C-292/82

on the validity of Article 1 (a) of Commission Regulations (EEC) Nos 2271/78 of 29 September 1978 (Official Journal, L 275, p. 28), 2555/78 of 31 October 1978 (Official Journal, L 307, p. 32), 2807/78 of 30 November 1978 (Official Journal, L 334, p. 32), 3115/78 of 30 November 1978 (Official Journal, L 370, p. 26), 181/79 of 31 January 1979 (Official Journal, L 26, p. 36), 410/79 of 28 February 1979 (Official Journal, L 50, p. 28) and 615/79 of 30 March 1979 (Official Journal, L 79, p. 28) fixing the rates of refunds applicable from 1 October 1978 to 30 April 1979 to sugar and molasses exported in the form of goods not covered by Annex II to the EEC Treaty,

T H E C O U R T (Second Chamber)

composed of: K. Bahlmann, President of Chamber, P. Pescatore and O. Due, Judges,

Advocate General: Sir Gordon Slynn Registrar: H . A. Rühi, Principal Administrator

gives the following

MERCK v HAUPTZOLLAMT HAMBURG-JONAS

(d) 17.02 Other sugars (but not Finally, Annex I to Regulation No including lactose and 3330/74 includes inter alia mannitol and glucose); sugar syrups (but sorbitol, which are classified under sub- not including lactose syrup headings 29.04 C I I and III of the and glucose syrup); artificial Common Customs Tariff, and sorbitol honey (whether or not mixed cracking products, which are classified with natural honey); caramel under subheading 38.19 T Those prod- ucts are used in medicine and for other ,» purposes.

JUDGMENT OF 17. 11. 1983 — CASE 292/82

It follows that a production refund on "Beet or cane syrup containing, in the sugar used in the chemical industry was dry state, 9 8 % or more by weight of only, provided for in the case of solid . sucrose (including invert sugar expressed beet sugar and cane sugar classified as sucrose)." under heading 17.01 of the Common Customs Tariff and the sucrose syrups Annex C includes inter alia mannitol and classified under subheading ex 17.02 sorbitol. D II. Consequently, invert sugar, which basically consists of glucose, fructose and water, is not, for example, a syrup on (b) The rates of export refunds for the which such refunds are paid. period in question, namely 1 October 1978 to 30 April 1979, were established by Commission Regulations Nos 2271/78 of 29 September 1978 (Official C — Export refundi Journal 1978, L 275, p. 28), 2555/78 of 31 October 1978 (Official Journal 1978, L 307, p. 32), as amended by Regulation (a) Article 4 (3) of Regulation (EEC) N o 2680/78 of 15 November 1978 No 2682/72 of the Council of 12 (Official Journal, L 322, p. 20), 2807/78 December 1972 laying down general of 30 November 1978 (Official Journal rules for granting export refunds on 1978, L 334, p. 32), 3115/78 of 29 certain agricultural products exported in December 1978 (Official Journal 1978, the form of goods not covered by Annex L 370, p. 26), 181/79 of 31 January 1979 II to the Treaty, and the criteria for (Official Journal 1979, L 26, p. 36), as fixing the amount of such refunds amended by Regulation No 336/79 of (Official Journal, English Special Edition 21 February 1981 (Official Journal 1981, 1972 (9-28 December), p. 42) as L 45, p. 22), 410/79 of 28 February 1979 amended in particular by Council Regu- (Official Journal 1979, L 50, p. 28) and lation (EEC) N o 707/78 of 4 April 1978 615/79 of 30 March 1979 (Official (Official Journal 1978, L 94, p. 7), Journal 1979, L 79, p. 28) fixing the provides that: rates of refunds applicable to sugar and

molasses exported in the form of goods I I — Facts and national pro- not covered by Annex II to the Treaty. cedure The fourth recital of the preamble to those regulations refers to Article 4 (3) of Regulation No 2682/79 cited above. Between October 1978 and April 1979 Article 1 of the contested regulations is the plaintiff in the main action, Firma worded as follows: E. Merck, of Darmstadt (hereinafter referred to as "the plaintiff"), exported from the Federal Republic of Germany "The rates of the refunds applicable . . . to various non-member countries to the basic products appearing in Annex mannitol classified under subheading A to Regulation (EEC) No 2682/72 and 29.04 C I I of the Common Customs listed in Article 1 (1) of Regulation Tariff and sorbitol classified under tariff (EEC) N o 3330/74, exported in the subheadings 29.04 C III (b) 2 and form of goods listed in Annex I to Regu- 38.19 T 1(b). lation (EEC) No 3330/74, are fixed as shown : The plaintiff claimed from the Haupt- zollamt [Principal Customs Office] Hamburg-Jonas export refunds ap- (a) in Table I of the Annex hereto for plicable to sugar exported in the form of those same goods, in so far as they the goods mentioned above. are shown in the Annex to. Regu- In each case the Hauptzollamt calculated lation (EEC) No 1400/78; those refunds on the basis of the lower rates shown in Table I of the annexes to (b) in Table II of the Annex hereto for . Regulations Nos 2271/78, 2555/78, goods other than those mentioned 2680/78, 2807/78, 3115/78, 181/79, under (a)." 336/79, 410/79 and 615/79 cited above. In each case the plaintiff lodged an All the corresponding regulations objection against those decisions. It covering the period 1 May 1979 to 30 contended that it had not been granted June 1980 retained the same wording as any production refund in respect of the that of Article 1 cited above. However, goods exported because the German Commission Regulation No 1678/80 of customs authorities had considered that 27 June 1980 fixing the rates of the the sugar solution used in the manu- refunds applicable from 1 July 1980 to facture of those goods, namely invert sugar and molasses exported in the form sugar, did not constitute a sucrose syrup of goods not covered by Annex II to the which qualified for the refund referred Treaty (Official Journal 1980, L 166, p. to in Article 1 of Regulation No 1400/78 34), the wording of which is in other cited above. The plaintiff accordingly respects identical to that of Article 1 of believes that it is entitled to claim export the contested regulations, provides in refunds at the rates not reduced by Article 1 (a) that the rates of the refunds production refunds. applicable are fixed as shown: The Hauptzollamt maintained its point of view, however. "in Table I of the Annex hereto for The plaintiff then appealed against the those same goods, in so far as they are decision of the Hauptzollamt to the shown in the Annex to Regulation Finanzgericht Hamburg. It contended (EEC) No 1400/78 and have benefited that it was an infringement of the from the granting of a production prohibition of discrimination laid down refund." in the second subparagraph of Article 40

The Hauptzollamt contended that it was However, the Finanzgericht is doubtful bound by the regulations in question, the about the validity of Article 1 (a) of the terms of which are clear and do not regulations in question. Article 4 (3) of admit of the construction which the Regulation N o 2682/72 might require plaintiff places upon them. In order for the Commission to apply the higher rates the rates shown in Table I of the annexes of export refund shown in Table II of to those regulations to apply the goods the annexes to the regulations in cases exported simply have to be listed in the where no production refund has been annexes to Regulations Nos 3330/74 and granted. That view is supported by 1400/78. Article 1 (a) of Regulation No 1678/80, according to which the table in the The Finanzgericht stayed the pro- annex is applicable to the goods which ceedings and referred the following are listed in the annex to Regulation No questions to the Court for a preliminary 1400/78 and on which a production ruling: refund has been granted. Like the earlier regulations fixing rates of refund, Regu- " 1 . Is Article 1 (a) of Commission Regu- lation No 1678/80 is based on Regu- lations (EEC) Nos 2271/78, lation No 3330/74 and refers to the rules 2555/78, 2807/78, 3115/78, 181/79, contained in Article 4 (3) of Regulation 410/79 and 615/79 void in the light N o 2682/72 and in Regulation No of Article 4 (3) of Regulation (EEC) 1400/78. In the light of those N o 2682/72 of the Council, as considerations the conclusion could be amended by Council Regulation drawn that the question whether a (EEC) N o 707/78, in so far as it production refund had in fact been provides, in the case of exports of granted should also have been mannitol and sorbitol classified considered when the rates of export under headings 29.04 C I I , 29.04 refund were applied during the period in C I I I and 38.19 T of the Common question.

The Commission states first of all that, Furthermore, the Commission does not according to the information which it deny that it has a legal duty to adopt had when the regulations in question rules, if necessary, to new technical were adopted, only basic products developments in order to ensure that the attracting a production refund were used rules which it adopts are appropriate and to make mannitol and sorbitol. that all manufacturers and traders concerned are treated in the same way. However, there is no discrimination For the purposes of clarity and rati- within the meaning of Article 40 (3) of onalized administration the Commission the Treaty if the Commission carefully therefore considered it necessary to considers the implications of new apply to the final product concerned a developments and only when it is rate of export refund reduced by the sufficiently certain that comparable amount of the production refund. The circumstances do exist and adequate purpose of that simplified administrative checks can be made allows payments to procedure was to avoid unnecessary and be made from public funds in respect of costly investigations to ascertain whether new manufacturing methods. Therefore the production refund had actually been the alleged fact that exporters of granted in each case. mannitol and sorbitol made from an

JUDGMENT OF 17. 11. 1983 — CASE 292/82

invert sugar solution on which no However, if the Court decides that the production refund is paid are in a worse regulations in question are unlawful on position does not constitute discrimi- account of an omission, it should, in nation against particular groups or accordance with its case-law, merely persons as they are free to use the basic declare that they are incompatible with product of their choice and thus receive 'the Treaty. It will then be for the the full rate of refund. Commission to adopt the necessary measures.

The plaintiff in the main proceedings The Commission accordingly believes stated that until 1976 it produced that the first question of the Finanz- mannitol and sorbitol itself from sugar in gericht Hamburg should be answered as the crystalline state, which was inverted follows : and then hydrogenized. However, for technical and economic reasons it made certain changes in its method of manu- Consideration of Article 1 (a) of facture after 1976. Owing to those Commission Regulations Nos 2271/78, changes it no longer produced invert 2555/78, 2807/78, 3115/78, 181/79, sugar itself but bought it from a manu- 410/79 and 615/79 fixing the rates of facturer. The German customs auth- refund applicable to sugar and molasses orities refused to pay the plaintiff the exported in the form of goods not export refunds at the higher rates set out covered by Annex II to the Treaty has in Table II of the annex to the regu- disclosed no factor of such a kind as to lations in question and the plaintiff sub- affect the validity of those provisions. sequently formed an association with the manufacturer of invert sugar with a view to obtaining more favourable customs treatment. In this way the two under- takings were able to receive production 2. The second question refunds from January 1980.

The Commission's view is that the The Advocate General delivered his second question does not therefore arise. opinion at the sitting on 6 October 1983.

MERCK v HAUPTZOLLAMT HAMBURG-JONAS

Decision

3 According to the file and additional information provided by Merck at the hearing, until 1976 it produced mannitol and sorbitol from sugar in crystalline form, turning it into an invert solution and then subjecting it to hydrogénation. Those operations were all carried out on its premises. For that production Merck at that time obtained production refunds and reduced export refunds.

4 However, as from 1976 Merck introduced changes in its method of manu- facture for technical and economic reasons. Owing to those changes it

JUDGMENT OF 17. 11. 1983 — CASE 292/82

stopped inverting the sugar itself and purchased invert sugar from another producer in the Community. Apart from those changes the production process remained basically the same but the plaintiff was no longer able to obtain production refunds.

s The Finanzgericht Hamburg, assuming that the grant by the German auth- orities of the export refunds at the reduced rates was based on a correct interpretation of the regulations in question, decided to stay the proceedings and referred the following questions to the Court:

"1 Is Article 1 (a) of Commission Regulations (EEC) Nos 2271/78, ' 2555/78, 2807/78, 3115/78, 181/79, 410/79 and 615/79 void in the light of Article 4 (3) of Regulation (EEC) N o 2682/72 of the Council, as amended by Council Regulation (EEC) N o 707/78, in so far as it provides in the case of exports of mannitol and sorbitol classified under headings 29.04 C II, 29.04 C III and 38.19 T of the Common Customs Tariff in respect of which no production refund has been granted, for the application of the rates of export refund specified in Table I instead of those specified in Table II of the annexes to the aforementioned regu- lations fixing rates of refund?

9 As far as export refunds are concerned, Article 4 (3) of Regulation (EEC) No 2682/72 of the Council of 12 December 1972 laying down general rules for granting export refunds on certain agricultural products exported in the form of goods not covered by Annex II to the Treaty and the criteria for fixing the amount of such refunds (Official Journal, English Special Edition 1972 (9-28 December), p. 42), as amended in particular by Council Regu- lation (EEC) N o 707/78 of 4 April 1978 (Official Journal, L 94, p. 7), provides that:

"In fixing the rate of the refund account shall be taken, where appropriate, of production refunds, aids or other measures having equivalent effect applicable in all Member States, in accordance with the regulation on the common organization of the market in the product in question, to basic products . . .".

That regulation is applicable inter alia to the basic products listed in Annex A thereto exported in the form of the goods listed in Annex C. Annex A to the regulation covers inter alia certain sugar syrups, including invert sugar. Annex C includes mannitol and sorbitol.

io The rates of export refunds for the period in question, namely 1 October 1978 to 30 April 1979, were fixed by the Commission in the contested regu- lations. In each case the fourth recital in the preamble to those regulations refers to Article 4 (3), cited above, of Regulation No 2682/72 and Article 1 is worded as follows:

JUDGMENT OF 17. 11. 1983 — CASE 292/82

"The rates of the refunds applicable . . . to the basic products appearing in Annex A to Regulation (EEC) N o 2682/72 and listed in Article 1 (1) of Regulation (EEC) N o 3330/74, exported in the form of goods listed in Annex I to Regulation (EEC) No 3330/74, are fixed as shown:

MERCK v HAUPTZOLLAMT HAMBURG-JONAS

that the Community industry and the industries of non-member countries which obtain supplies of agricultural products on the world market compete under equal condiditons.

1 4 In creating such equal conditions of competition it is necessary however to avoid over-compensation due to the fact that export refunds may be granted in addition to other aid received by the Community industry concerned, in particular in the form of production refunds. For this reason Article 4 (3), cited above of Regulation N o 2682/72 provides that in fixing the rate of the export refund account is to be taken, where appropriate, of production refunds as regards the basic products used.

is It was precisely in order to achieve that balance intended by the Council regulations that the Commission included two tables of rates in the contested regulations, one for goods in respect of which production refunds have been paid and the other for goods in respect of which such refunds cannot be paid. In their preambles all those regulations expressly refer to Article 4 (3) of Regulation N o 2682/72 and Article 1 of each regulation provides that, in the case of products which are listed in the annex to Regulation N o 1400/78 in respect of which therefore a production refund may where appropriate be granted, a reduced export refund is to be granted. In the case of all the other products, however, provision is made for the grant of an unreduced export refund.

i6 In the observations which it submitted to the Court the Commission explained that its information at the time at which the contested rules were adopted was that only basic products attracting a production refund were used to make mannitol and sorbitol. In making Article 1 of the contested regulations refer to the annex to Regulation No 1400/78 it thus had no intention to reduce export refunds on commodities not attracting production refunds. Its intention was merely to simplify administration and avoid unnecessary and costly investigations into whether producers had in each case actually exercised their right to such a refund. When in June 1979

Costs

20 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 proceedings pending before the national court, costs are a matter for that court.

MERCK v HAUPTZOLLAMT HAMBURG-JONAS

On those grounds,

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

in answer to the questions submitted to it by the Finanzgericht Hamburg by order of 21 October 1982, hereby rules: