C-131/73

composed of: R. Lecourt, President, M. Sørensen, President of Chamber, P. Pescatore (Rapporteur), R. Monaco, J. Mertens de Wilmars, H. Kutscher and C. Ó Dálaigh, Judges,

Advocate-General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure Geneva Protocol of 16 July 1962, contracted the obligation to open The facts and procedure may be sum­ annually on imports from third countries marized as follows: a Community tariff quota of 22 000 metric tons of frozen beef and veal In connexion with the fifth tariff bound under GATT at 20 % duty. conference held under the auspices of the General Agreement on Tariffs and The Council took note of this Trade (GATT), the Community, by the commitment in Article 4 (1) of

quota concerned and shall manage their Customs Law No 1424 of 25 quota in accordance with their own September 1940 in that, acting in administrative provisions, especially concert, the first-named as respons­ those dealing with tariff quotas.' ible partner of the limited liability company, Grosoli and Co., the The quotas allocated to Italy were second-named as manager, they put 15 000 metric tons for the year 1968, 20 754 kg of frozen beef and veal to 12 000 for 1969. Their distribution was uses other than direct consumption the subject of circulars from the Ministry and thereby avoided payment of the of External Trade dated respectively 16 agricultural levies, amounting to May 1968 and 23 April 1969; these 5 721 245 lire, applicable to imports circulars specifically provided that the from third countries; quaota of beef and veal imports from third countries, bound at 20 % duty and 2. Breach of Article 110 of the Penal exempt from levy, must be used Code, of Article 4 of Law No 570 of exclusively for direct consumption. 31 July 1954 and of Article 3 of Law On the basis of these Ministerial No 418 of 20 March 1968 in that, circulars, the Grosoli Company, a acting in concert and in the afore­ limited liability company, with its mentioned capacities, they avoided registered office at Cadoneghe, in the payment of turnover compensation province of Padua, whose joint owners tax amounting to 188 000 lire on the are the brothers Giulio and Adriano quantity of meat referred to under (1) Grosoli, was given authority to import, above.

JUDGMENT OF 12. 12. 1973 — CASE 131/73

2. If the answer is in the affirmative, in presented before the Court can be the event that importers to whom summarized as follows: consignments had been allocated failed to comply with the requirement A — On the first question as to use, could Member States impose pecuniary penalties on them Messrs Giulio and Adriatto Grosoii, based on the amount of the levy? defendants in the main action, take the view that Regulations No 92/68 and No The application of the Tribunale of 110/69 in no way give the Italian Trent (Sezione Penale) was registered at Government authority to prescribe the the Court of Justice on 30 April 1973. use to which frozen beef and veal In accordance with Article 20 of the imported under the GATT quota must Protocol on the Statute of the Court of be put. Justice of the EEC, the Commission of the European Communities and the 1. The establishment of a common defendants in the main action submitted agricultural policy and, particularly, of a their written observations on 31 July common market organization has, in the 1973; the Government of the Italian sector concerned, resulted in the transfer Republic did so on 10 August. of all legislative powers from the After hearing the report of the Judge Member States to the Community; this Rapporteur and the Opinion of the is why policy options in the economic Advocate-General, the Court decided to field are open only to the institutions of open the oral procedure without a the Community. This conclusion is preparatory inquiry. based on Article 40 of the EEC Treaty and the body of secondary agricultural The oral observations of the defendants

1973. favour of allotting shares. These were In proceedings before the Court, the decisions of expediency reflecting a defendants in the main action were choice of economic policy; the use to represented by Piero Castellini, of the which the goods were to be put was of Padua Bar, Giovanni Maria Ubertazzi the same order. The silence of the and Fausto Capelli, both of the Milan Regulations on this point goes to show

that, particularly because of the as subjecting it, albeit indirectly, to comparatively small part of the overall special treatment. As the EEC is itself import requirements represented by the bound by the GATT agreements, it quota and of the build-up of reserves in cannot force or empower Member States certain Member States as a result of to prescribe a use for frozen beef and intervention measures, the Council veal which forms part of the GATT intended not to prescribe the use to quota. which frozen meat imported under the GATT quota would be put. 5. From the answer it gave on 26 May 1971 to written Parliamentary Question

be put. Regulation No 110/69. It is clearly confirmed by Article 3 of Regulation No 3. Study of the preambles to 186/73 of the Council of 23 January Regulations No 92/68 and 110/69 indicates that the Council was activated 1973 on the opening, apportionment and method of administration of a by concern not only to meet the Community tariff quota for frozen beef requirements of each Member State but also to avoid disturbance of the common and veal falling within subheading 02.01 A II (a) 2 of the Common Customs

6. The outcome of these considerations conditions on free access to the quota allocated to them. is that the Community could not and did not intend to impose any condition on 4. The nature of the quota in itself access to quotas of frozen meat assigned militates against allowing the States to to Member States. Article 3 of prescribe a use for the goods. As the Regulation No 92/68 and Article 2 of product concerned is imported under Regulation No 110/69 must, therefore, GATT conditions, it must, in fiscal be interpreted to mean that the terms, be subject to the same treatment Community has granted the Member as the domestic product; to lay down a States power to allocate their share of compulsory use for it would be the same the frozen beef and veal quota under

GATT among persons who have made and 12 000 for direct consumption; for appropriate application, to the exclusion the year 1969, Italy's quota was fixed by of any possibility whatever that this the Council at exactly 12 000 metric tons power includes authority to prescribe the i.e. at the amount to be used for use to which the meat must be put. The consumption, while, again by decision of answer to the first question is therefore the Council, Regulation No 805/68 of 27

quotas. These provisions, which are in answer to the first question must substance identical, endow Member therefore be in the affirmative. States with power not only to manage their quota but also to determine on The Commission of the European what conditions advantage can be taken Communities recalls that the Community of it. The power to determine these tariff quotas represent exceptions from the Common Customs Tariff duties: conditions implies the right of Member States to prescribe the final use to which they are the subject of special Customs the product must be put; in fact, this use arrangements provided for under the is one of the conditions of eligibility to Common Customs Tariff.

In these circumstances, the Member which each nation managed its quota. States have no power to add a condition In deciding on the use to which the concerning the use to which the goods product in question should be put, the may be put. The effect of decisions of Italian Republic took the economic and this Court, particularly the judgment of social situation of the country into 18 February 1970 in Case 40/69 account, at the same time complying (Hauptzollamt Hamburg-Oberelbe v both with the principle of the common Firma Paul G. Bollman, reference for a organization of the market and with the preliminary ruling from the Bundesfi international obligations of the nanzhof, Rec. 1970, p. 80) is that, in the

GROSOLI

The 92/68 does no more than recognize the upshot of these Regulations is that the obvious necessity to provide for the Member States are under an obligation 'management' of a quota or of a share of to do two things: to ensure that the the quota; it is, of course, important to Regulations are implemented, and to allow for administrative action which, treat all importers alike, without given the multiplicity of Customs posts, subjecting them to conditions. enables imports to be subjected to centralized accounting so as to ensure 3. Further evidence that 'management' that the quota is not exceeded. The does not confer authority to prescribe 'management' of a quota refers to this the use for the product covered by the centralized accounting and does not quota is contained in Article 5 of the include the possibility of prescribing a Council Decision of 13 October 1964 on use for the goods imported. the additional tariff quota of frozen beef Article 2 of Regulation No 110/69 and veal referred to in Article 4 of provides not only that each Member Regulation 14/64 (OJ p. 2584).

