C-28/76

on the interpretation of certain provisions of regulations of the Council and of the Commission concerning the application of compensatory amounts and corrective amounts for imports into the Federal Republic of Germany of unsweetened whole milk powder coming from France,

THE 'COURT

composed of: H. Kutscher, President, A. M. Donner and P. Pescatore, Presidents of Chambers, J. Mertens de Wilmars, M. Serensen, Lord Mackenzie Stuart and A. O'Keeffe, Judges,

Advocate-General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

office is in Darmstadt, imported into the under subheading 04.02 A II b 2 of Federal Republic of Germany from the Common Customs Tariff, to be France four consignments of reduced by the amount of 2 or less unsweetened whole milk powder having u. a. even where the fat content is in a fat content by weight between 9·6 % excess of 3 % by weight and the and 24·5 % in immediate packings of a remaining conditions of Regulation weight in excess of 2·5 kg. (EEC) No 712/74 are fulfilled? 2. Were the rates of the monetary The Neuenberg-Rheinbrücke customs compensatory amounts under office classified the product under tariff Regulation (EEC) No 725/74 referred subheading 04.02 A II b 2 of the to in question one compatible with Common Customs Tariff and, pursuant the basic enabling provision between to Regulation No 725/74 of the 25 June and 15 August 1974?' Commission of 29 March 1974 'altering the monetary compensatory amounts 3. The order for reference was received (OJ L 89 of 1. 4. 1974, p. 1) imposed at the Court of Justice on 15 March compensatory amounts at the rate of DM 1976. 25·74 basic amount plus DM 0·91 supplementary amount for each percent In accordance with Article 20 of the of fat content per 100 kg net weight. Protocol on the Statute of the Court of Justice of the EEC written observations The plaintiff lodged an objection with were submitted by 'Milac GmbH Groß- the chief customs office in Freiburg but und Außenhandel' represented by was unsuccessful. Subsequently it lodged Dietrich Ehle and by the Commission of an appeal against the charge before the the European Communities, represented Finanzgericht, Baden-Württemberg, by its Legal Adviser Peter Gilsdorf. arguing in particular that the compensatory amounts imposed by the German customs authorities should be Upon heraring the report of the reduced by a corrective amount equal to Judge-Rapporteur and the views of the 2 u.a. per 100 kg and that in addition the Advocate-General the Court decided to

II — Written observations sub­ of the Council (OJ English Special mitted pursuant to Article Edition 1968 (II), p. 176) which 20 of the Protocol on the sought inter alia (fourth recital) to Statute of the Court of standardize measures taken by the Justice of the EEC intervention agencies. A necessary precondition for such measures is the A — Observations submitted by 'Milac existence of uniform intervention GmbH Groß- und Außenhandel' prices; — to the decided cases of the Court of 'Milac GmbH Groß- und Außenhandel' Justice in particular in Cases 34/70 (hereinafter referred to as 'Milac') assumes (Syndicat National du Commerce that the Court is in possession of the file Extérieur des Céréales and Others v of the case before the German court and Office National Interprofessionnelle refers to its submission of 4 April 1975 des Céréales and Minister of lodged in the legal arguments set out in Agriculture [1970] ECR 1233), this submission. In the context of the 153/73 (Holtz and Willemsen present proceedings for a preliminary GmbH v Council and Commission of ruling it limits its written observations to the European Communities [1974] the principal questions making the ECR 675), 31/74 (Galli [1975] ECR following observations in particular: 47) and 51/74 (Hulst v Produktschap voor Siergewassen [1975] ECR 79). 1. The first question The national court raises the question In the present case the Commission — whether the introduction of different and possibly also the Council — intervention prices is, in all, compatible infringed the principle of equality of with the common organization of the treatment and was guilty of a misuse of market in the milk sector. However this

MILAC v HAUPTZOLLAMT FREIBURG

levying of the compensatory amount agricultural market, such is very exactly based on the content scrupulous account is taken of the of powdered milk it is difficult to see corrective amount that these why the same principle cannot be products may enter the German applied for determining the market without facing any corrective amount which is intended restriction on competition. to eliminate the discriminatory nature of the fixing of different In view of this it may be asked whether intervention prices and which is the Commission is not, within the combined with the compensatory common market, practising a policy of amount to which it is related. In its discriminatory prices which give rise to letter of 4 September 1973 the distortions in competition and which in Commission itself recognized that this form is surely incompatible with the the corrective amount and the principle of a single market with compensatory amount are closely identical conditions of competition and linked and it stated that there existed with free movement of goods.

JUDGMENT OF 23. 11. 1976 — CASE 28/76

duction of the system of corrective amounts the German customs 2. The second question authorities undertook analogous corrections when recovering the (a) The question arises particularly with monetary compensatory amount for regard to a partial amount which was not whole milk powder; taken into account in correcting the — in its judgment in Case 95/75 (Effem compensatory amount applicable to milk v Hauptzollamt Lüneburg [1976] powder having a content by weight in ECR 361) the Court held that when excess of 3 %. In imposing and calculating the levy applicable to correcting the monetary compensatory trade with third countries the amount the Commission can only apply Commission was obliged to fix and a single criterion: impose levies according to the — either the compensatory amount for quantities of cereals incorporated in the whole milk arising from the the product. incidence of the monetary measures on skimmed-milk powder was (f) Finally, the Commission cannot justified at the level which was in place any reliance on the concept of force at the time; in this case it 'skimmed-milk powder' in order to should also have been adjusted by produce the argument that the corrective two units of account or by a partial amount was merely fixed for a single corrective amount corresponding to type of milk powder for reasons of the milk powder content; practicability. This argument is opposed — or else the fixing of different by the following considerations: intervention prices for skimmed-milk — the concept of substantive equality powder in France and in the Federal with regard to competition is the Republic of Germany had no effect principle governing compensatory on trade in the sector of powdered amounts and corrective amounts, not milk having a fat content by weight the formal concept of 'skimmed-milk in excess of 3 %; in this event the powder'; compensatory amount for whole milk — the Common Customs Tariff does powder should have been abolished not use the term skimmed-milk or considerably reduced.

Furthermore this is the reasoning on case. It points out the following in which the arguments of the Commission particular: concerning products under tariff subheading 04.02 A II a of the Common (a) By Regulation (EEC) No 1188/73 Customs Tariff in its letter of 4 'fixing the target price for milk and the September 1973 are based. intervention prices for butter, skimmed-milk powder and the Grana (b) In its judgment in Case 55/75 padano and Parmigiano Reggiano [Balkan Import-Export v Hauptzollamt cheeses for the 1973/74 milk year' (OJ L Berlin Packhof[1976] ECR 19) the Court 122, 1973, p. 1) the Council, considering of Justice recognized that the that the particular situation obtaining in Commission had a measure of discretion certain Member States did not permit of in this respect so wide that in practice the application of a uniform intervention there can be no judicial review of the price for skimmed-milk powder and that calculation and fixing of the it was therefore necessary to subject the compensatory amounts applied to the said price to a corrective, introduced a various products. It may be asked corrective amount. Paragraphs 1 and 2 of whether the fact that the assignment to Article 2 of this regulation provided that: the Commission of such a wide measure '1. … the price at which the of discretion is compatible with the intervention agencies in Belgium, constitutional principle of the guarantee Germany, Luxembourg and the of legal protection. Without losing sight Netherlands buy in skimmed-milk of the necessity of the system of powder shall be equal to the monetary compensatory amounts it must intervention price, less a corrective of nevertheless be borne in mind that: 2 u.a. per 100 kg. — the monetary compensatory amounts 2. The corrective mentioned in imposed by the Federal Republic of paragraph 1 shall be applied, for the Germany were fixed at too high a rate product in question, in the trade of from the very beginning; each of the Member States referred to — these amounts should have been in paragraph 1 with other Member reduced a long time ago. States and third countries, the That these statements are undeniable is Benelux countries being considered as one Member State. shown by the declarations submitted in the present case by the Council of For this purpose, the amounts levied experts and those of the Member of the at importation and those granted at Commission responsible for agricultural exportation within the framework of matters. Although the Commission the common agricultural policy, shall defends all the rates of the monetary be reduced by the amount of the corrective.' compensatory amounts it only does so 'reluctantly'. Solely a reduction in the monetary compensatory amounts to the Regulation No 1188/73 entered into level of the actual effect of a monetary force on 14 May 1973. The detailed rules measure would be capable, particularly for its application were laid down by with regard to intra-Community trade, of Regulation No 1267/73 of the protecting trade from distortions of Commission (OJ L 130, 1973, p. 22) which remained in force until 31 March competition. 1975.

Therefore the rules applicable to the In respect of their nature it observes that period concerning the court making the the text of the first question does not reference are those contained in clearly show whether it concerns the Regulations Nos 663/74 and 712/74. interpretation or the validity of certain provisions of Community law. Having (b) The monetary compensatory regard to the grounds of the order for amounts were established by Regulation reference and in view of the problems No 974/71 of the Council 'on certain which Milac requested the German court measures of conjunctural policy to be to submit to the Court of Justice, this taken in agriculture following the question should be read as essentially temporary widening of the margins of seeking to know whether: fluctuation for the currencies of certain 'Provisions of Community law also Member States' (OJ English Special require the application of the corrective Edition 1971 (I), p. 257). For the period amount for the product in question involved in the present case the amounts (whole milk powder), were laid down by Regulation No 218/74 1. whether the basic regulation, No of the Commission (OJ L 24, 1974, p. 1) 663/74 of the Council in particular in Annex I to this (a) requires such an interpretation of regulation with the following Community law and that amendments: Regulation No 712/74 of the — for the period from 1 April 1974 to 1 Commission constitutes an July 1974 the annex setting out the infringement of this provision; monetary compensatory amounts (b) in any event allows of such an under Regulation No 218/74 was that interpretation and that the laid down by Regulation No 725/74 regulation of the Commission did of the Commission (OJ L 89, 1974, not make use of this possibility p. 1); thus infringing legal provisions of — for the period from 1 July 1974 to 1 superior force; August 1974 the abovementioned 2. or if question (1) is answered in the annex was that contained in negative, the Council regulation Regulation No 1692/74 of the prohibiting such an interpretation Commission (OJ L 177, 1974, p. 1); itself constitutes an infringement of a — for the period after 1 August 1974 the legal provision of superior force'. annex was that contained in Regulation No 2038/74 of the Thus the content of the first question is Commission (OJ L 211, 1974, p. 1). complex. The question raises

interpretation of Article 3 (2) of skimmed-milk powder or beef and Regulation (No 663/74): veal 'may have an influence'. — the first is drawn from the wording of According to the recital in the the first and second paragraphs of preamble of the draft relating to that article which show that the skimmed-milk powder the corrective product referred to in paragraph 2 amount therefore could have or can only be that referred to in should have been extended to trade paragraph 1, that is to say in certain products other than the 'skimmed-milk powder' for which intervention products which would Article 2 of that same regulation fixes certainly include whole milk powder. the intervention price at 79·00 u.a. However, the Council did not accept per 100 kg and which, in accordance these drafts. In adopting the text of with Annex I to Regulation No Article 2 set out above it exluded the 1108/68 of the Commission (OJ, beef and veal sector from the system English Special Edition 1968 (II), p. of corrective amounts and, in the 387) has a maximum fat content of milk sector, it consciously and 1·5 %; deliberately restricted the system to — the other is drawn from the historical skimmed-milk powder. background to Article 2 of Regulation No 1188/73 which is In the ligth of these considerations it repeated without alteration by Article follows therefore that Article 3 of

3 of Regulation No 663/74 for the Regulation No 663/74 of the Council 1974/1975 milk year. The original does not give the Commission the right proposals put forward by the to fix the corrective amount for products

other than skimmed-milk powder such these regulations) which are not as whole milk powder. 'skimmed-milk powder' within the rules laid down for intervention (a fat content No argument to support a different up to 1·5 %), it did not however go interpretation may be derived from the beyond the bounds of the powers objectives of the abovementioned article. assigned to it. On the other hand the exclusive application of the corrective amount In fact 'milk powder having a fat content solely to the products in question by weight equal to or less than 3 %' is a complies with the Commission's product which, in commercial trade and intention to confine the consequences of for the processing industry, which, in the restricted measure of harmonization commercial trade and for the processing of prices to that which is strictly industry, has the same characteristics as necessary. milk powder having a fat content up to 1·5 %.

compensatory amount. In fact the two within the limits of the margin of mechanisms are quite independent of discretion which it enjoys on a technical each other, and have legal bases whose level. It could have fixed another fat objectives are not identical although they content as the limit but it decided to may be analogous. The object of the adopt the limit of 3 % taking account of corrective amounts is to compensate for commercial usage. On the other hand the nominal difference in price, powdered milk such as that at issue, expressed in units of account, for having a fat content by weight of skimmed-milk powder; monetary between 9·6 % and 24·5 %, is a product compensatory amounts are intended to which is clearly different and one which compensate for distortions in the real constitutes, even from the point of view price structure which have arisen because of prices, something distinct from of monetary measures. The deduction skimmed-milk powder.

MILAC v HAUPTZOLLAMT FREIBURG

deflections of trade in this sector as well Deutschmark which occurred at the time which could have jeopardized the of the imports in question had the effect objective sought by the Council of producing an equivalent increase in regulation. Community agricultural prices expressed in national currency, in particular of the Furthermore the fact that on the intervention price for skimmed-milk occasion of the reform of the rules by the powder. The deduction of a corrective Regulation No 663/74 the Council raised amount of two units of account, on the no objection against the regulations other hand, corresponds to a fall in the adopted by the Commission up to that intervention prices in Germany and time confirms that the Commission consequently to a harmonization of the remained within the limits of its actual intervention price in that country discretion. However, if the Court of (and in the Benelux countries) towards Justice were to rule that the Commission the actual price in the other Member exceeded its powers by including these States.

JUDGMENT OF 23. 11. 1976 — CASE 28/76

In the Community general instead of first adopting a limited skimmed-milk powder is largely used for measure, it cannot be criticized for the preparation of animal foods (whereas having exceeded the limits of its whole milk powder is never used for the discretion assigned by legal provisions. manufacture of such preparations) and in relatively insignificant quantities for the (b) On the other hand the differential manufacture of soup or dietetic dishes. A application of corrective amounts in substantial part of the skimmed-milk commercial trade does not constitute an powder is moreover exported to third infringement of the prohibition on countries as the Community is the discrimination contained in the Treaty. largest exporter of this product in the This is so for various reasons: world and these exports are principally — First, according to the decided cases carried out in large packages.

MILAC v HAUPTZOLLAMT FREIBURG

storage and its manufacture requires less — In conclusion the differential expensive technical equipment than that treatment of the two products in necessary for whole milk powder. Finally, question with regard to the corrective unlike the case of whole milk powder, amount is justified by clear, concrete the market price of skimmed-milk reasons. Therefore by adopting Article 3 powder is not merely influenced but (2) of Regulation No 663/74 the determined by the intervention price Commission cannot have misused its (storage of butter). discretion or committed a manifest error in its appraisal of the market situation. — It is possible that if the difference is As this provision does not for any other too great in evaluating substances other reason conflict with rules of Community than lipids, between whole milk powder law of a superior order, it cannot be and skimmed-milk powder, the latter regarded as being illegal. could replace the former, at least for the manufacture of certain processed II — The second question products. However, for reasons of profitability this procedure would be (a) In the opinion of the court making limited as the use of skimmed-milk the reference there could in the present powder in place of whole milk powder case be an infringement of the principle must go hand in hand with an alteration contained in Regulation No 974/71 of of production methods and practices. A the Council whereby 'the compensatory reduction of two units of account per 100 amounts should be limited to the kg (around 2·5 %) of the intervention amounts strictly necessary to compensate price for skimmed milk powder could the incidence of the monetary measures but with difficulty and never to a on the prices of basic products covered substantial extent, cause such a by intervention arrangements' (final substitution. recital).

JUDGMENT OF 23. 11. 1976 — CASE 28/76

compensatory amounts in accordance measurable relation between the partial with the provisions of Regulation No disturbance and a corresponding 974/71 whereas the question raised does reduction in the compensatory amount not put forward the problem of the be established: this is not so in the validity of the provision adopted by the present case. Council. Under Regulation No 974/71 the Commission did not have and does Secondly, from the clear text of Articles 2 not have the power to correct the general and 3 of that regulation, which does not level of compensatory amounts which, in make any provision for exceptions, it can respect of Germany, are calculated on the be deduced that these provisions are still basis of Article 2 (1) (a) (according to the applicable in their entirety in cases of text laid down by Regulation no 1112/73 disturbance within the meaning of of the Council, OJ L 114, 1973, p. 4). Article 1 (3). Such a correction could only be made by virtue of a Council regulation on the This is not altered by the fact pointed basis of Article 43 of the Treaty, in out by Milac before the German court particular by amending the rate of that by Regulation No 539/75 (OJ L 57, exchange applicable for the purposes of 1975, p. 2) the Commission substantially the common agricultural policy. reduced the limit for the compensatory amount applicable to whey powder. — Similarly, the Commission does not When, at the beginning of 1975 the have the power to amend the level of the price actually obtaining on the market compensatory amounts as calculated for this product fell sharply the amount pursuant to Regulation No 1974/71 for of the final reference price used until specified products. The position would be then for fixing the compensatory amount different if, under Article 1 (3) of could not be retained. Similar measures

MILAC v HAUPTZOLLAMT FREIBURG

in calculating the monetary com­ either in whole or in part, to trade in pensatory amounts. However, this was milk powder under tariff subheading not done in the present case. On the 04.02 A II b 2 of the Common

contrary, the Council had established a Customs Tariff having a fat content corrective mechanism which was also by weight in excess of 3 %. based on Article 43 of the Treaty and Furthermore, consideration of the which had a separate existence question raised has disclosed no independent of the rules relating to factor of such a kind as to affect the monetary compensation. It deliberately validity of those provisions. restricted the application of the 2. Consideration of the questions raised corrective amount to trade involving has disclosed no factor of such a kind skimmed-milk powder. In these as to affect the validity of the circumstances the Commission would monetary compensatory amounts laid have infringed the said regulations if, in down by the Commission and the context of Regulation No 974/71, it applied between 25 June and 15 had again taken into account the August 1974.' corrective amount in respect of trade relating to whole milk powder. In The plaintiff in the main action, addition, Regulations Nos 1188/73 and represented by Mr Ehle, Advocate of the 663/74, as subsequent enactments of a Cologne Bar, the Commission, special nature, take precedence over the represented by its Legal Adviser, Mr relevant provisions of Regulation No Gilsdorf, acting as Agent, and the 974/71. Council, represented by its Legal Adviser, Mr Schloh, acting as Agent, presented On the basis of these observations the oral argument at the hearing on 29 Commission proposes that the following September 1976. The latter supported the answers to given to the questions arguments put forward by the Agent of referred: the Commission. '1. Article 3 (1) of Regulation No 663/74 must be interpreted as meaning that The Advocate-General delivered his the corrective amount provided by opinion at the hearing on 28 October this provision cannot be applied, 1976.

The plaintiff in the main action argues on the one hand that the compensatory amounts should be reduced by a corrective amount equal to 2 u.a. per 100 kg and on the other hand that they had been fixed at too high a level as the development of the market price had neutralized the effects of the revaluation of the Deutsche Mark.

3 The first of the questions referred by the national court asks whether Regulation No 725/74 must be interpreted as meaning that compensatory amounts must be reduced by the abovementioned corrective amount and the second question asks whether that regulation is incompatible with Regulation No 974/71 of the Council upon which it is based because of the level at which the compensatory amounts have been fixed.

The first question

4 Regulation No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (OJ, English Special Edition 1968 (I), p. 176) provides that each year there shall be fixed a target price for milk and intervention prices — designed to assist in achieving the target price of milk — for certain products processed from milk: butter, skimmed-milk powder and Grana Padano and Parmigiano Reggiano cheeses.

MILAC v HAUPTZOLLAMT FREIBURG

In the Annex to Regulation No 1108/68 of 27 July 1968 concerning the method of application of public storage of skimmed-milk powder (OJ, English Special Edition, 1968 (II), p. 387) the Commission fixed at 1·5 % the maximum limit for the fat content of skimmed-milk powder which could be purchased by the intervention agencies.

7 Regulation No 663/74 of the Council of 28 March 1974 fixing the prices for the 1974/75 milk year (OJ L 85, 1974, p. 52) again increased the target price for milk, maintained the intervention price for butter in the original Member States (which had been reduced for the 1973/74 milk year) and increased the intervention price for skimmed-milk powder.

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8 The fifth recital of that regulation states: 'whereas the particular situation obtaining in certain Member States at present does not permit the application of a uniform intervention price for skimmed-milk powder; whereas it is therefore necessary to apply a corrective factor to the aforesaid price'.

The sixth recital of that regulation states: 'whereas in order to ensure that this corrective factor affects market prices in the said Member States without leading to distortions of competition it is necessary to compensate for price differences occurring in trade in skimmed-milk powder.

Accordingly Article 3 of that regulation provides:

'1. By way of derogation from Article 7 (1) of Regulation (EEC) No 804/68 the price at which the intervention agencies in Belgium, Germany, Luxembourg and the Netherlands buy in skimmed-milk powder shall be the intervention price less a corrective amount of 2 u.a. per 100 kg.

The Commission is said to have abused its powers by not applying to that product a corrective amount corresponding to the 2 u.a. applicable to skimmed-milk powder having a fat content by weight of up to 3 %.

In so doing it has, in the view of the plaintiff, infringed Article 3 of Regulation No 663/74 which authorized it to prescribe corrective amounts for products other than skimmed-milk powder.

10 Article 3 (1) of that regulation derogates from the provisions of Article 7 (1) of Regulation No 804/68 of the Council only in respect of skimmed-milk powder.

Neither Regulation No 663/74 of the Council, nor Regulation No 1188/73, adopted for the preceding dairy year, contains a definition of 'skimmed-milk powder'.

It is evident from the fifth and sixth recitals of that regulation that the Council laid down a corrective amount only for skimmed-milk powder and that consequently the Commission did not have the power to apply it to other products derived from milk.

The Commission maintains that although it did not adopt, in implementing Regulation No 712/74, for the purpose of fixing the corrective amount for skimmed-milk powder, the fat content of 1·5 % adopted for the definition of this product, the reason for this was to avoid any possibility of frustrating the application of Article 3 of Regulation No 663/74.

Furthermore the fact that the Council deemed it necessary in exceptional circumstances to fix a reduced intervention price for skimmed-milk powder for certain countries did not necessarily imply that the system of monetary compensatory amounts applicable to other products derived from milk also had to be amended in order to avoid any possibility of placing other products derived from milk in a less favourable position.

13 The reply to be given to the first question, therefore, is that the combined provisions of Article 1 of Regulation (EEC) No 974/71, Article 1 of Regulation (EEC) No 218/74 and Part 5 of Annex I to that Regulation in the version contained in Regulation (EEC) No 725/74 and applicable to powdered milk under tariff subheading 04.02 A II b 2 of the Common Customs Tariff must be interpreted as meaning that they do not allow the reduction of the monetary compensatory amount by 2 u.a. or less where the fat content by weight is in excess of 3 %.

14 Consideration of the second question has disclosed no factor of such a kind as to affect the validity of Regulation No 725/74.

Costs

is The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable.

As these proceedings are, so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, costs are a matter for that court.

Kutscher Donner Pescatore

Mertens de Wilmars Serensen Mackenzie Stuart O'Keeffe

Delivered in open court in Luxembourg on 23 November 1976.

A. Van Houtte H. Kutscher

Registrar President

OPINION OF MR ADVOCATE-GENERAL WARNER DELIVERED ON 28 OCTOBER 1976