C-3/80

on the validity of Article 1 of Regulation No 2547/74 of the Commission of 4 October 1974 and of Regulation No 539/75 of the Commission of 28 February 1975 fixing the monetary compensatory amounts and certain rates for their application,

T H E COURT (Second Chamber)

composed of: P. Pescatore, President of Chamber, A. Touffait and O. Due, Judges,

Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

the Netherlands into the Federal Oeding levied monetary compensatory Republic of Germany several amounts at the rate of 169.90 DM per consignments of milk-based compound 1 000 kilograms net weight in respect of feedingstuffs intended for fattening the imports carried out in January 1975 calves, having a starch content by weight and at the rate of 149.40 DM in respect of less than 10 % and falling within tariff of the imports carried out in March 1975 subheading 23.07 B I a of the Common (instead of the rates of 127.40 DM and Customs Tariff. 112.10 DM respectively applying in the case of tariff subheading 23.07 B I a 3).

by its order of 29 September 1977 The customs office, however, classified received at the Court of Justice on 5 the product under tariff subheading January 1978, referred to the Court for a 23.07 B I a 4, finding a milk product preliminary ruling under Article 177 of content of more than 75 %. It made that the EEC Treaty several questions on the finding in application of Article 11 (1) of interpretation of the regulations of the Regulation No 823/68 of the Council of Council and of the Commission 28 June 1968 determining the groups of concerned respectively with the calcu- products and the special provisions for lation of levies on milk and milk calculating levies on milk and milk products and the method of determining products (Official Journal, English the lactose content of compound Special Edition 1968 (I), p. 199), which feedingstuffs imported from third provides that the milk product content of countries with regard to the rate of products falling within tariff subheading monetary compensatory amounts levied ex 23.07 B are to be determined by on those products. applying a coefficient of 2 to the lactose

June 1968 determining the groups of Consequently, and in accordance with products and the special provisions for Article 1 of Regulation No 2547/74 of calculating levies on milk and milk the Commission of 4 October 1974 and products is decisive with regard to the Article 1 of Regulation No 539/75 of the amount of the monetary compensatory Commission of 28 February 1975 fixing amounts which must be charged on the monetary compensatory amounts and compound feedingstuffs coming under certain rates for their application tariff subheadings 23.07 B I a 3 or (Official Journal L 272, p. 1 and Official 23.07 B I a 4 of the Common Customs Journal L 57, p. 2), the customs office at Tariff which were imported from the

Prior to the issue of that judgment the In so far as they include in the basis of Court had held in its judgment given on assessment for monetary compensation 3 May 1978 in Case 131/77 Milac [1978] the content by weight of any whey in ECR 1041, a reference from the Finanz- compound feedingstuffs within tariff gericht des Saarlandes for a preliminary subheadings 23.07 B I a 3 and 4 of the ruling, that Article 1 of Regulation No Common Customs Tariff, are Article 1 539/75 of the Commission is invalid in of Regulation (EEC) No 2547/74 of so far as it fixes compensatory amounts the Commission of 4 October 1974 in respect of trade in powdered whey. and Article 1 of Regulation (EEC) The Court had held that the price of No 539/75 of the Commission of powdered whey, a product derived from 28 February 1975 invalid in that they the processing of milk, did not depend infringe higher ranking Community law, on the price of skimmed-milk powder. in particular Article 2 (2) of Regulation However, under Regulation No 974/71 (EEC) No 974/71 of the Council of of the Council of 12 May 1971 on 12 May 1971? certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of The order of the Finanzgericht Münster fluctuation for the currencies of certain was registered at the Court Registry on Member States (Official Journal, English 8 January 1980. Special Edition 1971 (I), p. 257) monetary compensatory amounts may be charged or granted in respect only of In accordance with Article 20 of the products the price of which depends on Protocol on the Statute of the Court of products covered by intervention Justice of the EEC, written observations arrangements under the common organ- were submitted on 19 March 1980 by ization of agricultural markets. the Commission of the European Communities, represented by its Legal Adviser, Peter Gilsdorf, acting as Agent, Milchfutter consequently submitted assisted by Albrecht Stockburger, of the before the Finanzgericht Münster that Frankfurt am Main Bar, and on 27 the charging of monetary compensatory March 1980 by Milchfutter, the Plaintiff amounts in application, in particular, of in the main action, represented by Regulations Nos 2547/74 and 539/75 of Dietrich Ehle, of the Cologne Bar. the Commission is contrary to Regu- lation No 974/71 of the Council in so far as account is taken, in the calculation After the hearing the report of the of those amounts, of the quantity of Judge-Rapporteur and the views of the powdered whey contained in the milk- Advocate General the Court decided to based compound feedingstuffs imported open the oral procedure without any by it. preparatory inquiry.

B — Matters of law (a) It is appropriate to recall that, by its Regulation No 1824/77 of 4 August 1977 altering the monetary compen- (a) The answer to be given to the satory amounts applicable to milk and question put by the Finanzgericht milk products (Official Journal L 203, p.Münster must be based upon Regulation 7), the Commission, as from 1977, No 974/71 of the Council: the issue is ceased to apply monetary compensatory to determine the manner of calculating amounts to whey and that, by Regu- the monetary compensatory amount lation No 3005/77 of 22 December 1977 applicable to the products in question altering the monetary compensatory and thus, at the same time to pronounce amounts for certain milk products and upon the interpretation and the cereals (Official Journal L 354, p. 1), it application of Article 2 (2) of Regulation excluded the powdered whey content No 974/71 in terms of which, for from the calculation determining mone- products the price of which depends on tary compensatory amounts for animal that of products covered by intervention feedingstuffs containing powdered whey. arrangements under the common organ- As from that date monetary compensatory ization of agricultural markets, the amounts have been calculated by taking compensatory amount shall be equal to account of the actual percentage of the incidence, on the price of the skimmed-milk powder contained in the product concerned, of the application of finished product, without other products the compensatory amount to the price of derived from milk also being taken into the product on which they depend. The consideration by means of a flat-rate monetary compensatory amount for a calculation. product intended for animal feeding which contains both skimmed-milk powder and powdered whey may (b) Following upon the judgment of therefore not be calculated only on the the Court of 3 May 1978 in Case 131/77 basis of the skimmed-milk powder; in Milac, the Commission, by its Regulation particular, the same monetary com- No 1733/78 of 24 July 1978 amending pensatory amount may not be charged Regulation No 1036/78 (Official Journal on both the powdered whey content and L 201, p. 36), excluded the whey content the skimmed-milk powder content. in milk and cream from the calculation of the monetary compensatory amount. (b) In its judgment of 4 July 1978 in Case 5/78 Milchfutter the Court recalled (c) The dairy constituents of the that the rules governing the determi- compound feedingstuffs imported by nation of the products subject to the

system of compensatory amounts are to (c) Having regard to the higher be sought in the provisions of the regu- authority of the rules of Regulation No lations on the organization of the various 974/71, that conclusion, which is valid agricultural markets, given that the for the future, must be equally valid for products in question are designated the past. In so far as the Commission is according to the headings · and sub- not itself prepared to undertake the headings of the Common Customs necessary corrections for products

Both methods protection for the level of Community produce the same result: in neither case prices but seek rather to maintain is the monetary compensatory amount uniform prices, which are the foundation applied to compound animal feeding- of the present organization of agri- stuffs higher than that provided for tariff cultural markets. The payment or the subheading 23.07 B I a 3 of the Common charging of monetary compensatory Customs Tariff. The first method is amounts is only lawful where their non- certainly the more correct one, powdered application is such as to involve distur- whey being generally excluded from the bances in the movement of the goods determination of the monetary com- concerned. pensatory amount for a compound pro-

amounts. The Commission has accepted The Commission disputes that the this conclusion, which is the only correct finding, made in the judgment of the one, in Regulations Nos 1824/77, Court in the Milac case that, given that 3005/77 and 1733/78. the price of powdered whey is not

dependent on that of skimmed-milk compound foods. A simple calculation of powder which is an intervention product, the powdered whey content was the fixing of monetary compensatory therefore not possible for the purpose of amounts for powdered whey is contrary fixing monetary compensatory amounts. to Regulation No 974/71, leads to the The reliable method of calculation result that powdered whey must be provided for by Community regulations excluded from the calculation of rested on the determination of lactose in monetary compensatory amounts appli- accordance with Regulation No 823/68, cable to compound foods. which, in the nature of things, made no distinction between the lactose emanating from the skimmed-milk powder and the lactose emanating from a mixture with powdered whey. (a) According to Regulation No 974/71 the price of compound foods, containing milk products and falling within tariff subheading 23.07 B I a 3 or Accordingly, in the absence of effective 23.07 B I a 4 depends essentially on the methods of control capable of easy content of the principal component, application in practice, the Commission's more precisely, the "milk product" unwillingness in the first years of the content within the meaning of Article 11 application of monetary compensatory (1) of Regulation No 823/68 and, amounts to take account in fixing them especially, of skimmed-milk powder, of the powdered whey content should being a product subject to the common not be criticized. The necessity of relying organization of the market and covered exclusively on information furnished by by intervention measures. Originally, manufacturers and importers and the skimmed-milk powder represented the opportunities for falsification would have main part, in value and in quantity, of involved difficulties for the system of the "milk product" in compound foods. monetary compensatory amounts, parti- However, more and more, the manufac- cularly in the powdered milk sector. In turers of compound foods are having view of the impossibility in practice of recourse to the addition of whey, which determining in a reliable manner the is much less expensive. Whey is also a powdered whey content, the only alter- milk product. From the point of view of native would have been to dispense with its composition, it is distinguishable from applying any monetary compensatory skimmed-milk powder by a lower protein amount to compound foods. That and fat content as well as by a solution would not have been acceptable considerably higher lactose content. having regard to the importance in quality and value of the milk product content of compound foods.

practice was not unilaterally directed of the percentage powdered milk content against the trade but was motivated by of the final product. objective difficulties of control. (d) The question put by the Finanz- (c) The fact that, at the end of 1977, gericht Münster admits of the following the Commission decided no longer to answer: take account of the powdered whey Consideration of Article 1 of Regulation content in determining the monetary No 2547/74 of the Commission of 4 compensatory amounts applicable to October 1974 and Article 1 of Regu- compound foods does not call in lation No 539/75 of the Commission of question the validity of the system which 28 February 1975 has disclosed no factor applied until then. Because of the of such a kind as to effect their validity. widening of the obligation to make the appropriate declarations imposed on exporters and importers, improvements III — Oral procedure in methods of analysis which had meantime taken place and the fact that Milchfutter GmbH & Co. KG, The the group of manufacturers and traders plaintiff in the main action, represented concerned is limited and may be by Dietrich Ehle and the Commission, regarded as trustworthy, the Commission represented by Albrecht Stockburger, considered it appropriate to draw submitted oral argument and answered distinctions between the constituents of questions from the Court at the sitting the milk products on the basis of which on 10 July 1980. compensatory amounts are calculated for compound foods and thenceforward to The Advocate General delivered his calculate those amounts only on the basis opinion at the sitting on 2 October 1980.

4 The classification of the product being now settled, the plaintiff in the main action has raised an issue concerning the calculation of the monetary compensatory amounts applicable in this case. From the order seeking the preliminary ruling, it appears that the plaintiff considers, with reference to the judgment of the Court of 3 May 1978 in Case 131/77 Milac v Haupt- zollamt Saarbrücken [1978] ECR 1041, that the charging of a monetary compensatory amount is contrary to Regulation No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (Official Journal, English Special Edition 1971 (I), p. 257), in so far as account is taken, in the calculation of that amount, of the quantity of powdered whey contained in the compound feedingstuffs in question. According to information supplied by the plaintiff, those feedingstuffs contain 65·2% skimmed-milk powder and 9·5% powdered whey.

5 The plaintiff considers that, in accordance with the principle which emerges from the Milac judgment, the whey content ought to be excluded from the calculation of the monetary compensatory amounts applicable to compound feedingstuffs.

6 It is with a view to deciding this dispute that the Finanzgericht has submitted the following question:

In so far as they include in the basis of assessment for monetary compensation the content by weight of any whey in compound feedingstuffs within tariff subheadings 23.07 B I a 3 and 4 of the Common Customs Tariff, are Article 1 of Regulation (EEC) No 2547/74 of the Commission of 4 October 1974 and Article 1 of Regulation (EEC) No 539/75 of the Commission of 28 February 1975 invalid in that they infringe higher ranking Community law, in particular Article 2 (2) of Regulation (EEC) No 974/71 of the Council of 12 May 1971?

— on the one hand, that the product involved should be a product covered by intervention arrangements under the common organization of agri- cultural markets or one the price of which is dependent on that of such a product;

— on the other hand, that it should be established that monetary fluc- tuations are capable of leading to disturbances in trade in the agricultural product in question.

9 Having regard to the criteria adopted by the regulation, the implementation by the Commission of that provision in accordance with the provisions of Article 6 implies a wide discretionary power as respects the dependence of the price of the products in question in the price of one or more agricultural products covered by intervention arrangements in the context of the common organization of the market and as respects the ascertainment or anticipation of disturbances in trade in the product or products concerned.

MILCHFUTTER v HAUPTZOLLAMT GRONAU

10 Precisely because of the nature of compound feedingstuffs falling within tariff subheading 23.07 B l a , evaluation of these matters gives rise to special difficulty, not only as regards the assessment of economic data, but also as regards the opportunities for practical application and control. The fact that particular feedingstuffs contain a more or less substantial percentage of a product which does not satisfy the condition of dependence contained in Article 1 (2) (b) of Regulation No 974/71 does not have the result of imposing on the Commission an automatic duty to exclude that element from the calculation of monetary compensatory amounts. In fact, the determi- nation of those amounts is subject to a complex assessment made up of various factors related to the nature of the feedingstuffs and the relationship, in terms of volume and value, of their various constituents.

JUDGMENT OF 30. 10. 1980 — CASE 3/80

Costs

1 4 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in 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, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Second Chamber)

in answer to the question submitted to it by the Finanzgericht Münster by- order of 20 November 1979, hereby rules: