C-77/86

THE QUEEN v CUSTOMS AND EXCISE, EX PARTE NATIONAL DRIED FRUIT TRADE ASSOCIATION

OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN delivered on 30 June 1987

My Lords, provided for measures which are not authorized by Council Regulations (EEC) Nos 516/77 (and in particular Article 14 thereof) and 521/77 and / or as containing provisions and having effects which were disproportionate to The National Dried Fruit Trade Association the aims of those regulations and / or represents importers and distributors of because it was not adequately reasoned. dried fruits in the United Kingdom. In proceedings in the High Court of England and Wales it challenges the validity of Community legislation imposing a minimum import price (MIP) and a countervailing (2) Whether Council Regulation (EEC) charge on imports below the MIP , for dried No 2089/85 and Commission Regu­ grapes, other than currants, imported into lation (EEC) No 2237/85 and / or the Community from third countries, which Commission Regulation (EEC) No legislation is implemented by the Commis­ 2238/85 (as amended) are invalid and sioners of Customs and Excise. The unlawful as containing provisions and question in issue is of importance to the having effects which are dispropor­ members of the Association, since the tionate to any aims for which those United Kingdom is a substantial importer of regulations were introduced and / or as dried grapes, and to similar traders in some being inadequately reasoned.' other Member States; it is also important to producers in Greece, at the relevant time the only Member State producing dried grapes other than currants, namely that species The first question relates to regulations known as sultanas. laying down the MIP and countervailing charge between 1982 and 1985; the second to regulations providing for such a system from 1 September 1985. I refer to them as 'the first MIP system' and 'the second MIP The High Court has referred two questions system' respectively. to the court under Article 177 of the EEC Treaty:

'(d) where the abovementioned situation In the twelfth recital it was recognized that arises as a result of imports, the prices ' ... the common price and levy machinery obtaining on the Community market, may prove inadequate in exceptional at a comparable stage for products circumstances; whereas to ensure that in from third countries, and in particular such cases the Community market is not left any excessive downward trend in these completely exposed to the disturbances prices.' which might result, the Community should be allowed to take any appropriate action as quickly as possible . . . ' In the event that serious disturbances exist or are threatened, Article 2 provides that where required import certificates may be discontinued or refused, and where not Accordingly, Article 14 (1) provided that: required, imports may be suspended in 'if, by reason of imports or exports, the whole or in part. It also provides: Community market in one or more of the products specified in Article 1 is or is likely to be exposed to serious disturbances which '(1) ... might endanger the objectives set out in Article 39 of the Treaty, appropriate measures may be applied in trade with non-Member countries until such distur­ (c) for all products : bances or threat thereof have ceased.'

I do not accept this latter argument. If a question had been raised as to whether A minimum price of ECU 106.7 per 100 there was an implied power it was sensible kilograms net for imports of dried grapes to introduce an express provision. The other than currants was fixed and by Article question remains whether the power was 2 (2) : 'If the minimum price is not respected already to be implied in the regulation. a countervailing charge of ECU 16.0 per 100 kilograms net shall be applied'.

The Commission relies on the Court's judgment in Joined Cases 41 to 44/70 Inter- national Fruit Co. v Commission [1971] The Association contends that the ECR 411 and Case 345/82 Wünsche v Commission regulation constituting the first Germany [1984] ECR 1995. In the latter MIP system was invalid because it was ultra case which was concerned with Article 14 vires, it infringed the principle of propor­ (1) of Regulation No 516/77 and Article 2 tionality and failed to give reasons which (1) of Regulation No 521/77, the Court satisfied Article 190 of the Treaty. held that 'since the Commission was entitled to take protective measures leading to complete suspension of imports from third countries, it was, a fortiori, entitled to adopt less restrictive measures'.

As to vires it is said, first, that there was no express power in Article 14 of Regulation No 516/77 or Article 2 (1) of Regulation No 521/77 to impose a countervailing I do not consider that it can be said that to charge at all and Article 13 (2) of Regu­ impose a countervailing charge at all was lation No 516/77 excluded the levying of ultra vires. A countervailing charge is an any charge equivalent to a customs duty and instrument by which the MIP can be the imposition of any measure having equi­ enforced and I would accept in principle valent effect to a quantitative restriction. both that there is an implied power to use That is undoubtedly correct. such an instrument for such a purpose and

The more difficult question is whether this particular countervailing charge was ultra Then it is said that this Commission regu­ vires. lation was invalid because it covered all dried grapes other than currants. The Asso­ ciation contends that dried grapes include both sultanas and raisins. They are produced in a different way, have different qualities and different culinary uses. Thus, sultanas are dried in the shade, coated with a product to keep them soft, whereas raisins The first argument raised is that a flat-rate are dried in the sun, are not coated and charge does not necessarily satisfy the are much less soft. The Netherlands condition imposed by Article 2 (1) of Regu­ Government points out that the distinction lation No 521/77 in that it may not ensure between them is recognized in Regulation that the import price plus the countervailing No 426/86 (Official Journal 1986, L 49, p. charge is 'at least equal to such minimum' 1) which now governs the relevant common import price. organization of the market. It is said that 'raisins' are not produced in the Community and not even used in some Member States; sultanas, on the other hand, are produced in substantial quantities in Greece and used throughout the Community. Therefore, there can be no justification for imposing Commission Regulation No 2742/82 recites the countervailing charge (or it seems to that the countervailing charge ('tax') should follow the MIP) in respect of raisins (as be calculated on the basis of the prices opposed to sultanas) since raisins were not a applied by the main non-Member States. Community product which needed This clearly entitles the Commission to fix a protection. countervailing charge which ensures that even the lowest prices are raised by the countervailing charge above the import price. Theoretically the Commission could fix a lower charge so that the import price of some goods plus the countervailing charge would still be less than the MIP and, On the other hand, the Greek Government if it did so, these importations would be in and the Commission point to heading 08.04 breach of Article 2 of Regulation No of the Common Customs Tariff which 2742/82. There is, however, nothing to specifies only two categories of dried grapes indicate that the charge fixed in the present 'currants and others'. The Greek Govern­ case did allow goods to come in below the MIP. If there was evidence that the charge ment and the Commission contend that if dried grapes are not currants they are

raisins. Sultanas and raisins are inter­ me to follow that an MIP and a counter­ changeable and indeed there exists commer­ vailing charge for all dried grapes other cially a product called 'sultana raisins'. than currants was ultra vires. Importation of one product not produced in the Community may be capable of threatening a serious disturbance of the Community market in a product produced in the Community, if the two have sufficiently similar qualities and if the products are to a sufficient degree actually used or potentially The Commission's argument that the capable of being used for comparable Common Customs Tariff refers only to purposes. Article 14 (1) of Council Regu­ 'currants' and 'other dried grapes' does not lation No 516/77 does not limit the assist since the question remains as to measures which may be taken to imports of whether there is more than one type of the same product. Although it seems to me 'other' dried grapes. prima facie that there are differences between 'sultanas' and what in popular parlance in at any rate some Member States would be called 'raisins', I do not find it possible to say in a reference of this kind, and without findings of fact by the trial court, that there was no degree of inter- changeability between the two products and Although questions of fact of this kind, if that it was necessarily ultra vires for the they have to be resolved, are essentially for Commission to take appropriate measures in the national court from which a reference respect of all dried grapes other than comes, it seems to me that the point made currants. by the Association (that the names 'sultanas' and 'raisins', even if they both come from the same type of seedless grape, are not coterminous), can be accepted for the purposes of this reference. Recital 1 to Regulation No 2742/82 refers to 'sultanas' harvested in the Community and at the end of the day the Council, and I think the Commission, really acknowledge that Leaving aside for the moment the question whether on the facts it was justified to sultanas are one sort of raisin, sultanas thus impose a countervailing charge in the first being in some respects different from other place, and to continue it as long as it was raisins. This concession seems consistent continued, the other arguments as to vires with eating habits or tastes in at any rate overlap with those advanced in support of some Member States. the contention that this charge was dispro­ portionate and it is convenient to consider these arguments together. It is said that to impose this countervailing charge went beyond what was reasonably necessary to achieve a legitimate purpose and was penal, arbitrary and uncertain. It was, therefore, not within the Commission's power to adopt On the other hand, even accepting that it as a legitimate instrument for enforcing there are differences between sultanas and the MIP ; in addition the system adopted raisins (or other raisins), it does not seem to

The Commission accepts that at a time of considerable fluctuation in dollar parities a trader could find that a price above the MIP This contention, it is argued, is based on at contract date was below it on import commercial realities. The contract price has date. It says that traders should have to be fixed well before the goods are conducted their dealing in German marks to entered for customs purposes. It is fixed by avoid this result. That to my mind is not a international practice in United States sufficient answer. If other methods of dollars and on import that price has to be attaining the object of the regulations are translated into national currency. The available it seems to me that to require minimum price expressed in ecus and the international trade practice to be changed to countervailing charge (expressed in ecus) meet a serious disturbance of the market have to be converted into national (and only for such period as that currencies adjusted by a coefficient. disturbance exists or is threatened) is wholly Comparison of the import price and the disproportionate if indeed practicable. Nor corresponding MIP has to be made on the is it a sufficient justification that by Regu­ day of completion of the customs import lation No 2186/83 (Official Journal 1983, L formalities (Articles 2 and 3 of Regulation 210, p. 11) it was made possible for a trader No 2742/82). During the period of the first to lodge an undertaking to pay the MIP MIP system, the MIP changed three times; converted into national currency at the date the coefficients were changed 18 times and of application plus 4 %, since as the Asso­ the rate used by the customs authority to ciation asserts and the Commission does not convert US dollars into pounds sterling contest, this was unattractive since margins changed 107 times. When coefficients were were below 4 %. changed the previous rate was maintained in respect of goods which had already left the country of export so long as they were imported within a fixed period. This ensured some price stability. None the less it is argued and not challenged that when the necessary comparisons were made, goods In support of its contention that to levy the which at the exchange rate prevailing on the full countervailing charge irrespective of the amount by which the MIP was not attained

It seems to me that the essence of the scheme was to maintain an MIP in a To the extent that the MIP was fixed at a product which was partially produced in the level (other than de minimis) above the Community and which the Community highest price prevailing in the Community needed to import. Unlike the Wünsche case, for sultanas it seems to me that it cannot be where importers knew that a penalty would said that it was necessary to achieve the aim be payable if a quantitative threshold was of the legislation (Case 66/82 Fromançais exceeded, and could opt not to import, in SA v Forma [1983] ECR 395). Whether it the present case traders would not know did so, however, depends on a detailed until the relevant comparison was made on investigation of the facts — the level of the basis of the parities and coefficients then Community prices at different periods. That prevailing whether they had respected the seems to me not to be an exercise which can MIP . It would in my view have been be undertaken by the Court on a legitimate and proportionate to require preliminary reference. If the facts are found them to pay the shortfall; it goes far beyond (as they have not so far been found by the what is necessary to maintain an MIP to national court) then it can be seen whether require traders to pay the full countervailing the MIP was fixed at a level which was charge whatever the shortfall. Such a charge unjustifiably high. has become a discriminatory penalty and ceased to be the necessary instrument for enforcing the MIP which can be implied into the first MIP system. I accept, therefore, that to the extent that provision was made for the countervailing charge to be more than the difference between the The Association next contends that the import price and the MIP at the date of charge levied applied indiscriminately to completion of the customs import importations of packed goods and goods

A more fundamental argument advanced is that there was no justification to introduce Finally, under this head it is said that if the this scheme at all or to keep it in force for goods bought were, on receipt, found to be the full period during which it was kept in below contract quality, e. g. damaged or force. dirty, any price reduction negotiated or awarded in a commodity arbitration was deducted from the import price. In the result the final price might be found to be below the MIP and the countervailing charge be payable. It seems to me, on the recitals to Regulation No 2742/82 and on the facts agreed that it cannot be said that at the time of its intro­ duction the MIP and a countervailing charge otherwise valid were unjustified. For whatever reason, perhaps because in the preceding period prices had been kept high in anticipation of the accession of Greece to the Community, stocks of sultanas were The Commission replies (a) that the goods high and the prices of third-country dried should be inspected before they enter the grapes were falling and imports of them Community, and (b) that a clause should rising. To fix an MIP with an appropriate have been included in the contract of sale countervailing charge was therefore within that if a defect in the goods led to compen­ the Commission's powers. sation which under the MIP system made the importer liable for the countervailing charge, the seller should pay the amount of that charge to the importer. The Commission's first argument seems to me to be unrealistic; the second to impose an It is said, however, that this regulation was undue burden on the importer. kept in being longer than was justified.

