C-42/72

JUDGMENT OF THE COURT 6 FEBRUARY 1973 1

Alfons Lütticke GmbH

v Hauptzollamt Passau (preliminary ruling requested by Finanzgericht)

Case 42/72

Summary

Agriculture — Goods resulting from the processing of agricultural products — Imports — Charges — Fixing such charges — Criteria — Milkfat — Content — Determination

and

HAUPTZOLLAMT OF PASSAU,

on the validity of Article 7 (3) combined with Annex V of Regulation No 83/67/EEC of the Council of 18 April 1967 (OJ 1967, No 81), establishing tariff specifications relating to goods covered by Regulation No 160/66/EEC of the Council, and determining the fixed components applicable to such

1 — Language of the Case: German.

JUDGMENT OF 6. 2. 1973 — CASE 42/72

goods and the quantities of basic products to be taken as having been used in their manufacture,

I — Summary of facts and preparation containing cocoa and procedure containing 26 % or more by weight of milkfats', and classified it under tariff The facts and procedure may be heading 18.06-D-II-c-2 -2. summarized as follows: On entering objection to this ruling, Lütticke endeavoured at first to obtain 1. On 21 August 1968, Alfons Lütticke GmbH (hereinafter called Lütticke) classification under the tariff heading cleared through the Customs Office at corresponding to the criteria originally Simbach-Innbrücke goods declared as applied. As the judgment given by the 'cream milk chocolate in bulk', with a Court of Justice on 3 March 1971 in view to putting it on the market. The Case 51/70 had in the meantime been Customs Office classified the goods as 'a published, Lütticke abandoned their mixture of cocoa powder and milk attempt to obtain this designation and powder'. requested that the goods be treated as an 'other food preparation containing cocoa After analysis of a sample of the goods, in accordance with the method laid and containing less than 26 % by weight down by Article 7 (3) and Annex V of of milkfats', and that they might therefore be classified under the tariff Regulation No 83 of the Council of 18 April 1967 (OJ 1967, p. 81), the heading 18.06-D-II-b-2. The analysis of a Customs Technical Examination and reserve sample still held by the Customs Training Institute of Munich found, Office, carried out by the Customs inter alia, a milk fat content of 26.9 %. Technical Examination and Training By amending notice of assessment of 29 Institute (hereinafter called CETI) on 27 October 1968, the Customs Department May 1971, in accordance with the then treated the goods as 'a food above-mentioned method, produced the

result of 26.1 % in respect of the weight legislative power, but must respect the content of milkfat. fundamental principles of Community As the objection to the ruling was not law, in addition to the limits expressly upheld, Lütticke took the matter to the laid down by the Treaty. According to Munich Finanzgericht. the jurisprudence of the Court, among these principles are those of By Order dated 14 June 1972, that court 'proportionality' and of the 'protection decided to suspend proceedings and of fundamental Rights', as well as the referred the following question to the principles drawn from German writes Court of Justice: and jurisprudence of the 'laws of logic', 'Is Article 7 (3) of Regulation No 'natural laws' and the 'results of 83/67/EEC, combined with the method scientific experiment'. of analysis defined in Annex V, valid or Lütticke goes on to examine the problem not?' in question by giving a detailed analysis 2. The Order was received at the Court of the technical aspects, supported by offers of evidence and the documenta­ Registry on 6 July 1972. tion annexed to its statement of case. It Lütticke, represented by Peter Wendt, points out in particular that, at the and the Commission of the European present stage of scientific knowledge Communities, represented by its Legal there is no method of analysis enabling Adviser Friedrich Wilhelm Albrecht, milkfat content to be isolated from total submitted their written observations in fat content contained in a sample and accordance with the provisions of Article thereby directly to determine the content 20 of the Protocol on the Statute of the by weight of milkfat. The only possible Court. method of analysis is an indirect method, After hearing the report of the Judge which consists in determining whether, Rapporteur and the opinion of the and to what extent, the total fat content Advocate-General, the Court decided to reveals a characteristic element open the oral procedure without a indicating the presence in the sample of preparatory inquiry. milkfat content. This element is the The oral observations of Lütticke and butyric index of the total fat content, the Commission were made at the capable of being directly determined, hearing on 22 November 1972. either by the Grossfeld method, or by a The Advocate-General presented his more exact gas chromatographic opinion at the hearing on 11 January procedure. From the butyric index, and 1973. taking into account the quantities of that element which, from experience, are found in milkfat, it is then possible to determine approximately the percentage by weight of milkfat contained in the II — Observations submitted sample. under Article 20 of the The method of analysis chosen in this Protocol on the Statute case by Annex V of Regulation No of the Court of Justice 83/67 is defective in several respects:

