C-38/95

MINISTERO DELLE FINANZE v FOODS IMPORT

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 19 September 1996 *

Introduction 'the CCT') defined heading No 03.02 of the Tariff as follows:

1. This preliminary reference raises the question whether dried, salted fish made 'Fish simply salted or in brine, dried or from the species Molva molva, known in smoked: English as ling, but imported into Italy for use in the traditional dish, baccalà, should have benefited from the former suspension of import duties in respect of dried, salted cod. The Molva genus is related to the Gadus genus, of which the members are indisputably cod, as both genera arc mem­ bers of the family of Gadidae. However, A. Dried, salted or in brine: Molva molva is not among the species listed in the exempting Regulation after 1981. The Court is asked, in the alternative, to interpret the provisions of Community law on the post-clearance recovery of unpaid duties.

I. Whole, headless or in pieces:

Legal context

4. The 22nd recital in the preamble to Council Regulation (EEC) No 3796/81 of 29 December 1981 on the common organiza­ In Schedule XL to the Geneva Protocol of tion of the market in fishery products (here­ 2 7 16 July 1962 to the General Agreement on inafter 'the Regulation') states, in relevant Tariffs and Trade (hereinafter 'the GATT'), part: the European Economic Community's tariffs as regards position 03.02 reproduced the above-quoted descriptions, in so far as is rel­ evant. The quotas and rates of duty set out in Schedule XL were reproduced in Council Regulation (EEC) No 950/68 of 28 June 3 1968 on the Common Customs Tariff. However, the latter employed the term 'Cod' 'Whereas, however, it is in the Community on its own, omitting the reference to stock­ interest that application of Common Cus­ fish and klippfisch. toms Tariff duties should be totally sus­ pended for certain products; ... whereas for economic and social reasons the maintenance of traditional supplies of basic foodstuffs, such as salted and dried cod, is also justified.'

3. Customs duties were suspended in respect of the import of dried or salted cod and cod fillets by Article 16 of Council Regulation (EEC) No 2142/70 of 20 October 1970 on the common organization of the market 4 in fishery products. This suspension was This recital reproduces the texts of the 16th recital in the preamble to Regulation No 2142/70 and of the 17th recital in the preamble to Regulation No 100/76, save 1 — Journal Officiel 1960 No 80, p. 1537. The tariff was specified as corresponding to list G in Annex I to the EEC Treaty, on which rates of duty were to be negotiated between Member States. 2 — 440 UNTS 1 and 441 UNTS 1. 5 — OJ 1973 L1,p. 1. 3 — OJ, English Special Edition 1968 (I), p. 275. 6 — OJ 1976 L 20, p. 1. 4 — OJ, English Special Edition 1970 (III), p. 707. 7 — OJ 1981 L 379, p. 1.

A. Dried, salted or in brine:

6. This heading was altered in turn by Council Regulation (EEC) No 3759/87 of 30 November 1987 amending Regulation I. Whole, headless or in pieces: (EEC) No 3796/81 on the common organi­ 9 zation of the market in fishery products. It refers, under heading No 0305 30 (following the new harmonized commodity coding sys­ tem), to fillets, dried, salted or in brine, '[o]f cod (Gadus morhua, Gadus ogac, Gadus macrocephalus) and of fish of the species Boreogadus saida'. As regards whole dried fish, whether or not salted, heading 8 b) Cod (Gadus morrhua, Boreogadus No 0305 51 governs 'Cod (Gadus morhua, saida, Gadus ogac) Gadus ogac, Gadus macrocephalus)', while heading No 0305 59, 'Other', includes 'Fish 10 of the species Boreogadus saida'.

9 - OJ 1987 1.359. p 1 10 — Even under this altered description and coding system, the species Gadus morhua. Gadus ogac and Boreogadus saida 8 — The standard spelling of lhe first species is Gadus morhua. remained subject to a common duly regime, including a This spelling will be employed in the present Opinion, duty exemption within the limit of an annual tariff quota, except where quoting from texts employing A different spell- different from that applicable to dried fish of the species ing. Gadus macrocephalus.

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OPINION OF MR FENNELLY — CASE C-38/95

7. Article 20(1) of the Regulation states: (EEC) No 950/68 on the Common Customs Tariff. They state, in relevant part:

3. When for any reason, goods are, prima facie, classifiable under two or more head­ ings, classification shall be effected as fol­ 8. The rules for the interpretation of the lows: nomenclature of the Common Customs Tar­ iff (hereinafter 'the interpretative rules') applicable during the period material to the 13 — Sec Council Regulation (EEC) No 3300/81 of 16 Novem­ present case are set out in Section I A of Part ber 1981, OJ1981 L 335, p. 1; Council Regulation (EEC) I of the CCT in a number of consecutive No 3000/82 of 19 October 1982, OJ 1982 L 318, p. 1; Council Regulation (EEC) No 3333/83 of 4 November Council Regulations amending Regulation 1983, OJ 1983 L 313, p. 1; Council Regulation (EEC) No 3400/84 of 27 November 1984, OJ 1984 L 320, p. 1. The respondent quotes similar but differently numbered rules in its pleadings, without citation, which appear to be drawn from a later version adopted in Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical 11 — Cited in footnote 6 above. nomenclature and on the Common Customs Tariff, 12 — OJ 1984 L 340, p. 1. OJ 1987 L 256, p. 1.

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MINISTERO DELLE FINANZE v FOODS IMPORT

(a) The heading which provides the most not collected as a result of an error made by specific description shall be preferred to the competent authorities themselves which headings providing a more general could not reasonably have been detected by description. the person liable, the latter having for his part acted in good faith and observed all the provisions laid down by the rules in force as far as his customs declaration is concerned.

9. Article 5(2) of Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post- clearance recovery of import duties or export 10. Foods Import dei Fratelli Monti S. r. 1. duties which have not been required of the (hereinafter 'the respondent') is a family person liable for payment on goods entered enterprise which specializes in the import of for a customs procedure involving the obli­ preserved fish, which it describes as klip- gation to pay such duties (hereinafter 'the pfisch or baccalà, into Italy. Klippfisch is 1 Regulation on recovery') 4states: formed by salting cod; it may also be dried 15 by exposure to air. The dried, salted fish in question was ling (Molva molva). The respondent stated at the oral hearing that this fact was normally clearly indicated by it in the customs documentation relating to the 'The competent authorities may refrain from 46 consignments imported from Norway taking action for the post-clearance recovery which are in question. In each case, it was of import duties or export duties which were

15 — Stockfish is formed by drying cod in the air without added 14 — Oj 1979 L 197, p. 1. salt.

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OPINION OF MR FENNELLY — CASE C-38/95

17 — The term Molva, without further qualification, relates to a genus, and the terms Gadus morhua, Boreogadus saida and 16 — 62 UNTS 122. Gadus ogac relate to species rather than to subspecies.

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MINISTERO DELLE FINANZE v FOODS IMPORT

3. In any event, must Article 5(2) of Council should have paid duty at the time of customs Regulation (EEC) No 1697/79 of 24 July clearance. 1979, giving debtors the right (see the Court's judgment in Case 314/85 Foto- Frost v Hauptzollamt Lübeck-Ost [1987] ECR4199) to benefit from the fact that the competent authorities may refrain from tak­ ing action for the post-clearance recovery of duties, be applied also in the present case in which the customs authorities failed to col­ lect the relevant duties on account of an error, having regard also to the conduct of the alleged debtor who had observed all the provisions laid down by the rules in force as far as his customs declaration was con­ cerned?'

(Polar cod, or Arctic cod) belongs to the Furthermore, no reason was indicated for the genus Boreogddus, but also belongs, with amendment, which implies that it was not Gadus, to the sub-family Gadinae. Thirdly, intended to alter the pre-existing regime. Molva molva (ling) belongs to the genus Therefore, the list of species in the relevant Molva and to the distinct sub-family Loti- Tariff heading should be seen as being only 20 nae, indicative.

18. The respondent also contests the legality of the imposition of duty on a cod species 20 — SeeCommission of the EC, Multilingual Illustrated Dictio- nary of Aquatic Animals and Plants (Office for Official such as Molva molva, which, it asserts, is Publications of the EC, Brussels, Luxembourg, 1993), pp. 109 to 114. 21 — Sec, for example, Commission Regulation (EEC) No 3583/86 of 24 November 1986 concerning the slopping of fishing for cod by vessels flying the flag of the United 22 — The latter two species arc members of the sub-families of Kingdom; OJ 1986 L 332, p. 6. Phycinae and Lotinae respectively.

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MINISTERO DELLE FINANZE v FOODS IMPORT

contrary to Article 11(1 )(b) of the GATT, is morrbua, Boreogadus saida, Gadus ogac)' discriminatory relative to similar products occupies position B I h), while 'Ling (Molva (that is, dried, salted fish of the three species spp.)' is found at the distinct position B I m). listed in the Tariff heading at issue), and con­ stitutes a misuse of powers in so far as it is an attempt to gain ammunition for fisheries negotiations with third countries (an object which is noted in the Opinion of the Econ­ omic and Social Committee on the proposed amendment of the Regulation in 1984 which 2 ended the suspension of duties). 3

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OPINION OF MR FENNELLY — CASE C-3S/95

sary to examine any of the other rules. If it heading No 03.02 A I b) and II a), must be had been intended that the category 'cod' read by reference to the content of that should remain open, the scientific names heading in the CCT; thus, it should be con­ given would have been preceded by terms strued as being confined to the three species such as 'of the species', or succeeded by the listed, the unqualified term 'cod' being notation 'spp.' merely indicative. The respondent did not make any observations on this textual differ­ ence between Article 20 and Annex VI to the Regulation.

23. Regarding the second question, the 24 — See, for example, Joined Cases 21/72 to 24/72 International Fruit Company v Produktschap voor Groenten en Fruit Commission argues that no question has [1972] ECR1219; Case C-280/93 Germany y Council [1994] ECR I-4973. For arguments on the possible direct been referred regarding the validity of the effect of the GATT following its amendment in 1994 by the Regulation or its compatibility with the Marrakcsh Agreement establishing the World Trade Organisation, see P. Lee and B. Kennedy, 'The WTO GATT. The Commission and Italy submit — will it bite in Europe? The potential direct effect of GATT 1994 in European Community law' (1996) 30, 1 that the list of products in Article 20 of the Journal of World Trade 67. Regulation, which mentions simply 'Cod' at 25 — Cited in footnote 2 above.

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MINISTERO DELLE FINANZE v FOODS IMPORT

25. If the ling (Molva molva) imported by the respondent under the description of klip­ 26. The Court is not required in the present pfisch or baccalà traditionally enjoyed case to interpret definitively cither the exemption from duty, the explanation may pre-1981 or the post-1987 Tariff. It is well be found in some way to arise from the con­ known that the ordinary-language names of tinued application in Italy of the former fish can be inconsistent and a single word Annecy arrangements under the GATT, may have a broad or narrow meaning mentioned in paragraphs 11 and 24 above. At depending on language or country or even least, the Tribunale Civile e Penale di on the particular context. While greater pre­ Ancona seems to have been ready to give cision is required in matters of tariff classifi­ effect to these provisions in the respondent's cation, even here usage is not always consis­ tent. Thus, while the term 'cod' may on occasion be restricted to the single genus Gadus, or even the single species Gadus 26 — While Case 70/87 Fediol v Commission [1989] ECR1781 concerned a Community act which referred expressly to morhiia, it has at times been used, as in the trade practices 'which arc incompatible with international case of Boreogadus saida, to include other law or with generally accepted rules', certain passages in paragraphs 19 to 21 of the judgment of the Court could be species of the Gadinae sub-family. In such relied upon to argue for a generally applicable principle of interpretation in harmony with the Community's interna circumstances, it seems futile, and is, in any tional obligations under an agreement which is not directly effective, such as the GATT. event, unnecessary, to define with precision

28. I also accept the view of the Commis­ sion, outlined above, that interpretative rules 3(a) and 4 do not apply to the present inter­ pretative problem. As heading No 03.02 A, on its face, excludes Molva molva, and thus consigns it to the position 'Other', this is not a situation in which goods appear to be clas­ sifiable under more than one heading or sub­ heading, which might be regulated by rule 3(a). Nor is it a situation in which the goods in question do not fall under any heading or sub-heading, as the position 'Other' is suffi­ ciently capacious to accommodate Molva molva. As this species falls within one of the 27. Heading No 03.02 A I b) and II a) of the positions provided for in the Tariff, there is, CCT, as amended by the Regulation, is in accordance with rule 1, no need to have unambiguous: it applies only to the three regard to any further interpretative rules. species mentioned, Gadus morhua, Boreoga- dus saida and Gadus ogac. The 1987 amend­ ment excluded Boreogadus saida from the general class 'Cod' (thereafter confined to members of the Gadus genus) but continued to link it with Gadus morhua and Gadus ogac under a single Tariff heading and duty regime. Thus, at no stage did the heading extend beyond the sub-family Gadinae. Furthermore, only one of the three species 29. I now turn to the arguments that the listed in 1981 is outside the genus Gadus or amended CCT heading No 03.02 A I b) and 'true cod'. Species which might, in other contexts, be considered to be cod are 28 — On the other hand, the fact that the same list accompanies the term 'Cod' under heading No 03.01, which contains a separate position, 'Ling (Molva spp.)', is not, to my mind, conclusive. A separate position for 'Ling' in respect of 27 — I might add that the similar question of what is, objectively, fresh, chilled and frozen fish could simply constitute a spe­ 'true' or 'traditional' klippfisch is not directly germane to cific exception to a more general position, 'Cod', rather the instant problem, as the term docs not even appear in the than a proof that the latter cannot include the former even Tariff. when no distinct position for 'Ling' is provided.

II a) should continue to be read widely referred to the connection between access to because no reason was stated for any alter­ the Community market and the granting of ation of its pre-existing scope and because, if access for Community vessels to the econ­ read more narrowly than before, consequent omic or fishing zones of non-member coun­ 29 upon the 1981 amendment, it would be tries. Changes in the conditions of supply, invalid by reason of discrimination against whether or not linked to increased access to essentially similar products and of improper third-country fisheries, would constitute reasoning. The first of these arguments economic reasons for an alteration in the assumes, of course, that the pre-existing Community import duty regime. heading, which referred only to 'Cod', was properly interpreted widely to include dried, salted ling. As I have already said, the Court is not called upon in this case to interpret definitively that superseded provision. How­ ever, if the heading should, even before amendment, have been construed as referring only to fish of the sub-family Gadinae, or to only some species of that sub-family, as the Commission contends, then the amendment 31. I would not, in any event, accept the was purely textual and clarificatory rather contention that an alteration of the regime than substantive. As stated at paragraphs 27 with a view to securing such concessions and 28 above, I agree. constitutes a misuse of power. Customs duties perform a number of legitimate func­ tions; they act as, inter alia, the currency of international trade negotiations. Nor am I convinced by the charge of unlawful dis­ crimination. The respondent relied upon two cases which concerned the Council's exercise of the power under Article 28 of the EEC Treaty to alter or suspend duties in the CCT, Ethicon v Hanptzollamt Itzehoe and Texas Instruments v Haitptzollamt München- 30 Mitte. While the Court stated in both cases that it would review measures which disad­ vantaged certain traders or were discrimina­ 30. If, on the other hand, the amendment tory, it is evident that a wide margin of dis­ was designed to effect a narrowing of the cretion is left to the Council. Flexibility is class of fish governed by the heading, the necessary in order to be able to respond statement of reasons contained in the recitals appropriately to international trading cir­ does not contradict such an interpretation. cumstances. In Ethicon, in which the Coun­ As was noted above, economic reasons were cil had suspended duties on one product and added in 1981 to the formerly merely social not on another, having the same properties reasons mentioned in the recitals to the suc­ and intended for the same use but of an cessive Regulations which provided for the suspension of duties on dried and salted cod. The Economic and Social Committee, in its Opinion on the Commission proposal which 29 — OJ 1981 C 159. p. 7; see paragraph 2.3.1. of the Opinion. 30 - Case 58/85 [1986] ECR 1131 and Case 227/84 [ 1985] led to the adoption of the Regulation, ECR 3639 respectively.

objectively different composition from the that products should be differentiated for first, the Court found no misuse of power or customs purposes in accordance with their manifest rnisjudgment of the economic situ­ objective characteristics. In this regard, it is ation, even though the decision was taken in worth noting the statement of the Court in ignorance of the import need for the latter Ethicon that 'the descriptions of goods on product. In Texas Instruments, the suspen­ which customs duties have been suspended sion of duties only in respect of electronic must be interpreted according to objective memories (Eproms) not exceeding a certain criteria derived from their wording and that size was not found to have been intended to they may not be applied contrary to their place certain traders at an advantage or dis­ wording to other goods even if their proper­ advantage, or to have been discriminatory. It ties and application are no different from 32 is worth noting, for the purposes of the dis­ those covered by the suspension'. The cussion of reasons for amendment immedi­ requirement of objective criteria is condi­ ately above, the Court's remark that '[c]us- tioned by the difficulties posed by subjective toms regulations may be altered for a variety characteristics such as the intended use of a 33 of reasons, such as progress in technical product. While compliance with the objec­ tive criteria should be verifiable at the cus­ knowledge or commercial developments and toms clearance stage, it is not necessary that changes in the economic situation which 31 similar goods governed by different Tariff have occurred in the meantime'. In the headings should be immediately visually dis­ light of these decisions, the differentiation tinguishable from each other; indeed, this for customs purposes between fish of two will often be impossible, because the criteria different sub-families, with different objec­ may be highly technical and may relate to tive characteristics such as appearance and the chemical, zoological or genetic make-up geographical distribution, does not appear to of goods. In such cases, the Court has me to be unlawful, even if the fish, once accepted the need for verification by highly dried and salted, are used for similar culinary 34 specialized analysis. In the circumstances, purposes. the similar outward appearance of fillets of dried, salted ling and cod of the species listed in heading No 03.02 A II a) is not determina­ tive of the classification of ling, as expert

33. The reference simply to 'Cod' and 'Fil­ lets of cod' in Article 20 of the Regulation, rather than to cod accompanied by the list of three species set out in the amended CCT in Annex VI, is not enough to indicate, in my 35. As regards the third question, the view, that the suspension of duties continued respondent submits that it acted in good to apply to a wider class of fish, including faith, that the consignments of dried, salted ling. The terms used arc simply abbreviated fish that it imported were declared as such to descriptions of the goods in question. Thus, the customs authorities, including references for example, it is nowhere mentioned that to the species from which they were derived, the fish and fish fillets in question must be and that the authorities repeated their error dried, salted or in brine. It is the reference to in the course of 46 transactions. Italy argues the relevant CCT heading numbers which is that the question is inadmissible, as the order determinative. In the present case, it shows for reference docs not disclose the infor­ that the heading in question applies only to a mation necessary to decide whether the con­ narrow class of cod fish, namely Gadus ditions set out in Article 5(2) of the Regu­ morbiia, Boreogadus saida and Gadus ogac. lation on recovery are satisfied. The This conclusion is, I think, confirmed by the Commission states that it is for the national fact that footnote (a) to the relevant heading court to make such a finding, but attempts to mentions the total suspension of duties for provide guidance for the interpretation of an indefinite period, evidently only in favour that provision by reference to the case-law of of fish of the species governed by that head­ the Court. ing.

light of the circumstances of the case, rather question, that dried, salted ling was entitled than give a purely abstract interpretation of to favourable customs treatment. This situa­ the applicable law. tion is comparable, in my view, to that in The Queen v Commissioners of Customs and Excise, ex parte Faroe Seafood, in which the Court considered that the fact that a trader did not alter a particular fish processing pro­ cedure tended in practice to show an honest belief that that procedure was consistent 37 with the rules. Ultimately, of course, it is 37. The constant case-law of the Court only the national court that can decide. shows that it is for the national court to apply Article 5(2) of the Regulation on post- clearance recovery of duties in the light of 35 the facts of the case. The competent authorities arc not entitled to take action after customs clearance to recover duties which have not been collected if the three conditions set out in Article 5(2) are satis­ 36 fied.

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MINISTERO DELLE FINANZE v FOODS IMPORT

40. The question whether any error on the existing Tariff heading 'Cod' is, in my view, part of the customs authorities could have decisive, the term 'cod' itself has no fixed been reasonably detected by the person meaning and is open to much wider interpre­ liable requires the national court to have tation. It appears that a wider interpretation regard to 'the nature of the error, the profes­ had, historically, been applied in Italy, possi­ sional experience of the traders concerned bly arising from the former GATT provi­ and the degree of care which they exer­ sions considered at paragraphs 11, 24 and 25 40 cised'. As regards the nature of the error, of this Opinion. This could have been mis­ the fact that the authorities persisted in error leading to a trader unfamiliar with legislative over a period of some three years would sug­ interpretation, even if he was professionally 41 gest that the issue was not a simple one. It experienced and exercised considerable care. should also be recalled that, while the addi­ Again, this is a question of fact within the tion of the list of three species to the pre­ exclusive domain of the national judge.

Conclusion

41. In accordance with the above analysis, I recommend that the Court answer the questions referred by the national court as follows:

(1) The dried fish scientifically classified as Molva was not covered by heading No 03.02 Alb ) and II a) of the Common Customs Tariff, as amended by Council Regulation (EEC) No 3796/81, which heading applied at the time of the facts giving rise to the present case only to cod of the species Gadus morhua, Boreogadus saida and Gadus ogac.