rate of the abovementioned the following:

Heading Rate of duty Rates of duty resulting from partial number (autonomous) suspension

17-04-C 20-7% 18%

1806-B 22.3% 19%

(a) The Community reserves the right to levy, in addition to the bound duty, an additional duty on sugar, corres­ ponding to the charge borne by sugar on importation, and applicable to the quantity of various sugars (calculated in sucrose) contained in these products.

JUDGMENT OF 15. 10. 1969 — CASE 14/69

in question. It maintained further that it is of little importance in the present does that concept also include, in ad case that in the GATT Protocol the dition to such customs duty, the Community reserves the right to impose additional duty which, in accordance an additional duty, since it appears from with footnote (a) to the tariff heading, the wording of footnote (a), relating to may be levied on the sugar contained tariff heading 17.04 and 18.06 (cf. A, in the product?' (b) above), that this additional duty B — The Finanzgericht bases its order cannot be regarded as a 'bound duty'. making the reference on the following

As The column of the GATT Protocol footnote (a) concerning the tariff head which shows the rates applicable is ings in question mentions an 'additional' headed 'Rate of duty' and not 'bound duty to be levied in addition to the duty'. Consequently, asserts the Haupt bound duty, it may be that Article 16 zollamt, for the tariff headings 17.04-C does not cover that duty. Further, that and 18.06-B, the 'bound tariff conces footnote in the French version, which sion' includes both the fixed duty and alone is authentic, distinguishes between the additional duty on sugar. 'bound duty' and 'additional duty'.

1. To the extent to which it dealt with Ill — Procedure trade with third countries, the purpose and the rationale of Regulation No 160/ The order making the reference was re­ 66/EEC may be summarized in the fol­ ceived at the Court Registry on 21 lowing manner: March 1969. Under Article 20 of the Protocol on the The profitability of an undertaking pro­ Statute of the Court of Justice, the cessing basic agricultural products de­ Commission of the European Communi­ pends very largely on the prices of those ties submitted written observations. products. Undertakings of a country in Markus & by its Walsh, represented which the cost of the basic product is authorized representative at litem, G. high are handicapped from the point of Espey, Advocate of Hamburg, and the view of competition as compared with Commission of the European Communi­ undertakings in countries in which the ties, represented by its Legal Adviser, basic product is sold at a low price. Friedrich-Wilhelm Albrecht, presented The EEC Treaty provides for the unifi­ oral argument at the hearing on 9 July, cation of external customs tariffs. In re­ 1969. spect of the processed products referred The Advocate-General delivered his to by the said regulation, it was neces­ opinion at the hearing on 18 September sary to take into account that fact that a 1969. simple ad valorem duty would not serve the purpose envisaged by the legislature. When, for example, a basic product is IV — Summary of the obser­ sold at a low price by an exporting vations submitted by country, the commercial value of the those concerned processed product will also be relatively low; it may happen consequently that Markus & Walsh considers that the first the differences in the prices of basic facet of the preliminary question must products are not entirely counterbalanced receive an affirmative answer and the and that the intended object, the protec­ second a negative answer. In fact in tion of the processing industry, is not respect of the goods concerned in the completely achieved. present case the first paragraph of The duty in question allows these diffi­ Article 16 of Regulation No 160/66/ culties to be avoided. EEC refers to Schedule XL of Annex B to the GATT Protocol. These provisions 2. The concept of bound customs duty of GATT distinguish clearly between in respect of third countries, within the 'bound duty' and 'additional duty' and it framework of GATT, calls for the fol­ must be accepted that the Commission lowing observations: and the Council knew of this document when they drafted Article 16. A — The concept of 'binding' is not de­ The sense in which the concept of bind­ fined in the General Agreement on ing' is used in the other provisions of Tariffs and Trade (GATT) and does GATT is irrelevant. not always have the same meaning with-

in it. On the other hand, the concept of applicable in respect of third countries, 'concession' and in particular that of expressed as a percentage of prices on 'tariff concession' appears regularly in importation of the goods in question, the provisions of GATT. Neither does may not exceed the rates of customs the GATT Protocol contain the concept duties resulting from any undertakings of 'binding'. The footnotes in Schedule entered into in respect of the said XL use the expression 'bound duty' to countries'. refer to the rates appearing under the column headed 'Duty'. C — Lastly the Commission refers to a On the other hand, in the technical series of provisions taken from agricul­ language of international trade relations, tural regulations of the Council which, the expression 'bound' means in prac­ taken together, show an exclusive con­ tice 'which has been the subject of an cern that the undertakings made by the undertaking in respect of the contracting Community within the framework of parties of GATT' or 'determined in ac­ GATT shall always be observed. cordance with the rules of GATT'. It is Furthermore, Regulation No 1059/69/ necessary therefore to understand by EEC of the Council of 28 May 1969, 'binding' not only the undertaking not which replaced Regulation No 160/66/ to raise the customs duty above the es­ EEC, enables it clearly to be seen that tablished level, but also that of reducing the Community has used its right to it or not increasing it beyond a given levy the 'additional duty' in dispute. level. 3. Such was also the case in the present B — If the first paragraph of Article 16 instance, for in addition it would be in­ of Regulation No 160/66/EEC is inter­ comprehensible that the protection pro­ preted on the basis of these statements vided for by Regulation No 160/66/ 'the ceiling of the charge is in this case EEC, which was therefore regarded as the concession made by the Community being necessary, should not be complete­ within the framework of GATT on the ly ensured, when this could have been basis of its own customs tariff. In other done without infringing the rights of words, the rights resulting for the con­ third parties. tracting parties to GATT from tariff It is not possible to raise the objection concessions should not be jeopardized'. that the relevant provision of the GATT The fact that the provision in question Protocol distinguishes between bound speaks of 'rates of the consolidated duty and additional duty. The expres­ Common Customs Tariff in respect of sion 'bound duty' referred to in foot­ third countries' also confirms that inter­ note (a) on the contrary is simply in­ pretation. It is also reinforced by the tended to refer to the column headed penultimate recital of the regulation: 'Duty' and means 'rates above, being 'Whereas the total amount of the charge part of the bound tariff concession.'

3 According to the wording of Schedule XL in Annex B to the GATT Protocol, a rate of 27% is imposed in respect of tariff heading 17.04 for 'Sugar con­ fectionery, not containing cocoa . . . C Other' and tariff heading 18.06 for 'Chocolate and other food preparations containing cocoa' subject to footnote (a) concerning an additional duty on sugar. This footnote provides that 'The Community reserves the right to levy, in addition to the bound duty, an additional duty on sugar, corresponding to the charge borne by sugar on im­ portation, and applicable to the quantity of various sugar (calculated in sucrose) contained in these products'.

4 The question raised seeks therefore to ascertain whether the maximum rate which, according to Article 16, the disputed charge may not exceed consists of the duty of 27% laid down in the GATT Protocol or the total of that duty and the 'additional duty on sugar' referred to in footnote (a).

5 It has been contended that the aforementioned provisions of the GATT Protocol distinguish between the 'bound duty'—a concept which would relate solely to the rate of 27%—on the one hand, and the 'additional duty on sugar', on the other.

6 Moreover, the Community provisions applicable have not defined the expres­ sions 'binding' and 'bound duty' any more than did those of GATT. It is

JUDGMENT OF 15. 10. 1969 — CASE 14/69

common ground that these expressions are frequently used in a wide sense to cover all the tariff concessions made by the members of GATT and to form the subject of an obligation within the framework of that agreement. Accord­ ingly, the answer to the question raised must be deduced primarily from the reasons for and aims of Regulation No 160/66/EEC.

8 According to the seventh recital of the preamble to the regulation in question 'the introduction of the system of agricultural levies for raw materials used has altered the previously established relationships between the protection assured to third countries in respect of the production of the agricultural pro­ ducts in question and of the goods resulting from their processing; whereas this change results in certain cases in a considerable reduction in the advan­ tages which the industries of the Member States producing these goods enjoyed in the Community'. The eighth recital of the same preamble states: 'Whereas the situation thus created and the abovementioned difficulties may be overcome by the introduction of Community trade arrangements directed, on the one hand, to bringing the prices of agricultural products imported into each Member State in the form of the goods in question to the level of those ruling on the domestic market, and on the other hand, to guaranteeing pro­ tection for the industries producing those goods'.

9 Taken as a whole, these factors indicate anxiety to ensure effective protection for the processing industries of the Member States against the importation of competing goods from third countries, in so far as the industries of those countries are able to obtain the basic agricultural products as prices more advantageous than those ruling in the Member States for the same agricultural products.

The 'variable' part of the charge provided for by Article 10 abovementioned meets this requirement precisely. On the other hand, the division of the

Costs

13/14 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable and as these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the Finanzgericht, Hamburg, the decision on costs is a matter for that court;

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of Markus & Walsh, the plaintiff in the main action, and the Commission of the European Communities; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Article 177;

OPINION OF MR GAND — CASE 14/69

Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, especially Article 20; Having regard to Regulation No 160/66/EEC of the Council laying down the trade arrangements applicable to certain goods resulting from the pro­ cessing of agricultural products, especially Articles 2 and 10 and the first paragraph of Article 16; Having regard to the Rules of Procedure of the Court of Justice of the European Communities;

A. Van Houtte R. Lecourt Registrar President

OPINION OF MR ADVOCATE-GENERAL GAND

DELIVERED ON 18 SEPTEMBER 1969 <apnote>1</apnote>

Mr President, and food preparations containing cocoa Members of the Court, (headings 17.04-C the and 18.06-B of Common Customs Tariff) from third In October and November 1967 Markus countries, in the present case the United & Walsh imported into the Federal Re­ Kingdom and the Republic of Ireland. On public of Germany sugar confectionary that occasion the customs office imposed, 1 — Translated from the French.