C-157/78

JUDGMENT OF 5. «. 1979 — CASE 157/78

In Case 157/78

REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht [Finance Court] Düsseldorf for a preliminary ruling in the proceedings pending before that court between

TRAWIGO GMBH & Co. KG, Würselen,

and

HAUPTZOLLAMT [Principal.Customs Office] Aachen-Nord,

JUDGMENT

Facts and Issues

The facts of the case, the course of the would lead to disturbances in trade in procedure and the observations submitted agricultural products." ' under Article 20 of the Protocol on the Article 4 of Regulation No 974/71 Statute of the Court of Justice of the provides that: EEC may be summarized as follows: "No compensatory amount shall be fixed where, in any Member State, the percentage referred to in Article 2 (1) I — Facts and written procedure does not exceed 2.5%" (this percentage represents the difference between the A — The framework of the regulations official conversion rate of the currency concerned and the so-called green rate). Article 1 (1) of Regulation No 974/71 of By Regulation No 800/77, a number of the Council of 12 May 1971 on certain goods were brought within the system of measures of conjunctural policy to be monetary compensatory amounts. They taken in agriculture following the were different kinds of sugar confec­ temporary widening of the margins of tionery, ice-cream and other ices, fluctuation for the currencies of certain chocolate and cocoa-based products, Member States (Official Journal, English pastry, biscuits, cakes and other fine Special Edition 1971 (I), p. 257) auth­ bakers' wares and various food orizes the Member States to charge and preparations. grant monetary compensatory amounts The second and third recitals in the on imports and exports of the products described in Article 1 (2): preamble to that regulation read as follows:

has become so marked as to have a and grant a payment on exports to the considerable effect on the conditions of United Kingdom of processed agri­ competition of the processed products, cultural products covered by tariff having regard to the characteristics of headings 17.04 D, 18.06 B, 18.06 C, the market in certain sensitive products." 19.08 B and 21.07 C. The recitals in the preamble to that decision state that: The sixth recital provides that the list of non-Annex II products should be "… the compensatory amounts charged reviewed by the end of the year in the or granted … [on] basic products would light of their economic situation. Thus amount to 34.7% in the case of the the second subparagraph of Article 2 (2) United Kingdom and to 10.4% in the of the regulation provides that monetary case of Ireland; … this situation, compensatory amounts shall not apply entailing a relative disadvantage to the beyond 31 December 1977 in respect of manufacturers … in Ireland on the cost products falling within tariff subheadings of the cost of the basic products of 17.04 D (sugar confectionery not con­ 24.3% may lead to distortion in the taining cocoa, other than liquorice ext­ terms of competition in trade in the ract, chewing gum and white chocolate), processed agricultural products referred 18.06 B (ice-cream (not including ice to in the Irish application between the cream powder) and other ices containing Member States concerned; … this cocoa), 18.06 C (Chocolate and sugar situation, in its present acute form since confectionery containing cocoa), 19.08 B November 1976, has given rise to serious (pastry, biscuits, cakes and other fine difficulties for the sectors concerned in bakers' wares other than gingerbread Ireland …" and the like) and 21.07 C (ice-cream (not including ice-cream powder) and other ices not containing cocoa). The monetary compensatory amounts thus introduced by this bilateral system between the United Kingdom and By Commission Regulation No 2657/77 Ireland were replaced by fresh amounts of 30 November 1977 on the application annexed to the Commission Decision of of monetary compensatory amounts to 4 May 1977 amending that of 23 March certain products not covered by Annex II 1977 (Official Journal 1977, L 123, to the Treaty (Official Journal 1977, p. 18). Under Article 3 thereof, this L 308, p. 48) the time-limit on the second decision as well as the decision of applicability of Regulation No 800/77 23 March 1977 ceased to apply on the was abolished and the monetary day on which Regulation No 800/77 compensatory amounts on the products took effect (that is 23 May 1977). under consideration were maintained for an indefinite period. B — The facts

