C-162/82

However, when the Commission takes It appears contradictory and discrimi- the change of tariff heading for natory for Regulation N o 749/78 to processed products only as a basic provide substantially more severe rule, justified on the one hand by the criteria for the determination of the need for legal certainty and on the • origin of cotton yarn than for the other hand by the problems of determination of the origin of cloths definition in multiple economic and fabrics. Although the Commission circumstances and when it possesses a discretionary power for supplements and adapts that basic rule the application of the general criteria in order to take into account the contained in Article 5 of Regulation particular features of specific working No 802/68 to specific work or or processing operations, it is not processing operations it cannot adopting a method which is in itself however, in the absence of objective incompatible with the general criteria justification, adopt entirely different provided by Article 5 of Regulation solutions for similar working or No 802/68. processing operations.

In Case 162/82

R E F E R E N C E t o t h e C o u r t u n d e r Article 177 of the E E C T r e a t y b y t h e Tribunal de Police [local c o u r t with m i n o r criminal jurisdiction], Strasbourg, for a preliminary ruling in t h e criminal proceedings pending before t h a t tribunal against

PAUL C O U S I N AND SOCIÉTÉ W O E H L ET C I E , S t r a s b o u r g ,

JOSEPH DELTOUR,

COUSIN

on t h e interpretation of Article 30 of the E E C T r e a t y a n d t h e validity of Commission Regulation ( E E C ) N o 7 4 9 / 7 8 of 10 April 1978 o n t h e determi- nation of the origin of textile products falling within Chapters 51 a n d 53 t o 62 of the C o m m o n C u s t o m s Tariff (Official J o u r n a l L 101, p . 7 ) ,

THE COURT

composed of: J. M e r t e n s d e Wilmars, President, U . Everling (President of C h a m b e r ) , Lord M a c k e n z i e Stuart, O . D u e and Y. G a l m o t , Judges,

Advocate G e n e r a l : Sir G o r d o n Slynn Registrar: P . H e i m

gives the following

JUDGMENT

declaration must be made containing all (a) working or processing as a result of the information necessary for the which the products obtained receive application of customs rules and the a classification under a tariff heading compilation of statistics for customs other than those covering the various purposes. In particular, the declaration products utilized except, however, must state the origin of the goods. working or processing specified in List A, where the special provisions Failure to comply with those provisions of that list shall apply; constitutes an infringement of customs law punishable by a fine. (b) working or processing specified in List B." Article 5 of Regulation (EEC) No • 802/68 of the Council of 27 June 1968 Cotton yarn not put up for retail sale, on the common definition of the concept under tariff heading 55.05, appears in the of the origin of goods (Official Journal, List A referred to in subparagraph (a) of English Special Edition 1968 (I), p. 165) the above provision, which mentions provides that: "Manufacture from products falling within heading No 55.01 or 55.03" as "A product in the production of which being "working or processing that two or more countries were concerned confers the status of originating shall be regarded as originating in the products". Cotton yarn is not mentioned country in which the last substantial in List B. process or operation that is economically justified was performed, having been The third paragraph of Article 2 of carried out in an undertaking equipped Regulation No 749/78 lists in addition for the purpose, and resulting in the certain working or processing which manufacture of a new product or "shall in any event be considered as representing an important stage of manu- insufficient . . . to confer the status of facture." originating products irrespective of whether or not there is a change of tariff Commission Regulation (EEC) No heading", including operations to ensure 749/78 of 10 April 1978 on the determi- the preservation of products during nation of the origin of textile products transport and storage, simple operations falling within Chapters 51 and 53 to 62 consisting of removal of dust, sifting, of the Common Customs Tariff (Official screening or washing and change of Journal L 101, p. 7), which was adopted packaging. on the basis of the regulation quoted above, provides in Article 1 that: 2. Between 1978 and October 1980 Etablissements Tricotage mécanique de "Textile products falling within Chapters Marmoutier SA and Allenbach SA both 51 and 53 to 62 of the Common established in France, purchased cotton Customs Tariff shall be considered as yarn not put, up for retail sale, coming originating in the country in which they under tariff heading 55.05 B II, from have undergone one complete process Wuppertaler Garnbleicherei und Färberei as specified in Article 2 or in the Eduard Goebel (hereinafter referred to Community if they have undergone such as "Goebel") whose principal offices are process there." in Wuppertal in the Federal Republic of Germany, and its representative in Article 2 provides that: France, Mr Deltour.

