C-185/73

OFFENE HANDELSGESELLSCHAFT IN FIRMA H. C. KÖNIG

on the validity of EEC-Regulation No 7a/59 of 18 December 1959 (OJ 1961, p. 71) and the interpretation of tariff headings Nos 22.09-A-II and 22.09-C- V-b of the Common Customs Tariff

THE COURT

composed of: R. Lecourt, President, A. M. Donner and M. Sørensen, Presi­ dents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore, H. Kutscher, C. Ó Dálaigh and A. J. Mackenzie Stuart (Rapporteur), Judges

Advocate-General: A. Trabucchi Registrar: A. Van Houtte

gives the following

Article 1 of the Regulation purports to Article 38 of the Treaty provides: 'add to the list in Annex II to the Treaty' '1. The common market shall extend to the following products, under Nos 22.08 agriculture and trade in agricultural and 22.09 in the Brussels Nomenclature: products. 'Agricultural products' means the products of the soil, of Ethyl alcohol or neutral spirits, whether stockfarming and of fisheries and or not denatured, of any strength, products of first-stage processing obtained from agricultural products directly related to these products. listed in Annex II to the Treaty, excluding liqueurs and other spirituous beverages and compound alcoholic 1 — Translator's Note: This appears in the French preparations (known as 'concentrated version of the CCT as follows: 'Alcool éthyli­ extracts') for the manufacture of que non dénaturé de moins de 80°;' (ethyl alco­ hol, undenatured, of a strength of less than 80°). beverages.

JUDGMENT OF 29. 5. 1974 — CASE 185/73

neutral . . .' product which must fall Official Journal of the Community. under tariff sub-heading No 22.09-A. They shall enter into force on the date Forming the view that it was therefore specified in them or, in the absence an agricultural product and that the thereof, on the twentieth day following levying of customs duties was not their publication. prohibited, the office subjected the Directives and decisions shall be notified product to a customs duty of 110-35 DM to those to whom they are addressed per 100 litres. and shall take effect upon such notification. The complaint by Konig to the Head Customs Office at Bielefeld (hereinafter In regard to products under heading No referred to as 'HZA Bielefeld') against 22.09-A, which are thus agricultural this rectification of duty having been products, derogations are permissible unsuccessful, König instituted proceed from certain rules providing for the ings before the Finanzgericht Münster, establishment of the Common Market. which by Order of 20 November 1970 On the other hand, in regard to products annulled the notice of rectification and under subheading No 22.09-C, the rules the rejection of the complaint. of the Common Market and, in particular, of the Common Customs The Bundesfinanzhof, to which HZA Tariff apply. Bielefeld appealed against the order on a In accordance with the 'Acceleration point of law, decided by order of 16 October 1973 to stay the proceedings Decision' of 26 July 1966, national and to ask the Court for a preliminary customs duties were to be finally ruling on the following questions: abolished as from 1 July 1968 and replaced, in respect of imports from 1. Is EEC Regulation No 7a/59 of 18 third countries, by the Common December 1959 (OJ 1961, p. 71) Customs Tariff.

strength? The Company Offene Handelsge sellschaft in Firma H. C. König 3. If Questions 1 and 2 are answered in (hereinafter referred to as 'König') the affirmative: How are the products imported a product described as 'brandy under tariff headings Nos 22.09-A-II for drinking, from molasses spirit, and 22.09-C-V-b to be distinguished watered down to drinking strength'. from one another?