calculation formula set out in Annex have recorded a content by weight V of Regulation No 73/67 (first of milkfat in any case less than formula), is used to determine the 26 %, which would have involved a butyric index, is too high in relation tariff classification under the to the factor 1.4 used in it. This heading 18.06-D-II-b-2. factor takes into account a quantity (c) In the third place, the calculation of between 500 and 550 mg, while formula for determining the the factor 1.4 is only exact for 500 percentage by weight of milkfat to 501 mg; (second formula) laid down in (b) In the second place, the method in Annex V of Regulation No 83/67 question distorts or does not results in values which are too high, completely reproduce the Grossfeld by taking into consideration a mean method, on which it is based. The butyric index of 20. It does not take process of determining the butyric into account the fact that the butyric index of milkfat shows fluctuations index of the total fat content (first formula), which is precisely the from which it has been established, starting point in the calculation of by means of analyses, that the the content by weight of milkfat, margin of uncertainty in determining this factor is at least ± 10 %. does not provide for blank tests ('Blindversuch'), so that it does not On the basis of these considerations, deduct from the titration values Lütticke submits that Article 7 (3) of those resulting from these tests Regulation No 83/67, together with ('Blindwerte'). Because of this Annex V, is invalid, because it is omission, the formula in question contrary to all the general principles of arrives at values between 0.84 % law mentioned above, and, in particular, and 1.4 % too high. to that — accepted in the jurisprudence That this is, in this case, a gross of the Court — according to which the error, is further evidenced by the means chosen must be shown to be

LÜTTICKE v HAUPTZOLLAMT PASSAU

Such markets which the legislature did not verification is essential more especially intend. On the other hand, the method as, on the one hand, the Council has described in Annex V of Regulation No always refused to communicate to the 83/67 is altogether imprecise. It is useless nationals of the Member States to raise the objection that this information relating to the process of imprecision concerns only products the drafting the rules of law (the national milkfat content of which is at the courts themselves up to now have not dividing line between two tariff dared to refer questions to it as to this) sub-headings, for it is precisely these while, on the other hand, the Court of products which, in most cases, cross Justice is the only institution able to frontiers. establish all the factual points capable of Further, the provisions in question settling a problem of validity.

By the same token, these documentation relating to Regulation provisions militate against the require No 1061/69. ment, already pointed out by the Court, After pointing out — by way of concrete of the uniform application of examples — that the Regulations of the Community law in all the Member Council, more often than the Regulations States, as well as the principle of equality of the Commission, contain errors of treatment. As in fact the level of the capable of affecting the validity of an act entry duties does not, in the system in and which, most probably, are due to question, depend on the precise the conditions of time and procedure calculation of the milkfat content, but is under which this institution works, linked with a calculation the results of Lütticke excludes, in this case, the which are affected by several factors of possibility of a partial annulment of uncertainty and can, because of this, Annex V, as it is not for the Court to vary from one analysis to another, establish a new method of analysis products with the same milkfat content eliminating the errors contained in the risk being subjected to different charges. method in question. But, if such a One can even submit in this respect that modification lies solely within the Annex V of Regulation No 83/67 competence of the legislature, the Court infringes Article 13 of Regulation No could nevertheless indicate in its 160/66, which prohibits the levying of judgment which is de lege ferenda the customs duties and charges having correct method of analysis capable of equivalent effect, since if the imported being recognized as valid.

JUDGMENT OF 6. 2. 1973 — CASE 42/72

their manufacture (on the basis of '1. Article 7 (3) of Regulation No 83/67, which the Commission fixed the combined with the method of 'variable' factor in every quarter). analysis described in Annex V, is void. — Further, this Regulation established methods of analysis allowing for the 2. A method of analysis based on the calculation of the content of certain Grossfeld process, which is affected constituents in certain products. For by factors of uncertainty and does goods containing milkfat, one is not comprise blank tests ("Blindver referred specifically to the method of such"), is valid according to analysis described in Annex V. Community law insofar as it provides for a deduction in weight of — Annexes I and II of Regulation No 7.4 % in respect of milkfat content, 83/67 were replaced, from 1 July when the determination of a milkfat 1968, by Annexes A and B of content higher than the actual Regulation No. 735 of the Council of content would be prejudicial to the 18 June 1968 (OJ 1968, L 138), subjects of the Community.' where goods containing milkfat and whose packing does not comply with certain conditions, are classified, B — Observations of the Commission within tariff heading 18.06, under the sub-headings D-II-b-2 and D-II-c-2, The Commission firstly sets out the legal according to whether their milkfat content is 'more than 6.5 % and less background of the problem in question,' than 26 % or '26 % or more'

LÜTTICKE v HAUPTZOLLAMT PASSAU

In any case, the is that which appears in Annex V of reasons for this choice must also be Regulation No 83/67, save in one appraised in relation to the problem detail. The calculation formula for of the absence of blank tests determining the butyric index of ('Blindversuch'). total fat (first formula) is identical in both Annexes, but Regulation No 3. With regard to this problem, that is 1061/69 applies a flat-rate deduction the fact that the method in question does not take into consideration the of '1.2' to the values resulting from that formula, which has the effect of results of blank tests in calculating setting the butyric index at a lower the butyric index of total fat, the

exists in this case. Firstly, it wholly exactly equivalent to that (levy) denies that the Grossfeld method applied to the basic products followed in this case is 'outdated'. Apart themselves, it would have been from the consideration that Lütticke necessary to require proof of the itself does not appear to attach too much nature and quantity of the processed importance to this argument, seeing that basic products on the import of all the method in question is, in its opinion, products resulting from such 'applicable' subject to the correction processing. This solution, practicable introduced by Regulation No 1061/69, only in theory, was not follwed by

the legislature, which on the contrary entry into force of the system, so that opted for a system of a flat-rate there was no possibility of testing in nature. Firstly, the products resulting depth, by prolonged experiment, several from such processing were placed in methods of analysis. The legislature was groups (tariff headings), and then the at once able to define a method which quantities of the various basic seemed appropriate, with the possibility products 'taken as having been used thereafter of perfecting it or substituting in their manufacture' were fixed on a new method. a flat-rate basis for each group. This being so, even if the method Finally, the amount of the 'variable' described in Annex V of Regulation No factor of the charge was fixed, not 83/67 only leads to results which, by day by day, on the basis of reason of the factors of uncertainty free-at-frontier prices, but quarterly, which, according to Lütticke, affect it, on the basis (for example for milk are not absolutely correct, but are by products) of the threshold price for way of being approximate values, there the same quarter and the average is no legal defect in this. c. i. f. prices for the first 2 1/2 months of the preceding quarter (Article 12 The Community legislature could restrict (1) of Regulation No 160/66). itself to adopting such approximate values for customs purposes, just as it To the extent that the tariff specification has defined the different tariff headings of goods is connected with the quantities for certain standard products and then, of certain components in those goods, in order to differentiate between them, the tariff classification depends on the has, in numerous cases, fixed method of analysis used for determining percentages, which, by their nature, these quantities. If, in this case, each contain some flat-rate factors.