In the course of a subsequent investigation the French customs auth­ orities determined that Goebel were The proceedings formed part of a whole finishers, primarily of lisle thread, who series of actions brought before various had purchased unbleached cotton yarn, local courts for false indication of origin mainly in Egypt and the United States, on the importation of cotton yarn sold which was then put into free circulation by Goebel. In one case, the Tribunal de in the Federal Republic of Germany. T o Police in Troyes dismissed the charges that yarn Goebel applied the following against the accused, holding that the processes : processing carried out by Goebel had given the yarn material properties which enabled it to be used for a purpose for which it could not have been used Gassing, where that had not already before, and that the third paragraph of been performed prior to purchase by Article 2 of Regulation N o 749/78 could Goebel; be interpreted to the effect that the processing carried out by Goebel, being more extensive than that described in the Mercerizing, in which the cotton is paragraph, was capable of determining treated under tension with strong the origin of the product. In another case detergent, the purpose of the operation the Tribunal de Police in Tourcoing being to give the yarn a lustre similar to imposed 106 fines of FF 300 each on the that of silk and to improve its resistance customs agents concerned and 106 fines to breakage; of FF 200 each on Goebel and its director, Mr Hasenack, and dismissed the charges against the French importers. Spooling on dyeing cones and dyeing, the latter operation being performed in special apparatus which enables the dye to remain fast in washing of tempera­ 3. Before the Tribunal de Police in tures above 90°, and even resistant to Strasbourg the customs authorities boiling; claimed that it was the duty of all the parties concerned to make reasonable efforts to ascertain the true origin of the Re-spooling of the yarn for immediate goods and that in the circumstances of use in high quality knitwear. that case all the importers, who had been put on notice by the price differentials, could easily have ascertained that the The customs authorities considered that origin of the imported yarn was not the such processing did not enable the Federal Republic of Germany. They Federal Republic of Germany to be pointed out that the requirements regarded as the country of origin of the concerning the indication of origin had imported cotton yarn under Regulation been held by the Court of Justice in its No 749/78 because it did not have the judgments of 15 December 1976 (Case effect of bringing the cotton yarn under 41/76 Suzanne Crieļ née Donckerwolcke

[1976] ECR 1921) and 28 March 1979 determining the origin of certain woven (Case 179/78 Rivoira [1979] ECR 1147) textile products (Official Journal, English to be compatible with Article 30 of the Special Edition 1971 (I), p. 274). The EEC Treaty, even in the case of goods in question therefore arose whether the free circulation in another Member State. exceptions defined by Article 2 of Regu- lation No 749/78 amounted to a measure of the kind prohibited by Article The customs agents contended that they 30 of the EEC Treaty. were not at fault in having failed to conduct enquiries concerning the indication of origin which had been Accordingly, the Tribunal de Police in

The Tribunal de Police in Strasbourg considered that, prima facie, the customs authorities could require an indication of Pursuant to Article 20 of the Protocol on the first origin of the imported goods the Statute of the Court of Justice of the without thereby infringing Community EEC written observations were submitted law. However, as regards the determi- by Wuppertaler Garnbleicherei und nation of that origin there was a Färberei Eduard Goebel, Wolfgang difficulty in interpreting Commission Hasenack and Joseph Deltour, rep- Regulation N o 749/78, and especially resented by Jean-Claude Woog and Article 2 thereof, which defines the Jean-François Durand of the Paris Bar; extent of the working and processing in by Pierre Allenbach and Allenbach SA, relation to the tariff heading, and not and Paul Leclaire and Établissements merely in relation to the treatment of the Tricotage mécanique de Marmoutier SA, goods within the meaning of Regulation represented by Daniel Ohi of the No 802/68 of the Council of 27 June Strasbourg Bar; by Paul Cousin and 1968 and Regulation (EEC) No 1039/71 Société Woehl, Jean Schmitt and Société of the Commission of 24 May 1971 on Heppner and Jean-Daniel Seegmuller

and Transports SeegmuUer, represented or working, and a processing which is by E. Girard of the Paris Bar; by the economically justified. In the case of Government of the Italian Republic, textiles, and lisle thread in particular, the represented by Aldo Linguiti, Avvocato Commission considered those conditions dello Stato; and by the Commission of fulfilled if the products had been the European Communities, represented subjected to a complete process by Rolf Wägenbaur, its Legal Adviser. representing a stage in the manufacture of the product, which would be the case if the result was to bring the product under a tariff heading different from that Upon hearing the report of the Judge- governing each of the products used. Rapporteur and; the views of the Advocate General the Court decided by an order of 28 October 1982 to assign the case to the Fifth Chamber in The considerations set out in the accordance with Article 95 of the Rules preamble to Regulation N o 749/78 of Procedure and to open the oral indicate that the Commission wished to procedure without any preparatory make some exceptions to the rule inquiry. However, it requested Goebel contained in Article 5 of Regulation No and the Commission to reply in writing 802/68. An examination of the before the hearing to a number of provisions contained in Regulation No questions concerning the processing 749/78 reveals that the cases in which carried out by Goebel and the working or processing is not to be considerations underlying the adoption considered complete are far more of Regulation No 749/78. numerous than those in which the opposite may be said. In particular, the large number of products covered by List A, including cotton yarn not put up for retail sale, is subject to a special set of different rules which impose far more II — W r i t t e n o b s e r v a t i o n s s u b - severe conditions for permitting the mitted to the Court Community to be regarded as the place p u r s u a n t to A r t i c l e 20 of of origin. the P r o t o c o l on t h e S t a t u t e of t h e C o u r t of J u s t i c e of the E E C Such special conditions are particularly harsh and unwarranted in view of the fact that the working of the yarn carried out by Goebel was very extensive. For 1. Observations submitted by Wuppertaler the purposes of Article 5 of Regulation Garnbleicherei und Färberei Eduard No 802/68, gassing, mercerizing and Goebel, Mr Hasenack and Mr Deltour dyeing constitute a "substantial operation" "representing an important stage of manufacture". That is borne out by the terms of Regulation No 1039/71 WGF, Mr Hasenack and Mr Deltour of the Council of 24 May 1971 on submit that according to Article 5 of determining the origin of certain woven Regulation No 802/68 the origin of textile products (Official Journal, English products which are made in a country Special Edition 1971 (I), p. 274), which from imported products is primarily an states in particular that "dyeing, if it is economic question, which depends on accompanied by any finishing operation the application of substantial processing which has the effect of rendering the