II — Summary of the Tariff heading No 22.09-A-II covers grounds of the order ethyl alcohol, whether or not denatured, for reference of any strength, obtained from agricultural products. Concerning the first and second Article 2 of EEC Regulation No 950/68 questions excludes from the ambit of the Common The Bundesfinanzhof raises two Customs Tariff the agricultural products objections to the validity of Regulation listed in Annex II to the EEC Treaty. No 7a: The rates of internal duty on imports from the other Member States are 1. The time limit fixed in Article 38 (3) therefore still applicable. had already expired when EEC The delimitation of tariff headings Regulation No 7a/59 was published on accordingly permits a distinction to be 30 January 1961. The fact that the made between the field of application of Regulation was to take effect the Common Customs Tariff and that of retroactively from 31 December 1959, a date when the Council was still national tariff provisions still in force. competent to adopt the measure in question, is irrelevant. III — Procedure The publication of a Regulation has a constitutive effect, since only after the The order for reference was filed with prescribed publication can a Regulation the Registry of the Court on 3 December enter into force. (Article 191, EEC 1973. Treaty). In conformity with Article 20 of the 2. Only those products corresponding Protocol on the Statute of the Court of with the definition of agricultural Justice of the European Communities, products given in Article 38 can be written observations were submitted on added to the list. behalf of the Council of the EEC by its Legal Adviser, Daniel Vignes, acting as The tariff classification takes no account agent; on behalf of the Commission of whatever of a minimum alcoholic the EEC by its Legal Adviser, Peter strength. It is thus necessary to classify Kalbe, acting as agent; on behalf of under this heading (No 22.09) alcohol Ireland by the Chief State Solicitor, Liam intended for human consumption, so J. Lysaght, acting as agent; and on long as it does not contain special behalf of the United Kingdom by the flavouring substances. Products of this Treasury Solicitor, W. H. Godwin, kind cannot be considered as acting as agent. agricultural products of first-stage processing. They are in fact subjected Having heard the report of the after distillation to a further process, Judge-Rapporteur and the opinion of the namely dilution with water. Advocate-General, the Court decided not to undertake any preparatory inquiry. Concerning the third question Written observations submitted to the The Common Customs Tariff came into Court force on 1 July 1968, pursuant to EEC Regulation No 950/68 of the Council A — Observations of the Commission (OJ L 172 of 22 July 1968, p. 1), and of the EEC includes under heading No 22.09-C-V-b 'other spirituous beverages'. The As to the first question imposition of an internal levy was thus prohibited in respect of products within On the basis that the time limit fixed by that tariff heading. Article 38 (3) of the EEC Treaty

operates as a period of limitation, from As to the third question the expiration of which the Council, was no longer competent to add to the list of The distinction made in heading No 22.09 of the Brussels Nomenclature agricultural products, the Commission between avers that Regulation No 7a, according to its Article 2, was to enter into force (i) ethyl alcohol, undenatured, of a on 31 December 1959, that is, within the strength of less than 80° time limit. Since it was published in (ii) brandies, liqueurs and other 1961, it is clearly a case of retroactivity beverages which cannot have adverse effect, given that retroactive validity was not invoked (iii) compound alcoholic preparations in order to assert legal consequences. for the manufacture of beverages Moreover, Article 38 (3) of the Treaty is reflected in the subheadings or does not require that publication should heading No 22.09 of the Common take place during the course of the Customs Tariff: period of authorization. It is merely provided that the Council shall take a A — Ethyl alcohol, undenatured, of a decision within that period. In the strength of less than 80° absence of any special provision the B — Compound alcoholic preparations Council could have chosen a form which would not require publication in the C — Spirituous beverages. Official Journal. The term 'spirituous beverages' was The Commission concludes that it is preferred to the expression 'brandies, enough that a formal decision to adopt liqueurs and other beverages', which Regulation No 7a should have been gives rise to difficult problems of trans­ taken within the time limit. The addition lation. of new products to the list in Annex II A mixture or alcohol and water or a to the Treaty has no direct effect on strength of less than 80° is covered by their legal position, but simply offers the subheading No 22.09-A. Such a mixture possibility of including them subsequen­ of a strength of only 55° or less, which tly in measures concerned with can thus be drunk directly, remains a agricultural policy. No common mixture of alcohol and water, covered organization of the market exists up to by subheading No 22.09-A. the present time in respect of the alcohol Annex IV to the Common Customs mentioned in Regulation No 7a. Tariff in EEC Regulation No 950/68 speaks of tariff concessions provided As to the second question under GATT. In the case of liqueurs and brandies, and of ethyl alcohol, The Commission is of the opinion that undenatured, under heading No 22.09-A, the first stage of the manufacturing the introduction of a strength of up to process comprises all processes for the 46·2° clearly has the aim of limiting the making and producing of ethyl alcohols agreed tariff concessions to beverages of all strengths from agricultural directly intended for human consump­ products. The subsequent stage in tion. Accordingly, ethyl alcohol directly processing comprises all operations suitable for human consumption cannot which remove from this alcohol its be considered as a spirituous beverage original character and create new within the meaning of subheading No products having specific qualities. 22.09-C.