C — The question referred for a pre­ In Case 151/57 Peiser (sub judice), it has liminary ruling already been pointed out that the only possible legal basis for the introduction An action was brought before the Finanz­ of a monetary compensatory amount in gericht Düsseldorf, which by an order of respect of non-Annex II products was 7 July 1978 decided to stay the Article 235 of the Treaty, and that proceedings and refer the following Article 14 (3) and (4) of Regulation No question to the Court for a preliminary 1059/69 of the Council of 28 May 1969 ruling under Article 177 of the EEC laying down the trade arrangements Treaty: applicable to certain goods resulting from the processing of agricultural "Is Commission Regulation (EEC) No products (Official Journal, English 800/77 of 20 April 1977 invalid in so Special Edition 1969 (I), p. 240) did not far as it provides that monetary constitute an effective "specific compensatory amounts are to be charged arrangement" capable of being based on on imports and granted on exports of Article 235. goods coming within tariff heading 17.04 D (Code No 1704806 and In its application in Case 11/78, the 1704602)?" Italian Government stated in order to support a submission of absence of auth­ The order of the Finanzgericht was orization that there was no reason to received at the Court on 26 July 1978. fear disturbances in trade in agricultural Upon hearing the report of the Judge- products. It took the view that Rapporteur and the views of the confectionery is not an agricultural Advocate General, the Court decided to product but a (non-agricultural) open the oral procedure without any processed product. In its submission, the preparatory inquiry. disturbance had to have taken place in trade in agricultural products and not in trade in confectionery. The Commission found no such disturbance in trade in II — Summary of the written agricultural products, but only observations submitted to distortions of competition for the the Court under Article 20 products in respect of which monetary of the Protocol on the compensation was introduced. Statute of the Court of Justice of the EEC Regulation No 800/77 is not based on a sufficient statement of reasons, and A — Observations submitted by Trawigo infringes Article 190 of the Treaty. It is GmbH & Co. KG not conclusively shown that there was a threat of disturbances in trade in agri­ Trawigo submits that the introduction, cultural products within the meaning of by Regulation No 800/77, of a monetary Article 1 (2) of Regulation No 974/71, compensatory amount in respect of the which is a condition of the application of processed products in question is the rules.

2. Breach of the principle of proportion had no influence upon the trends of the ality prices of the processed products. Other factors have however been decisive, above all in the case of chocolate-based In Case 151/77, the Commission placed products the price of raw cocoa, which the accent on the incidence of the has greatly increased in recent years, and monetary compensation measures on the the considerable processing costs. processed products, stating that in the case of the products coming under tariff headings 18.06 C and 19.08 B, the On the other hand, the insignificance of average incidence amounted to 6.28% the effect on the processed product — and 6.45% at the beginning of 1977. It confectionery — of the monetary should be noted that referring to a compensation applicable to an inter purely mathematical incidence does not vention product is illustrated by the fact fulfil the condition laid down in the basic that the monetary compensatory amount regulation, according to which the on gums, jelly confectionery and monetary compensation measures are not compressed tablets represents approxi to be applied to processed products mately 0.6% of the final price of the unless, in addition to the incidence, product. Such minimal charges are not disturbances in trade have become apt to create disturbances in trade.

disturbed less by "prolonged" bilateral kind of correlation between monetary monetary compensation than by the intro stability and the decrease in exports. duction of multilateral monetary compensatory amounts applicable also to States in which trade in the processed The Commission must prove that the products at issue was not threatened with price of confectionery is a function of disturbances. the price of the intervention products concerned, that is to say cereals, sugar and milk powder. Thus far it has not It may also be wondered whether the

TRAWIGO v HAUPTZOLLAMT AACHEN-NORD

rule means that monetary compensatory compensatory amounts to a specific amounts may be levied in all the Member product, no monetary compensatory States, even when the incidence of the amount could therefore be intro­ monetary compensatory amounts on the duced in respect of confectionery. basic products only exceeds the 5% limit in a single Member State. The principle B — Observations submitted by the Irish of proportionality required monetary Government compensatory amounts not to be introduced at least in dealings between The Irish Government refers to the obser­ States belonging to the monetary snake, vations which it submitted in Case and required them to be confined to 151/77 cited above. countries in respect of which the inci­ dence exceeded the 5% limit. C — Observations submitted by the Italian Government 3. Breach of the prohibition on dis­ crimination laid down in Article 40 The Italian Government refers to the (3) of the Treaty observations which it submitted in Case

— On the other hand, specific forms of Trawigo, represented by J. Gündisch, discrimination are observed in the Advocate of the Hamburg Bar, the Irish sector under consideration. Thus, as Government, represented by J. Murray, regards white chocolate, the Com­ Barrister-at-Law, the Italian Govern­ mission states that no request for the ment, represented by I. M. Braguglia, introduction of monetary compen­ Avvocato dello Stato, and the Com­ satory amounts and no complaint mission of the European Communities, were ever submitted. However, it has represented by its Legal Adviser, P. not stated that requests for the intro­ Gilsdorf, acting as Agent, submitted oral duction of compensatory amounts or argument at the hearing on 12 December complaints had been submitted in 1978. respect of other products belonging to the group of products in question. The Advocate General delivered his If requests or complaints were the jus­ opinion at the hearing on 1 February tification for applying monetary 1979.

JUDGMENT OF 5. 4 1979 — CASE 157/78

In a letter of 27 March 1979 to the Having found in the Judges' Council President of the Court, Counsel for the Chamber on 3 April 1979 that it was plaintiff submitted observations concern­ already in possession of all the factors ing the Advocate General's opinion and necessary for the purpose of dealing with asked the Court to consider re-opening the problems arising in this case, the the oral procedure. Court decided not to re-open the oral procedure.

Decision

1 By an order of 7 July 1978 which was received at the Court on 26 July 1978, the Finanzgericht Düsseldorf referred a question to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty on the validity of Commission Regulation No 800/77 of 20 April 1977 amending, as regards products which are subject to monetary compensatory amounts, Regulation No 572/76 fixing the monetary compensatory amounts (Official Journal 1977, L 97, p. 18).

It emerges from the second and third recitals in the preamble to Regulation No 800/77 that, since all the basic agricultural products from which those goods are derived were subject to monetary compensatory amounts of a high level, "the difference in prices of the basic products had become so marked as to have a considerable effect on the conditions of competition of the processed products, having regard to the characteristics of the market in certain sensitive products".

4 The adoption of that regulation, which applied with effect from 23 May 1977, had been preceded by the Commission Decision of 23 March 1977 authorizing Ireland to take protective measures in respect of certain processed agricultural products under Article 135 of the Act of Accession and allowing that Member State until 31 December 1977 to levy a charge on imports from the United Kingdom and grant a payment on exports to the United Kingdom of the processed agricultural products coming under the above-mentioned tariff headings (Official Journal 1977, L 97, p. 29).

The recitals in the preamble to this decision stated that:

"… the compensatory amounts charged or granted … [on the] basic products, would amount to 34.7% in the case of the United Kingdom and to 10.4% in the case of Ireland; … this situation, entailing a relative disad­ vantage to the manufacturers … in Ireland on the cost of the basic products of 24.3%, may lead to distortion in the terms of competition in trade in the processed agricultural products referred to in the Irish application between the Member States concerned; … this situation, in its present acute form since November 1976, has given rise to serious difficulties for the sectors concerned in Ireland …"

According to Article 1 (2) of that regulation:

"Paragraph 1 shall apply:

(a) to products covered by intervention arrangements under the common organization of agricultural markets;

(b) to products whose price depends on the price of the products referred to under (a) and which are governed by the common organization of market or are the subject of a specific arrangement under Article 235 of the Treaty."

Article 235 of the Treaty provides:

"If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the Assembly, take the appropriate measures."

They submit that, according to the recitals in the preamble to Regulation No 800/77, the Commission assessed not the risk of disturbances in trade in agricultural products but the risk of distortions in competition in the products at issue.

They also submit that the statement of the reasons on which Regulation No 800/77 was based is defective inasmuch as it fails to take account of the risk of disturbances in trade in agricultural products and in that it confines itself to establishing the risk of disturbances in the conditions of competition in trade in the processed products.

9 It is true that in order to justify Regulation No 800/77 the Commission stated that "in the case of the processed products not subject to monetary compensatory amounts, the difference in prices of the basic products has become so marked as to have a considerable effect on the conditions of competition of the processed products …".

JUDGMENT OF 5. 4. 1979 — CASE 157/78

10 The wording of Article 1 (3) of Regulation No 974/71 as amended by Regu­ lation No 2746/72 of the Council of 19 December 1972 (Official Journal, English Special Edition 1972 (28 -30 December), p. 64) requires that for the application of compensatory amounts to basic agricultural products, the monetary measures referred to in paragraph 1 (namely the fluctuation of the exchange rate of a Member State's currency) should lead to disturbances in trade in agricultural products.

As regards the processed product, it emerges from the provisions of Article 2 (2) of Regulation No 974/71 that the compensatory amounts applicable shall be equal to the incidence, on the price of the product concerned, of the application of the compensatory amount to the price of the basic product on which it depends.

They submit that application of monetary compensatory amounts to the products at issue in respect of trade between Member States and with non- member countries is not justified by the small incidence which the monetary differences might have on the prices of the processed products.

They submit that under Article 14 of Regulation No 1059/69, the Council could have taken appropriate measures either to deal with the possible effect on trade between Member States and with non-member countries of special measures adopted under the common organizations as regards the prices of certain basic products, or to deal with a special situation which may arise in respect of certain goods.

They submit that, in the part concerning the products to which this action refers, Regulation No 800/77 breaches the principle of proportionality because a measure taken under the said Article 14 would have been adequate and sufficient to deal with the difficulties encountered by the Irish processing industries in the limited sector of trade with the United Kingdom, whereas the application of compensatory amounts was neither necessary nor in pro­ portion to the aim pursued.

12 The Commission states that in 1975 it adopted a practice whereby monetary compensation was to be fixed only in respect of processed products on which the maximum average incidence of the compensation exceeded 5%.

On 1 January 1977 the difference between the so-called green rates for the pound sterling and the Irish pound was 24,3%, which gave rise to repeated representations by the Irish Government and, following those rep­ resentations, to the decision of 23 March 1977 authorizing Ireland to take protective measures.

The Commission submits that consequently this provision is not appropriate to deal with the risk of disturbances in trade in processed products caused by the monetary situation of the Member States.

13 The plaintiff and the Italian Government have not called in question the stati­ stical data supplied by the Commission.

14 The plaintiff submits that the extension of the monetary compensation system to confectionery products is not justified by the fact that the compensatory amounts applied to the basic products also led to price differences and distortions at the stage of the processed products, because the Commission failed to state why it extended the compensatory amounts system to certain processed agricultural products but not to other important groups of products — such as, in particular, pasta, marmalade, jam and preserved fruit containing sugar.

It submits that the absence of compensatory amounts on the latter products entailed discrimination between exporters of those products and exporters of products caught by the contested regulation.

TRAWIGO v HAUPTZOLLAMT AACHEN-NORD

15 However, the Commission is not bound to fix compensatory amounts for all the products in a group, but may assess the need to apply compensatory amounts either by products or by groups of products.

THE COURT,

in answer to the question referred to it by the Finanzgericht Dusseldorf by an order of 7 July 1978, hereby rules:

Consideration of the question raised has disclosed no factor of such a kind as to affect the validity of Regulation No 800/77.

Mertens de Wilmars Mackenzie Stuart Pescatore

Sørensen O'Keeffe Bosco Touffait

OPINION OF MR MAYRAS — CASE 157/78