dyed product directly usable" confers a provision. Article 2 of Regulation N o fresh origin on the product. Goebel is an 749/78 and the annexes to the regulation undertaking especially equipped for must therefore be invalid. dyeing, gassing and mercerizing. These are very complicated and highly technical operations, resulting in the creation of a textile product of greater The regulation also amounts to a technical worth and higher market value, measure having an effect equivalent to a ready for immediate use, which is not quantitative restriction on imports. In the the case before such working. first place, contrary to what was stated by the Court in its judgment of 15 December 1976 (Case 41/76 Criel, née Donckerwolcke, [1976] ECR 1921), it has Regulation No 749/78 and List A the effect of requiring the importer to thereof thus have the arbitrary effect of declare with regard to origin something preventing the product exported by other than what he might reasonably be Goebel from qualifying as a product expected to know. In the second place, it originating in the Community in order enables the national customs authorities to satisfy national protectionist require- to apply restrictive measures on import. ments which are contrary to the spirit of As a result of the regulation the entry of the Treaty. such products into French territory is subject to obtaining an import licence (Dl) when in fact they are products in free circulation. It usually takes at least one month to issue the import licence The description in the third paragraph of and the goods are put in storage by the Article 2 of Regulation No 749/78 of the customs authorities for between two and processes which are not capable of six weeks; debts are therefore incurred in conferring a new origin on a product, the form of warehouse charges and moreover, shows that they have nothing marketing cannot be done with the speed in common with the treatment applied to which is particularly essential in the textile yarns by Goebel, a fact which textile industry. might be taken as an indication that those products, by contrast, may indeed be considered to have undergone processing sufficient to confer upon them Goebel, Mr Hasenack and Mr Deltour Community origin. therefore suggest the following reply to the question which has been raised:

2. The restrictive provisions imposed by obligation to indicate the country of the Commission in Regulation No origin of the imported product. 749/78 were adopted in breach of Regulation No 802/68 of the Council; they create a material, commercial and financial obstacle to the free movement of goods and, Furthermore, Regulation No 749/78 has therefore, constitute measures having the effect in practice of requiring the an effect equivalent to quantitative importer, contrary to the terms of the restrictions which are prohibited by judgment of the Court in Donckerwolcke, Article 30 of the Treaty. to make statements concerning the origin which go beyond what he knows or might reasonably be expected to know. Whilst he may know that the basic product was worked in Germany, it would be impossible or extremely difficult for him to ascertain in what state the basic product itself was supplied 2. Observations submitted by Pierre to Goebel, and it is not for him to carry Allenbach and Allenbach SA, and by out inquiries at Goebel's factory. In Paul Leclaire and Établissements creating extreme difficulties for the Tricotage mécanique de Marmoutier SA importer in inquiries into the origin, the rules concerning the origin of cotton yarn have the effect, if not the purpose, of restricting trade. Such rules must not be devised with a view to shielding trade or constitute an instrument of a Allenbach SA and Établissements protectionist nature. In this case, fur- Tricotage mécanique de Marmoutier SA, thermore, France has adopted a measure the French importers of cotton yarn having an effect equivalent to a supplied by Goebel, and their directors quantitative restriction, namely the observe, first, that according to the import licence requirement. case-law of the Court the requirement that the country of origin be indicated on the customs declaration form does not constitute a measure equivalent to a quantitative restriction if the goods in As far as the criteria for determining question are covered by measures of origin are concerned, the Commission commercial policy adopted by the used the concept of "complete process" importing Member State in conformity in Regulation No 749/78 whereas Regu- with the Treaty. However, during the lation No 802/68 of the Council period in question France did not request required only a "substantial process or application of Article 115 of the EEC operation". The restriction is therefore Treaty to yarn from Egypt and the clearly a far more stringent one. Of the United States of America. Checks alternative criteria mentioned in Article 5 introduced under national rules are of Regulation No 802/68 the Com- therefore unlawful and contrary to Article 30 of the EEC Treaty. Measures mission deliberately chose only that of of protection to be adopted in the future the "manufacture of a new product". cannot form the legal basis for imposing Such a restrictive concept of origin and on importers a general and permanent the reference to the Common Customs obligation to apply for a licence or an Tariff as the decisive criterion (a doubtful one in the light of the reference

In any case, the criteria for determining According to the judgment of the Court the origin of goods laid down by Regu- of 26 January 1977 (Case 49/76 lation No 749/78 are contrary to the Gesellschaft fiir Überseehandel mbH general rules contained in Regulation No [1977] ECR 41) it is unsatisfactory and 802/68 and constitute measures having insufficient to apply the general criteria an effect equivalent to quantitative laid down in Regulation No 802/68 on restrictions. the purely abstract basis of customs nomenclature. The work carried out by Goebel amounts to a substantial processing inasmuch as the procedures are fairly complex, play an important 3. Observations submitted by Mr Cousin rôle in the manufacturing process for and Société Woehl et Cie, Mr Schmitt yarn and result in an alteration of the and Société Heppner, and Mr appearance and the intrinsic properties of Seegmuller and Transports Seegmuller strength and durability of the finished product. The processing is the last applied to the product prior to its sale in that form, and it is an economically The customs agents, Mr Cousin and justified process without which the yarn Société Woehl, Mr Schmitt and Société would be unsuitable for use. The Heppner and Mr Seegmuller and processing is carried out in an under- Transports Seegmuller, maintain that the taking specially equipped for the customs authorities in their contentions purpose. In taking into account solely before the Tribunal de Police, attempted the basic product used in the manu- to deprive the word "reasonable", which facture of cotton yarn Regulation N o was used by the Court in the 749/78 fails inevitably to comply with Donckerwolcke judgment in particular, of the terms of Article 5 of Regulation No any meaning by compelling the customs 802/68. agent to inquire into the accuracy of his instructions and by creating absolute liability regardless of whether it was possible for him to discover the legal Mr Allenbach and Allenbach SA and Mr origin of the merchandise. That Leclaire and Établissements Tricotage approach is contrary not only to the mécanique de Marmoutier SA therefore judgment of the Court in Donckerwolcke suggest the following reply to the but also to the assurances given by the question which has been raised: French customs authorities in a letter to the Fédération des Commissionnaires en Douanes [Customs Brokers' Federation] which stated that the latter would in On the basis of the Treaty of Rome and most cases, in the absence of personal in particular Articles 9 et seq., 110 and misconduct, not be brought into 115 thereof, and other provisions of proceedings. It is likewise in conflict with Community law, it must be considered the principle of legal certainty stated by that the principle of requiring the origin the Court in its judgment of 9 July 1981 of goods to be stated on clearing (Case 169/80 Administration des Douanes customs is unlawful and constitutes a v 5,4 Gondrand Frères [1981] ECR 1931).

The provisions of Regulation No 749/78 Regulation No 749/68 is unlawful barely disguise the derogations from the because it was adopted by an authority principle in Article 5 of Regulation No without the power to adopt it and in 802/68 which they introduce. Whereas disregard of the correct procedure laid Regulation No 802/68 laid down two down by Article 235 of the EEC Treaty. alternative conditions, namely the manu- facture of a new product or an operation representing an important stage of manu- Regardless of the origin of the goods facture, Regulation No 749/78 makes which, being in free circulation, are those conditions cumulative by requiring placed on the market in another the products to have undergone complete Community country, the application of processing representing a stage in the criminal sanctions in respect of a

Observations submitted by the which case they could have been Government of the Italian Republic properly adopted only in application of Article 235 of the EEC Treaty. The Government of the Italian Republic observes thath the problem which has arisen has already been resolved in a Furthermore, if Regulation No 749/78 previous case before the Court did not constitute a measure having (judgment of 15 December 1976, Case an effect equivalent to quantitative 41/76 Donckerwolcke [1976] ECR 1921). restrictions, the national practices It has now to be considered in a more adopted by the French authorities do specific context, namely in relation to the amount to such a measure, which is provisions of Regulation No 749/78. prohibited inasmuch as prosecutions were instituted against persons acting in good faith and not in a position to know The requirement of a declaration of the what the true origin of the goods was. country of origin has been recognized

JUDGMENT OF 23. 3. 1983 — CASE 162/82

provided for in Article 115 of the EEC the Community. The choice of the Treaty. If, however, the importer was system adopted in Regulation N o 749/78 asked to declare more than he knew or was dictated by the fact that it had could reasonably have been expected to already been used in connection with the know the requirements might then be application of generalized preferences in incompatible with Article 30. favour of developing countries, that is to say, in Commission Regulation No 2966/77 of 23 December 1977 on the definition of the concept of originating It is therefore not clear how Articles 1 products for purposes of the application and 2 of Regulation No 749/78 could of tariff preferences granted by the come into conflict with Article 30. On European Economic Community in the contract, by establishing precise respect of certain products from criteria, applicable throughout the developing countries (Official Journal Member States, for identifying the place L 350, p. 1). of origin, the provisions help to create better conditions for compliance with the obligation to make a declaration. If the obligation were in any way a disprop- In this instance the processing consisted ortionate one it could never be as a in "gassing, mercerizing, spooling prior result of the application of the regu- to dyeing and re-spooling" the cotton lation, but only as a result of special yarn, which does not make of it an circumstances which would have to be "originating product". evaluated in the individual case.

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tension. The purpose is to give the yarn a The Commission points out, moreover, lustre similar to silk and to increase its that it is not clear in what respect the resistance to breaking. change in the legal situation brought about by the adoption of Regulation No The dyeing effected by Goebel is 749/78 amounts to an obstacle to trade. performed by one of the most modern Imports into France of cotton yarn not dyeing systems, which makes it possible put up for retail sale, in free circulation to dye up to 800 kg with the help of a in Germany but originating in the United computer so as to guarantee continual States or Egypt, are free and not subject consistency of colour; this makes it to customs duties, since France has not possible to obtain resistance to washing introduced protective measures based on at 80° or even at boiling point.

The adopted pursuant to Regulation No dyeing processes alone increase the value 802/68 of the Council and applicable by 99%. from 1 May 1978, according to which cotton yarn not put up for retail sale These finishing processes bring about a (under tariff heading 55.05) is not to be decisive change in the unbleached yarn regarded as originating in a particular as regards optical appearance, resistance country unless it was manufactured from to use and cleaning qualities. The products coming under headings 55.03 unbleached yarn in itself has no specific of the Common Customs Tariff. use. It is only after the finishing

Article 5 of Regulation N o 802/68 Regulation No 749/78, in the second makes necessary an interpretation of the recital in the preamble, refers to the criteria used, of which the regulation concept of "one complete process itself does not give any details. Several constituting a stage of manufacture". In methods were therefore conceivable for the field of textiles the customs tariff is applying measures of implementation, drafted in such a way that a fresh tariff each of which had already been used in heading corresponds to each stage of the past for certain cases. A first method manufacture (Cotton, not carded or consists in proceeding by a detailed combed — Cotton, carded or combed — description of the performance of the Yarn — Fabric — Articles of apparel). substantial process or operation; a The Commission took the view that second method involves fixing the gassing, mercerization and dyeing did percentage of value added deemed not involve a really "substantial" indispensable to constitute a substantial operation since the product was cotton process or operation; the third method is yarn both before and after. In any event that of changing the tariff heading, it is impossible to speak in this regard of supplemented where appropriate by "complete processing", the term by additional criteria. The last of these which Regulation No 749/78 defines the methods was the one selected by the words "substantial process or operation" Commission in Regulation N o 749/78. in Article 5 of Regulation No 802/68.

The choice of this system was not made on grounds of an economic nature but by reason of the practical advantages which it offers. A similar system has been IV — O r a l p r o c e d u r e in use since 1971 for the application of generalized preferences in favour of developing countries and is consequently At the sitting on 9 February 1983 oral familiar to traders (cf. Commission argument was presented by the Regulation No 2966/77 of 23 December following: Mr Cousin, Société Woehl,

3 The supplier of cotton yarn, Wuppertaler Garnbleicherei und Färberei Eduard Goebel [hereinafter referrred to as "Goebel") of Wuppertal in the Federal Republic of Germany, made deliveries over a period of several years and in particular between 1978 and October 1980 of cotton yarn not put up for retail sale falling under Tariff Heading 55.05 B II of the Common Customs Tariff, to various French customers including Etablissements Tricotage mécanique de Marmoutier SA and Allenbach SA, both established

JUDGMENT OF 23. 3. 1983 — CASE 162/82

in France. The customs declaration forms were prepared by customs agents including Woehl, Heppner and Seegmuller, companies acting on the instructions of Goebel. The gave the Federal Republic of Germany as the country of origin.

4 In the course of a subsequent investigation the French customs authorities established that Goebel, an undertaking in the textile finishing industry, had purchased unbleached cotton yarn, mainly in Egypt and the United States, and after it had been put into free circulation in the Federal Republic of Germany, subjected it to various finishing processes namely dyeing and usually also gassing and mercerizing prior to selling it to the consumers. The French customs authorities took the view that these processes did not enable the Federal Republic of Germany to be regarded as the country of origin of the cotton yarn under Commission Regulation (EEC) No 749/78 and brought proceedings before various Tribunaux de Police against Goebel and the various companies and persons connected with the imports in question.

"A product in the production of which two or more countries were concerned shall be regarded as originating in the country in which the last substantial process or operation that is economically justified was performed, having been carried out in an undertaking equipped for the purpose and resulting in the manufacture of a new product or representing an important stage of manufacture."

Article 14 of that regulation gives the Commission the power to adopt the necessary provisions for the implementation of the said Article 5, in accordance with a procedure laid down in paragraphs (2) and (3) of that article and following an opinion of the Committee on Origin.

s In exercise of that power, the Commission provided by Regulation No 749/78 that the textile products alluded to in that regulation were to be considered as originating in a country or in the Community if they had undergone one complete process as specified in Article 2. That article provides :

"The following shall be considered as complete working or processing: (a) working or processing as a result of which the products obtained receive a classification under a tariff heading other than those covering the various products utilized except, however, working or processing specified in List A, where the special provisions of that list shall apply; (b) working or processing specified in List B."

9 That provision is supplemented by the two lists A and B annexed to the regulation. List A enumerates the working or processing operations which result in a change in tariff heading without conferring on the products undergoing them the status of originating products or conferring that status only subject to certain conditions. On the other hand, List B sets out the working or processing operations which do not lead to a change in tariff heading but which do confer on the products undergoing them the status of

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T h e v a l i d i t y of R e g u l a t i o n N o 7 4 9 / 7 8

1 3 According to the persons accused, Commission Regulation N o 749/78 is invalid inasmuch as it precludes the acquisition of Community origin as a result of the processes in issue. On the one hand that provision is said to be contrary to Article 30 of the EEC Treaty and, on the other hand, by adopting it, the Commission has exceeded the powers which it derives from Regulation (EEC) N o 802/68 of the Council.

H The Commission, supported by the Italian Government, claims that it has made a legitimate and correct use of its power to interpret the vague terms of Article 5 of Regulation No 802/68 by adopting a simple and clear criterion which, moreover, is in conformity with the criteria laid down in Commission Regulation (EEC) No 2966/77 of 23 December 1977 (Official Journal, L 350, p. 1), on the definition of the concept of originating products for purposes of the application of tariff preferences granted by the European Economic Community in respect of certain products from developing countries. Regulation N o 749/78 involves no obstacle to trade in products in free circulation within the Community and is not therefore contrary to Article 30 of the EEC Treaty.

is On this matter it must first be pointed out, as the Court has stated in its judgments of 31 January 1979 (Cases 34/78 Yoshida Nederland v Kamer van Koophandel en Fabrieken voor Friesland [1979] ECR 115 and 114/78 Yoshida v Industrie- und Handelskammer Kassel [1979] ECR 151), that in adopting implementing provisions pursuant to Article 14 of Council Regulation (EEC) No 802/68, the Commission is obliged not to exceed the powers which the Council has conferred upon it for the implementation of the rules which it has promulgated in that regulation and, more precisely, that it must define specific criteria of origin which comply with the objective criteria of Article 5 of Regulation (EEC) N o 802/68 of the Council which is the legal basis of the implementing regulation and the source of the powers which the Commission exercises in adopting it.