The Commission replies that the justifi­ cation is that stock levels were kept down; if The Association's third line of attack against the MIP and the countervailing charge had the first MIP system is that the regulation not been preserved levels would have risen does not contain sufficient reasons to satisfy again. Article 190 of the EEC Treaty. First, there is no explanation as to why the protective measures were applied to raisins or any indication that the Commission had considered the market situations arising in respect of different types of dried grapes. The only reason given in the various regu­ lations continuing Regulation No 2742/82 There are no findings of fact on these was that 'import prices remain too low' matters. In the absence of such findings it whereas, as already mentioned, Article 1 of does not seem to me that the Court can rule Regulation No 521/77 set out several as to the actual effects of the regulation as factors which had to be taken into account. asked to do in the reference. What, Furthermore, whereas the fourth recital to however, can be said is that this regulation Regulation No 2742/82 states that the could only validly take appropriate measures countervailing charge is to be calculated 'on to avoid the effect or the threat of serious the basis of the prices applied by the main disturbances to the market in dried grapes non-Member countries', in practice the other than currants. Once those distur­ charge had no consistent arithmetical bances or a threat of such serious distur­ relationship with world prices. Thus the bances ceased to exist there was no legal reasoning was belied in practice.

The new Article 4a imposes an MIP for, inter alia, dried grapes which, according to Bearing in mind the Court's dictum in the paragraph 2, shall be determined having Beus case, it seems to me on balance that regard to the free-at-frontier prices on the recitals to Regulation No 2742/82 do import into the Community, the prices sufficiently set out the matters referred to in obtaining in international trade, the Article 1 of Regulation No 521/77. As situation on the internal Community market already noted, specific reference is made in and the trend of trade with third countries. the recitals to sultanas as a subgroup within By paragraph 3 'where the minimum import 'dried grapes'. I think the reasoning can be price is not observed, a countervailing criticized for not making more explicit the charge in addition to customs duty shall be Commission's reasons for applying the imposed, based on the prices of the main protective measures to other kinds of dried supplier countries outside the Community'. grapes not produced in the Community. Thus there is express provision for a However, I am not satisfied that that defect countervailing charge.

THE QUEEN v CUSTOMS AND EXCISE, EX PARTE NATIONAL DRIED FRUIT TRADE ASSOCIATION

The Association's challenge to the validity of the second MIP system is not directed towards the legality of an MIP system per se The Netherlands Government's support of or to the imposition of a countervailing the Association on the second MIP system is charge per se, since this is now expressly lukewarm. It points, correctly in my view, to authorized, but to its detailed implemen­ the different legal bases of the two systems: tation in which the Community authorities the first was designed to remedy serious are again said to have breached the principle short-term problems whereas the second is of proportionality and failed in their duty to an integral part of the support mechanism.

OPINION OF SIR GORDON SLYNN —CASE 77/86

Accordingly, I consider that the reply to the questions put by the national court should be to the effect that Commission Regulation (EEC) No 2742/82 and the regulations amending that regulation are invalid in so far as they provided for a flat-rate countervailing charge, whatever the amount by which the import price fell below the MIP fixed by the Commission. It has not been shown in this case that Council Regulation (EEC) No 2089/85 and Commission Regulation (EEC) No 2237/85 (as amended) are themselves invalid. Whether they were applied in a way which was ultra vires or disproportionate or discriminatory as between different forms of presentation are questions of fact for the national court.

As to costs, the Association's costs fall to be dealt with in the context of the national proceedings; the costs of the Netherlands and Greek Governments and the Commission and Council are not recoverable.