Products within subheading No 22.09-C Council were complied with. Having are to be differentiated from those taken its decision as to the content in within subheading No 22.09-A by reason due form, the publicity required to be of the specific organoleptic properties of given thereto had only a declaratory spirituous beverages. Very pure ethyl character, rendering the measure alcohol does not possess such properties applicable to individuals. and is not, for that reason, a spirituous Having ascertained that most of the beverage within the meaning of tariff Member States make a distinction subheading No 22.09-C, even though it between the promulgation of a law and is drinkable. its publication, this last being only a The Commission suggests the following matter of declaration, concerned with answer to the third question: applicability, the Council concludes that this distinction is made in the EEC Tariff subheading No 22.09-A (ethyl alcohol, undenatured, of a strength of Treaty in Article 189 (promulgation) and less than 80°) covers mixtures of water Article 191 (publication).

stances. No 950/68 of the Council concerning the Common Customs Tariff, Article 2 of B — Observations of the Council which allows of non-application of the tariff to agricultural products, is the first consequence for the product in question As to the first question of its addition to Annex II of the Treaty. The Council submits to the Court a minute of its 26th session, of 18 December 1959, to show that the As to the second question decision to add the products in question to Annex II to the Treaty was in fact The Council considers that the concept made on 18 December 1959. of first-stage processing cannot be Since Article 38 (3) of the EEC Treaty interpreted too rigorously.

Moreover, it is the Council. open to question whether the addition of The Council maintains that the rules of water to reduce the alcoholic strength of Article 38 (3) providing for a proposal a distilled agricultural product is a by the Commission and adoption by the process distinct from that of distillation.

C — Observations of the United As to the second question Kingdom The manufacture of ethyl alcohol from As to the second question products of the soil involves more than one processing stage. To produce ethyl According to the United Kingdom, the alcohol from cereals there are four power given to the Council by Article 38 stages, namely: milling, brewing, (3) to add products to the list in Annex fermentation and, lastly, distillation. II, does not extend to those products falling outside the meaning of the Ireland is of the view that by reason of expression 'agricultural products' as the various processing stages required defined in Article 38 (1). for the production of ethyl alcohol from agricultural products, this type of The Treaty itself provides that products alcohol does not constitute, whatever its in the list as it was framed originally are strength, an agricultural product within governed by Articles 38 to 46 of the the meaning of Article 38 of the Treaty Treaty. In drawing up the list, the and cannot, accordingly, validly be authors of the Treaty exercised a included in the list in Annex II to the particular power, in the same way as Treaty of Rome. when they gave a definition of 'agricultural products' in Article 38 (1). Oral procedure In so doing they created the 'Grundnorm' of the Community. During the oral procedure on 28 March The Council, however, when exercising 1974, the Council, represented by M. the power to add products to the list Vignes, developed a new line of was not in the situation of the authors of argument, to which the Governments of the Treaty and could not add to that the United Kingdom, represented by Mr 'Grundnorm'. Hall Brown, and of Ireland, represented by Mr Cooke, replied. In the view of the United Kingdom, alcohol to which water is added is a This argument may be summarized as follows: product which has progressed beyond first-stage processing. The production of According to the Council the Court no ethyl alcohol, covered by tariff headings longer has jurisdiction to give a Nos 22.08 and 22.09, whatever its preliminary ruling on the validity of alcoholic strength, is the result of a series Regulation No 7a. Although the of processes. Although fermentation may Regulation was in origin an act adopted

Law

1 By Order of 16 October 1973 of the Bundesfinanzhof, filed at the Registry on 3 December 1973, a preliminary ruling was requested of the Court as to the validity and interpretation of EEC Regulation No 7a/59 of the Council, bearing the date 18 December 1959 (OJ 1961, p. 71), as well as to the interpretation of tariff subheadings Nos 22.09-A-II and 22.09-C-V-b of the Common Customs Tariff.

2 During the oral procedure the Council adduced arguments from the Acts relating to the accession to the Communities of the Kingdom of Denmark, of Ireland and of the United Kingdom, in order to challenge the jurisdiction of the Court to pronounce upon the validity of Regulation No 7a.

JUDGMENT OF 29. 5. 1974 — CASE 185/73

According to such argument, as an addition to the EEC Treaty, the Regulation in question was, in any event, validated by Article 1 of the Treaty of Accession, which provides that the States acceding become Parties to the Treaty establishing the Communities 'as amended or supplemented'.

Moreover, Protocol No 19, annexed to the Act of Accession, concerning spirituous beverages obtained from cereals would have no meaning without the support of a valid organization of the market in alcohol, which, in its turn, necessarily presupposes the validity of the provisions made by Regulation No 7a.

The fact that that Regulation was to have taken effect as from 31 December 1959, the last day of the said time limit, does not alter the legal position, since the publication of a regulation has a constitutive effect.

HAUPTZOLLAMT BIELEFELD v KÖNIG

6 According to the wording of the second sentence of Article 38 (3), 'within two years of the entry into force of this Treaty, however, the Council shall, acting by a qualified majority on a proposal from the Commission, decide what products are to be added' to the list in Annex II to the Treaty.

This provision, by giving the Council power to decide the products to be added to the list, could not, after 31 December 1959, provide a legal basis for a decision of the Council supplementing that list.

In any case, it has been shown that within the time limit set by Articles 38 (3) the Council had in fact decided, on a proposal from the Commission, to insert in Annex II the products with which Regulation No 7a is concerned, as is shown in the text of the Regulation — dated 18 December 1959 — as published in the Official Journal.

The validity of this Regulation is not affected by the fact that this publication, on 30 January 1961, did not take place until after the expiry of the time limit, since this belatedness has no significance save as to the date from which the Regulation could be applied and take effect.

11 The intervening governments deny that the Council had, in any circumstances, acting within the scope of Article 38 (3), the option of adding alcohol to the list in question.

They submit that the competence of the Council was limited by the definition of agricultural products given in the first paragraph of Article 38, so that it was not permitted, in interpreting the concept of 'products of first-stage processing' contained therein, to rely on the list of products given in Annex II by the authors of the Treaty.

They suggest that the concept of first-stage processing should be interpreted as being restricted to a single operation on the raw material.

12 According to the definition in Article 38 (1), agricultural products are 'the products of the soil, of stockfarming and of fisheries and products of first-stage processing directly related to these products'.

Paragraph (3) of that Article provides that the products subject to the provisions of Articles 39 to 46 are listed in Annex II to the Treaty.

In this list appear, not only the principal agricultural products, but also a certain number of foodstuffs, the remoteness of which in industrial terms from the basic agricultural product goes beyond the point of first-stage processing as understood in a restricted sense.

Since the number of operations necessary to obtain a processed product is not the criterion for determining its classification as a product of first-stage processing, the dilution of ethyl alcohol with water after distillation does not affect its classification.

15 Accordingly, the fact that the Council added ethyl alcohol to the list in Annex II, without regard to its alcoholic strength, does not affect the validity of Regulation No 7a.

As to the third question

16 The third question asks how the products listed under tariff subheadings Nos 22.09-A-II and 22.09-C-V-b are to be distinguished from one another.

17 Heading No 22.09 in the Brussels Nomenclature covers both undenatured ethyl alcohols of a strength of less than 80°, and brandies, liqueurs and other spirituous beverages whatever their degree of alcoholic strength.

In the Common Customs Tariff, this heading is subdivided into No 22.09-A, ethyl alcohol, undenatured, of a strength of less than 80°, and No 22.09-C-I to V, spirituous beverages.

Costs

20 The expenses incurred by the Government of Ireland and the Government of the United Kingdom, by the Council and by the Commission of the EEC, which have submitted observations to the Court, are not recoverable, and as these proceedings are, insofar as the parties to the main action are concerned, a step in the action before the national court, costs are a matter for that court.

On those grounds,

THE COURT

in answer to the questions referred to it by the Bundesfinanzhof by order of 16 October 1973, hereby rules:

1. Examination of the questions referred does not reveal any elements such as to affect the validity of Regulation No 7a of the Council.

Registrar President

OPINION OF MR ADVOCATE-GENERAL TRABUCCHI

DELIVERED ON 30 APRIL 1974 1

Mr President, 22.09-A-II, the product was subject to a Members of the Court, customs duty, whereas it would have been exempt if its classification under 1. The present proceedings arise from a heading 22.09-C-V-b had been main­ dispute over the classification for tained.

customs purposes of a consignment of The interpretation of these tariff an alcoholic product imported into the headings has caused grave and more Federal Republic of Germany from complex preliminary questions to be Belgium in September 1968. It concerns raised concerning Article 38 (1) and (3) rough brandy distilled from molasses of the EEC Treaty and the validity of a spirit, the analysis of which showed it to regulation of the Council adopted on the be completely neutral and chemically basis of Article 38 (3). We are concerned pure, and which was therefore classified here with Regulation No 7a, dated 18 under tariff heading 22.09-A-II as ethyl December 1959 but published in the alcohol or neutral spirits, undenatured, Official Journal of 30 January 1961, by of a strength of less than 80°. Prior to which the Council, acting precisely by the analysis, the product had been virtue of the powers conferred by the classified under tariff heading said paragraph (3), added to the list of 22.09-C-V-b comprising spirituous agricultural products contained in Annex beverages. Once classified under heading II to the Treaty three groups of

1 — Translated from the Italian.