in law. introduce an entirely new method, or adapt one of the known methods to its In these circumstances, the particular own objectives. In order to lay down a fact that the method in question did not usable system for customs purposes, it provide for blank tests does not was necessary at all events, even in the constitute an irregularity in law. That interests of the importer, to have the legislature was not obliged to recourse to a method of analysis both provide for the deduction of values simple and quick to put into practice. derived from blank tests (from the Further, the method chosen had to be titration values) in the method laid down immediately applicable, from the date of follows from the flat-rate nature of the

between means and objectives, and does Finally, the Commission rebuts not constitute an 'abuse of power' on the Lütticke's contention that Article 7 (3) of part of the Council. In its capacity as the Regulation No. 83/67, combined with Community legislature, this institution Annex V, could, if it is not to be held on the contrary acted within the limits of void, be applied 'subject to a correction the powers granted to it by Articles 28, of the butyric index'. The effect of this 111 et seq. of the Treaty. argument is to apply Regulation No 1061/69 retroactively to imports Certainly, the method in question has occurring before its entry into force (1 been modified by Annex III of June 1969). Apart from the fact that no Regulation No 1061/69, as that retroactive effect was provided for in the Regulation provides that a flat-rate matter, Regulation No 83/67 must also amount reflecting the average values be considered as having a legislative obtained from blank tests must be character, so that it is impossible, even deducted from the butyric index. The by way of interpretation, to read the experience acquired in applying perfectly clear terms of Annex V as Regulation No 83/67 had led the providing for the correction in question. Commission to consider that the The Commission refers lastly, on the protective aim of Regulation No 160/66 question of retroactive effect, to the is not compromised by accepting, in judgment of the Court in Case 30/71 limited cases, a lower classification of 'Siemers' (Rec. L 1971, p. 919). the processed products concerned, and It considers therefore that the question that it was therefore opportune thus to posed should be answered in the modify the method previously applied. affirmative.

The method described in Annex V is an indirect method of analysis, based on the principle according to which the percentage of milkfat is calculated from the butyric index of the total fat and on an average butyric index contained in milkfat.

3 According to Lütticke, this method contains several uncertain factors leading to erroneous results and having the effect of imposing on the importer an unjustified fiscal charge analogous to a tax having equivalent effect to a customs duty.

These factors of uncertainty are due not only to the incorrect relationship between the total fat content taken as the basis of calculation and the factor applied, but also and above all to the fact that the said method takes into account neither blank tests nor fluctuations of the butyric index of milkfat, nor, lastly, the margin of error from one experimenter to another.

By not providing for a corrective flat-rate coefficient to compensate for the errors arising from these factors of uncertainty, the method in dispute gives values of the content of milkfat in the imported goods which are both approximate and too high.

4 In defining in Annex V the method of analysis for determining the milkfat content, Regulation No 83/67 establishes a material condition which is indispensable to the implementation of Regulation No 160/66/EEC of the Council of 27 October 1966 on the trade arrangements applicable to certain goods.

By virtue of this Regulation, and in particular Article 10, imports into a Member State from a third country are subject to a charge taking the place of

For each specification, the said Regulation, as well as Regulation No 83/67, adopted in implementation of it, fixed on a flat-rate basis the quantities of the different basic products to be taken as having been used in the manufacture of the taxable goods.

The variable factor to be charged on these goods was, under the terms of Article 12 of the said Regulation, fixed quarterly on the basis of the average of the threshold prices and the c.i.f. prices established for each period in question.

6 Within the framework of the system thus established, the calculation of the quantities of basic products in the goods must above all depend on the necessity of having recourse to a uniform method of analysis throughout the Community and at the same time of avoiding frustrating the protective purposes of the system.

It is impossible to find a ground of illegality in the fact that the method of analysis employed does not take into account all factors capable of arriving at exact values.

JUDGMENT OF 6. 2. 1973 — CASE 42/72

7 Having regard, therefore, to the flat-rate structure and the purposes of the system established by Regulation No 160/66, the fact that the method of analysis described in Annex V of Regulation No 83/67 is affected by factors of uncertainty and, because of this, results in approximate values of the milkfat content, is not sufficient to constitute a defect affecting the validity of the provisions of Regulation No 83/67 on which it is based.

Article 7 (3) of Regulation No 83/67 of the Council of 18 April 1967, combined with Annex V of the same Regulation, is not invalid by reason

LÜTTICKE v HAUPTZOLLAMT PASSAU

of the fact that the values of milkfat content, owing to factors of uncertainty in the method of analysis laid down in the said Annex, are determined approximately.

Lecourt Monaco Pescatore

Donner Mertens de Wilmars

Delivered in open court in Luxembourg on 6 February 1973.

1 — Translated from the German.