Article 3 of Regulation No 92/68 since it ment: whether the Member State provides that 'the quotas shall be concerned has opted for the principle of managed by each Member State in 'first come, first served,' or that of 'prior accordance with its own administrative allotment,' 'management' of the quota provisions'. assumes that the conditions of eligibility to take a share have been determined in 4. The reference to the administrative advance. Thus, the more detailed provisions of the Member States in provision in Article 2 of Regulation No Article 3 of Regulation No 92/68 and 110/69 merely amplifies Article 3 of Article 2 of Regulation No 110/69 Regulation No 92/68; and, as is borne cannot be interpreted to mean that the out by a comparison of the preambles of extent of the powers conferred on the the two Regulations, it contains nothing Member States varies according to the

JUDGMENT OF 12. 12. 1973 — CASE 131/73

5. An interpretation which widens the Community quota must be used only for powers of the Member States in relation direct consumption would, contrary to to the handling of Community quotas this principle, have the effect, if not the would be incompatible with the object, of influencing the market prices principle of non-discrimination between of meat for consumption, thus endanger Comunity operators, particularly be ing the basic purpose of the market tween operators of different Member organization, which is so to arrange States. This principle, embodied in things that the market price is as close as Article 3 and the second paragraph of possible to the guide price in order to Article 40 (3) of the Treaty, assumes ensure a fair return for the producers of special importance in the context of the Community. As such a departure Community quotas: in this field, the fact from the intervention system, or creation that the quota is limited gives special of conditions which make it possible, emphasis to the need for it to be requires action under Article 43 of the allocated on a uniform basis throughout Treaty, there can be no question of the Community, and every effort must wider interpretation of the provisions be made to avoid increasing, as a result submitted for consideration by the of wider interpretations, the danger,

case. obligations if the annual quota could not The Community tariff quota of frozen be fully taken up because a compulsory beef and veal was opened, on the basis use had been imposed. of Article 111 of the Treaty, as an act of Commercial policy; it represents an 8. Under the common market exception to the common import organization in beef and veal, the arrangements set up under the common Community itself had to resolve the market organization for beef and veal problem of frozen meat intended for coming from third countries. The processing, but the Community did not exception cannot go beyond what is feel able to make use of the GATT

quota. Article 4 of Regulation No 14/64, they are liable to a fine of up to ten referring to the possibility of fixing a times the amount of the Customs duty frozen meat quota, specified that this (in this case, levies) unpaid. Such a was additional to the GATT quota; sentence would have the effect of under the more detailed organization of cancelling out the profit from having the market set out in Regulation No imported frozen beef and veal free of 805/68, special arrangements laid down levy; under Article 4 (3) of Regulation in Article 14 for frozen meat intended No 14/64, no levy can be imposed on for processing exist side by side with the imports if effected under the quota of annual opening of the GATT quota 22 000 metric tons bound under GATT under Article 16 of the Regulation. The at 20 % duty, and imports exempt from Community did not feel that it ought to levy are indeed the subject of Regulation prescribe a specific use for meat No 92/68 and Regulation 110/69. The imported under the GATT quota; nor, Member States are entitled to determine therefore, could it, in the same breath, the conditions of eligibility for access to leave the Member States free to do so. a share of the tariff quota; on the other hand, they are prohibited from 9. Furthermore, to earmark the GATT introducing, in whatever guise, a levy quota for direct consumption could have precluded by Community law. had a despressing effect on fresh meat prices. The Community rules constitute The Government of the Italian Republic a self-contained system whose integrity takes the view that, since the Member must be a basic consideration in any States have power to make access to the interpretation: this integrity would tariff quota subject to certain conditions, disappear if the Member States were among them a direction as to its use, to recognized as having authority to pursue introduce penalties for importers who an objective diametrically opposed to do not comply with these conditions is that of the common market organ­ wholly consistent with Community ization. Regulations. Nor can there be criticism of the fact that, in this case, the 10. Finally, as we are concerned with pecuniary penalties are based on the an agricultural product subject to a levies which have remained unpaid. common market organization, it must be Moreover, the advantage of the tariff accepted that the Member States have no quota lies in exemption from the levy power whatever to make eligibility for a and it is therefore logical that the share of the GATT quota conditional on penalty for defaulting on a condition of its being used for a particular purpose. egilibility to enjoy this advantage should be determined in accordance with the B — On the second question long-established rules governing breach Messrs Giulio and Adriano Grosoli point of Customs laws. The second question must therefore also be answered in the out that they are charged with having contravened Article 102 of the Customs affirmative.

Under the terms of Article 3 of the Regulation, each Member State was to manage its own share of the quota 'in accordance with its own administrative provisions'.

In Regulation No 110/69 the Council divided the quota between the Member States for the year 1969, allocating a share of 12000 metric tons to Italy.

Article 2 of this Regulation provided that 'the Member States shall, as regards their own share of the quota, determine the conditions of eligibility for access to the tariff quota concerned and shall manage their quota in accordance with their own administrative provisions, especially those dealing with tariff quotas'.

3 The first question asks whether, under the provisions of Article 3 of Regulation No 92/68 and Article 2 of Regulation No 110/69, taken together, the Member States can, in regard to the consignments allotted to them in the share-out of the two quotas, adopt provisions designed to control their use.

The file shows that, in administrative circulars, the Italian authorities reserved their share of the quotas for direct consumption to the exclusion of other uses and demanded an undertaking from consignees that they would comply with this prescription.

Having obtained a share of the quota distributed under these conditions, the defendants in the main action are the subject of criminal charges because they did not comply with the use thus indicated in that they delivered a certain quantity of frozen meat to the processing industry.

5 As certain conditions need to be laid down in regard to allocation, as an integral part of the methods by which quotas are managed, the variation in wording cannot be read as an intention substantially to modify the rules applicable in 1968 for management of the 1969 quota.

Moreover, it is clear from the preamble of Regulation No 110/69 that the Council had no desire to make the system of management any different from that laid down in the Regulation applicable to the quota for 1968.

The question of interpretation referred to the Court is, accordingly, concerned with the scope of the management powers delegated to the Member States in the present case, and, in the context of these powers, what conditions are consistent with the relevant provisions adopted by the Council regarding the quotas concerned.

6 Under the Community system of tariff quotas, the institutions of the Community — Council and Commission — have power to determine the economic use to which these quotas are to be put and, consequently, to decide the way in which they are to be administered.

The conditions relating to use are determined both by the international commitments undertaken by the Community and by the general or localized

JUDGMENT OF 12. 12. 1973 — CASE 131/73

In these circumstances, the provisions of Regulation No 92/68 and of Regulation No 110/69 on the delegation to Member States of the way in which quotas should be administered must be taken to mean that, in the absence of any direction by the Council on the use to be made of them, reference in these Regulations to the 'administrative' provisions of the Member States cannot be interpreted as extending beyond the technical and procedural rules designed to ensure compliance with the general terms of the quota and the principle of equal treatment for those entitled to take advantage of it.

9 As soon, however, as a Member State introduces conditions regarding use in pursuit of objectives of economic policy which are not the subject of provisions adopted by the Community, these administrative powers are exceeded.

From the foregoing it follows that, in entrusting the Member States with the management of shares of a Community tariff quota, Article 3 of Regulation

GROSOLI

No 92/68 and Article 2 of Regulation No 110/69 did not empower Member States to adopt provisions designed to govern the use to which their allotted share is put.

10 As the second questions was conditional on the first being answered in the affirmative, there is no need to answer it.

in answer to the questions referred to it by the Tribunale of Trent by order of that court dated 13 April 1973, hereby rules:

Article 3 of Regulation No 92/68 and Article 2 of Regulation No 110/69 on the Community tariff quota of 22000 metric tons of frozen beef and veal, bound at 20% duty under GATT, must be interpreted to mean that, in entrusting the Member States with the management of shares of a Community tariff quota, they do not empower them to adopt provisions designed to govern the use to which their allotted share is put.

Lecourt Sørensen Monaco

Mertens de Wilmars Pescatore Kutscher Ó Dálaigh

Delivered in open court in Luxembourg on 12 December 1973.

A. Van Houtte R. Lecourt