C-437/93

1. The present proceedings are concerned imports and manufactures electronic compo- with the customs rules on inward processing nents, and the Hauptzollamt (Principal Cus- arrangements, in particular the provisions toms Office), Heilbronn, the competent Ger- governing the discharge of those arrange- man customs authority (hereinafter 'the ments by placing of the goods under the sys- Hauptzollamt'). In January 1991 the Haupt- tem of processing under customs control. zollamt had granted to Temic an authoriza- tion for inward processing, under the sus- pension system, of unmeasured integrated circuits from the Far East. The processing of those products by Temic consists in testing ('measuring') them, after which the usable circuits are identified and separated from More specifically, the preliminary questions those which are defective. The usable circuits concern the interpretation of Article 18(2)(d) (hereinafter 'A goods') are for the most part and the first paragraph of Article 18(3) of intended for re-export from the customs ter- Council Regulation (EEC) N o 1999/85 of ritory of the Community. For the unusable 16 July 1985 on inward processing relief circuits (hereinafter 'B goods'), Temic had arrangements > (hereinafter 'the basic regu- sought and obtained, in August 1991, autho- lation'), which makes the transfer of goods rization for them to be placed under the sys- from inward processing arrangements to the tem of processing under customs control, for system of processing under customs control the purpose of recovering the precious met- subject to the grant of an authorization by als they contained. The second authoriza- the competent authorities. The Bundesfinan- tion, however, was granted by the Hauptzol- zhof asks the Court to define the scope of lamt only for a quantity of B goods that authorization in order to enable it to proportional to the quantity of A goods decide whether, under the Community legis- actually re-exported. And it was against that lation, it should, or may, be subjected to limitation that Temic commenced legal pro- quantitative limits. ceedings, claiming that it was entitled to an authorization without any quantitative lim- its.

The processing operations, as defined in Article l(3)(h) of the basic regulation, are the Pursuant to Article 1(2) of the basic regu- working, processing and repair of goods, lation, the inward processing arrangements including the use of certain goods which make it possible, after the relevant authoriza- allow or facilitate the production of compen- tion has been obtained, for the following sating products and are used up in the pro- goods to be used in the customs territory of cess. Moreover, according to Article 6(3)(b) the Community in one or more processing of the basic regulation, and Article 26(1 )(b) operations: (a) non-Community goods of the implementing regulation, processing intended for re-export outside the Commu- operations may also involve 'the usual han- nity in the form of compensating products, dling operations to which goods may be sub- such goods not being subject to import ject in pursuance of Community provisions duties (the suspension system); (b) goods on customs warehousing and free zones'. Those provisions 5 include under the heading released for free circulation with refund or remission of the import duties levied on such goods if they are re-exported outside the Community in the form of compensating 5 — See in particular Article 18(1) of Council Regulation (EEC) N o 2503/88 of 25 July 1988 on customs warehouses (OJ products (drawback system). 1988 L 225, p. 1); Article 34(1) and Annex IV of Commis- sion Regulation (EEC) N o 2561/90 of 30 July 1990 laying down provisions for the implementation of Council Regu- lation (EEC) N o 2503/88 and customs warehouses (OJ 1990 L 246, p. 1); Article 8(a) of Council Regulation (EEC) N o 2504/88 of 25 July 1988 on free zones and free ware- 2 — Council Regulation (EEC) N o 2913/92 of 12 October houses (OJ 1988 L 225, p . 8); and Article 20(1) of Commis- 1992 establishing a Community customs code (OJ 1992 L 302, p. 1). sion Regulation N o 2562/90 of 30 July 1990 laying down provisions for the implementation of Council Regulation 3 — O J 1986 L 351, p . 1. (EEC) N o 2508/88 on free zones and free warehouses (OJ 4 — O J 1991 L 210, p. 1. 1990 L 246, p. 33).

6 — The list was adopted under the special procedure provided for in Article 31(2) and (3) of the basic regulation, and appears in Annex VI to the supplementary regulation; it is clear from the list as presently drafted, and from the scheme of the provision, that the products concerned are essentially Article 20 of the basic regulation lays down secondary compensating products. the principle that, where a customs debt is 7 — The holder of the authorization is nevertheless entitled t o request taxation of those products under Article 20 where incurred, its amount is to be determined on the provisions of that article would be more advantageous. the basis of the taxation elements appropriate 8 — In the present case, the relevant regulations are those men- tioned m footnote 6. to the import goods at the time of the decla- 9 — In particular, Council Regulation (EEC) N o 2763/83 o n ration of placing the goods under inward arrangements permitting goods to be processed under cus- toms control before being put into free circulation (OJ processing relief arrangements. However, 1983 L 272, p. 1) and Commission Regulation (EEC) N o 3548/84 of 17 December 1984 laying down certain provi- that principle is subject to certain exceptions, sions for the application of Regulation (EEC) N o including the following: application of the 2763/83 on arrangements permitting goods to be processed under customs control before being put into free circulation duties payable ('appropriate to them') on the (OJ 1984 L 331, p. 5).

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More specifically, the national court asks the Court of Justice to state: (a) whether Anicie 18(2)(d) and the first paragraph of Article 18(3) of the basic regulation must be inter- preted as meaning that discharge of the arrangements by an authorization for pro- The system in question is therefore designed, cessing under customs control may be made and ordinarily used, for the purpose of pro- subject to quantitative limits; (b) whether the cessing within the Community raw materials concept of 'circumstances' warranting the which are then re-exported (or forwarded to issue of the authorization Article 18(3) must another authorized customs location) in the be interpreted as meaning that it is compul- form of main compensating products. The sory to limit the said authorization in pro- latter products usually have added commer- portion to the quantity of products cial value and, after processing, have reached re-exported (in accordance with Article a subsequent (and sometimes final) stage in 21(l)(a), first indent, of the basic regulation); the production process. The added value is a and (c) whether such a limitation is permit- direct consequence of the physical treatment ted, even if not compulsory. which the products receive in the course of

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processing. The processing usually gives rise product. The testing only makes it possible to residual materials — rejects, waste — of to identify the components which are limited commercial value; in fact, they con- (already) operational (A goods) and those stitute secondary compensating products, which are (already) unusable (B goods). which it is permitted inter alia to release for Residual materials do not arise from that free circulation against payment of the duties operation, nor can the B goods strictly be applicable to the products when classified as regarded as such, in that they do not derive residues, which almost always proves more from processing, even though the processing advantageous than re-export. enables them to be identified.

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10. Against that background, we come to 12. The preliminary problem therefore arises the essential issue in the case, namely the of establishing, in the absence of an express scope of the authorization referred to in provision, what those conditions are. In Article 18 of the basic regulation. other words, it is necessary to ask of what conditions the competent authority must verify fulfilment before granting the authori- zation.

However, where those conditions are ful- The all too broad formulation of the last sen- filled, it seems to me that the authorization tence of paragraph 3 ('shall grant this autho- must be granted. Indeed, it would be rization where circumstances so warrant') unthinkable for the authority with responsi- relates to the conditions for issue of the bility for granting authorization to enjoy a authorization, but neither requires nor discretion. Otherwise applicants would be expressly allows it to be limited quantita- exposed to the risk of differences of treat- tively by reference to any particular crite- ment which would be incompatible with the rion. The authorization therefore appears, at purposes and functioning of the system and least where the relevant conditions are ful- filled, to constitute an unconditional meas- ure. 11 — Cited above, note 6.

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with one or more fundamental principles of duties calculated in accordance with the rules Community law. applicable to the customs procedure in ques- tion. It is therefore clear that the rules on duties applicable to processing under cus- toms control are different: they take account of the operation which the product has undergone, the cost of that operation and, above all, the fact that the processed product 13. Having regard to the principle whereby is, by definition, a different product from the authorization is granted when the pre- that placed under the system at the outset. conditions are fulfilled, but is withheld when There is not therefore the slightest reason for they are not, I find it difficult to imagine that the two provisions to be interpreted analo- the authority requested to issue the authori- gously. zation could have any right to impose quan- titative limits on it.

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express rule to that effect, rather than the expressly prescribed economic condi- expressly confining the obligation of propor- tions are not fulfilled. tionality solely to the case of release of sec- ondary products for free circulation.

It is not in fact reasonable to consider with- holding authorization solely because a trader 15. Finally, it does not seem to me that any has opted for a particular way of discharging importance can be attached to the fact that the inward processing arrangements when the customs authority is entitled to refuse to that option is expressly made available to issue an authorization whenever it finds that him by the basic regulation.

16. In the light of the foregoing, I suggest that the Court give the following answer to the Bundesfinanzhof:

Article 18(2)(d) and Article 18(3) of Council Regulation (EEC) N o 1999/85 of 16 July 1985 on inward processing relief arrangements must be interpreted as meaning that the authorization for discharge of inward processing arrangements by placing of the secondary compensating products under the system of processing under customs control cannot be made subject to quantitative limitations.