is In this case, it is common ground that Regulation No 749/78 prevents the operations in issue, when carried out on unbleached yarn, from conferring on it the status of an originating product. On the other hand List B, which sets out the working or processing operations which confer on the product undergoing them the status of originating products without a change in the tariff heading, includes "printing or dyeing accompanied by finishing operations (bleaching, dressing, . .. impregnating, sanforizing, mercerizing) of unbleached fabrics including knitted and crocheted fabrics". Similarly Regulation (EEC) N o 1039/71 of the Commission of 24 May 1971 on determining the origin of certain woven textile products (Official Journal, English Special Edition 1971 (I), p. 274) whose provisions have been replaced by those of Regulation No 749/78, had already provided that

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"dyeing, if it is accompanied by any finishing operation which has the effect of rendering the dyed products directly usable" would be an operation conferring the status of originating products on fabrics including knitted and crocheted fabrics.

i9 That appraisal relating to dyeing accompanied by other cloth and fabric finishing operations is in stark contrast with the rigorousness of the criteria for determining the origin for cotton yarn. In fact, not only does cotton yarn not appear in List B, but it is mentioned in List A in such a way that, to enable it to be regarded as originating in a country, it must even have been made there from cotton or cotton waste which has not been carded or combed.

24 Furthermore, in so far as the question put by the Tribunal de Police, Strasbourg, seeks the interpretation of Article 30 of the EEC Treaty in order to determine whether procedings brought by the national authorities under Regulation N o 749/78 are compatible with that article and whether it imposes limits on the penalties which may be imposed in such proceedings, that question is devoid of purpose, regard being had to the fact that the declaration that the regulation is invalid, in so far as the working or processing operations in issue are concerned, prevents its application by the national authorities within the limits of the scope of that declaration of invalidity. It is therefore no longer necessary to reply to that part of the question submitted.

Costs

25 The costs incurred by the Italian Government and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main procedings are concerned, in the nature of a step in the prosecution pending before the national court, the decision on costs is a matter for that court.

On those grounds,

T H E C O U R T (Fifth Chamber),

in answer to the question put to it by the Tribunal de Police, Strasbourg, in a judgment of 15 March 1982, hereby rules:

J. A. Pompe J. M e r t e n s de W i l m a r s Deputy Registrar President

O P I N I O N O F A D V O C A T E G E N E R A L SIR G O R D O N S L Y N N D E L I V E R E D O N 9 F E B R U A R Y 1983

My Lords, Regulation No 749/78 was adopted pursuant to Article 14 of Council Regu- lation (EEC) No 802/68 of 27 June 1968 The Tribunal de Police at Strasbourg, (Official Journal L 148, p. 1, English France, has referred to the Court under Special Edition 1968, p. 165) for the Article 177 of the EEC Treaty the purpose of applying Article 5 of that following question : Regulation to textile products falling within Chapters 51 and 53 to 62 of the Common Customs Tariff ("CCT"). It "On a proper interpretation of the EEC was adopted by the Commission because Treaty, in particular Article 30 thereof, the Committee on Origin to which a must the requirement laid down in draft was submitted was not able by a Articles 1 and 2 of Commission Regu- majority to approve it, and because the lation No 749/78 of 10 April 1978 Council did not act upon the (Official Journal L 101, 14. 4. 1978, Commission's proposal within the time p. 7), for conferring on certain textile prescribed. products the legal status, in relation to customs provisions, of products orig- inating in a Member State of the EEC, be regarded as a measure equivalent to a Article 5 of Regulation No 802/68 quantitative restriction?" provides as follows: