C-436/98

OPINION OF MR COSMAS — CASE C-436/98

OPINION OF ADVOCATE GENERAL COSMAS delivered on 11 May 2000 * Contents

I — Introduction I -10561 II — Legal context I -10561 A — System of special export refunds I -10561 B — System of private storage aid I -10563 III — Facts I-10565 IV — Questions referred for a preliminary ruling I -10568 V — Answers to the questions submitted I -10571 A — Admissibility I -10571 B — Substance I-10572 (1) Questions 1, 2 and 3: the need for individual wrapping and the 100 gram rule I -10572 (a) The need for individual wrapping I -10573 (b) Linguistic divergences I -10574 (c) The 100 gram rule I-10577 (2) Question 4: storage of trimmings weighing less than 100 grams I-10578 (3) Question 5: the permissible unit of disallowance for material examined in the case of payment of special export refunds I -10581 (a) Issues raised I -10582 (b) Infringement of the trader's obligations I-10582 (c) Forfeiture of the securities I-10583 (d) Cartons as units of disallowance I -10584 (e) Application of the principle of proportionality I-10585 (4) Question 6: the unit of disallowance in the case of storage I-10586 (a) Grant of private storage aid I -10586 (b)Unit of disallowance I-10588 (5) Questions 7, 8 and 9: the permissible unit for extrapolating sampling results I-10588 VI — Conclusion I-10592

* Original language: Greek.

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HMIL

5. Article 1 of Regulation No 1964/82 pro- vides, so far as relevant to the present case, that 'individually wrapped boneless cuts from fresh or chilled hindquarters of adult male cattle shall, when the terms of [the] regulation are complied with, qualify for 2. The questions are essentially concerned special export refunds'. with the interpretation of provisions relat- ing to the content of packets of beef, and the way in which the beef is wrapped, if it is to qualify for special export refunds and storage aid, and with the methods of checking compliance with the Community 6. In Article 2(1) it is specified that 'the legislation and calculating the amount of operator shall submit to the competent the security which is forfeited if those provisions are infringed. 3 — That regulation was amended by Commission Regulation (EEC) No .5169/87 of 23 October 1987 amending Regula- tions (EEC) No 12/82, (EEC) No 1964/82 and (EEC) No 74/84 in the matter of customs export formalities for 1 — OJ 19S2 I. 212, p. 48. certain beef on which special refunds are granted (OJ 1987 2 — OJ 1988 L 239, p. 20. L 101, p. 21).

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OPINION OF MR COSMAS — CASE C-436/98

authorities indicated by the Member States boning of the hindquarters, and in particu- a declaration stating his intention to bone lar that detailed rules for trimming and hindquarters as defined in Article 1 under packaging be established, together with a the terms of [the] regulation and to export description of the different cuts to be the entire quantity of boned pieces obtained. obtained, each piece being individually wrapped'.

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HMIL

10. The special export refund could be paid B — System of private storage aid in advance. In that case, a security equal to the advance payment plus 20% had to be provided.

C o m m i s s i o n R e g u l a t i o n (EEC) No 2220/85 of 22 July 1985 laying down common detailed rules for the application of the system of securities for agricultural products, 6 as amended;7and (c) Commis- sion Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural 13. Article 2(2) of Regulation No 2675/88 products, 8 as amended. 9 provides that private storage aid can be granted only for meat classified in accor- dance with the Community carcase classi-

(I), p. 187). 6 — OJ 1985 L 205, p. 5. adult bovine animals, 13 as corrected. 14 7 — By Commission Regulation (EEC) No 1181/87 of 29 April 1987 (OJ 1987 L 113, p. 31). 8 — OJ 1987 L 351, p. 1. 9 — In particular, it was amended: (i) by a corrigendum 10 — As amended by Commission Regulation No 3258/88 (OJ 1988 L 337, p. 29); (¡i) by Commission Regulation (OJ 1988 L 289, p. 52). (EEC) No 3494/88 of 9 November 1988 amending Regula- 11 — OJ 1980 L 114, p. 18. This regulation was repealed by tions (EEC) No 3154/85 laying down detailed rules for the Commission Regulation (EEC) No 3445/90 of 27 Novem- administrative application of monetary compensatory ber 1990 laving down detailed rules for granting private amounts, (EEC) No 548/86 laying down detailed rules for storage aid for beef and veal (OJ 1990 L 333, p. 30). the application of accession compensatory amounts and (EEC) No 3665/87 laying down common detailed rules for 12 — It was amended by Commission Regulation (EEC) the application of the system of export refunds on No 2826/82 of 22 October 1982 providing for the grant of private storage aid fixed at a standard rate in advance in agricultural products (OJ 1988 1. 306, p. 24); and (iii) by respect of hindquarters of beef and amending for the Commission Regulation (EEC) No 3993/88 of 21 Decem- second time Regulation (EEC) No 1091/80 (OJ 1982 ber 1988 amending Regulation (EEC) No 3665/87 laying L 297, p . 18). down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1988 13 — OJ 1981 I. 123, p. 3.

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OPINION OF MR COSMAS — CASE C-436/98

14. Article 2(2) of Regulation No 1208/81 19. In that regard, Article 5 of Regulation provides that for the purpose of establish- No 1091/80 provides as follows: ing market prices carcases are to be pre- sented 'without cod fat'.

'1. The amount of the security shall not exceed 30% of the amount of aid applied 15. Article 4(4) of Regulation No 2675/88 for. states that 'the large tendons, cartilages, pieces of fat and other scraps left over from cutting [or] boning may not be stored'.

2. Except in cases of force majeure:

16. Article 5(2) of Regulation No 2675/88 provides that 'after three months of storage under contract, a single advance payment of the aid may be made, at the storer's request, on condition that he lodges a (a) the security shall be forfeit proportio- security equal to the advance payment plus nately to the shortfall on the quantity 20%'. agreed in the contract if less than 90% of that quantity is entered into storage within the time-limits laid down and remains stored for the stipulated period in accordance with Article 3(2)(a);

III — Facts

20. HMIL Limited (formerly known as 23. Between April and September 1989, the Hibernia Meats International Limited) Minister and the Revenue Commissioners ('HMIL') is a company with limited liability examined 2 400 cartons of deboned beef 16 which at all material times was involved in declared for the purpose of grant of special the purchasing, deboning and trading of export refunds and placed in storage under beef. the APS scheme for 1988. The checks revealed that, in seven production plants used by HMIL, certain of its cartons which were examined included cuts or pieces of meat which in the Minister's view were not individually wrapped and also fat (which was cod fat), scraps and trimmings wrap- 21. During 1988 it declared approximately ped inside the cuts known as plate and 13 000 tonnes of beef with a view to flank and mid rib. Finally, the Minister obtaining special export refunds, pursuant alleged that in four of the production plants to Regulation No 1964/82, and entered in question the quantity of scraps and into the related contracts. 1 5It received trimmings and non-individually wrapped IEP 16 270 139.96 in special export pieces was extremely high. refunds. During that year it also entered into 138 private storage contracts under 16 — HMIL maintains (paragraph 2.10.2 of its observations) that, in total, 274 cartons of mid rib and 2 297 cartons of plate and flank were inspected and (paragraph 2.6.2) that 15 — As HMIL states (paragraph 1.I of its observations), it production covered by 120 of the 36.1 export refund bonds entered into 363 contracts (export refund honds) in 1988. was inspected.

(e) the extrapolation method for export refunds was based on the exclusion from export refunds plus the regulatory premium of the percentage by weight (a) all cartons found to contain trimmings of trimmings and non-individually or fat were excluded from APS and wrapped pieces found relative to the export refunds and the 20% advance weight of the carton sampled;

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HMIL

(f) where the weight of trimmings in any was invalid; (b) a declaration that in carton was greater than or equal to 3 performing its contracts with the Minister kg, the weight of the entire carton was relating to the APS and export refund included in the extrapolation calcula- schemes for 1988 it had acted in compli- tion; ance with the regulations governing those schemes; and (c) a declaration that the Minister was obliged to release the guar- antees given to it in respect of HMIL's contracts with it under the APS and export refund schemes for 1988. (g) where cod fat had been uncovered, the weight of the entire carton was inclu- ded in the extrapolation exercise for APS and export refunds;

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wrapped without infringing the regulation. when rolled up inside a cut of plate and It also held that Article 4 of Regulation flank from fresh or chilled hindquarters No 2675/88 required that all meat includ- of adult male cattle, which rolled up ing trimmings be placed in store and that cut is then wrapped, do or do not trimmings were accordingly eligible for qualify for special export refunds pur- APS. It then held that the sampling exercise suant to the said regulation? carried out by the Department of Agricul- ture, Food and Forestry ('the Department') did not reveal any measurable fault by HMIL which would require financial cor- rection as to APS or special export refunds. Finally, it concluded that the system of financial corrections applied by the Minis- 2. Is Commission Regulation (EEC) ter was so fundamentally flawed that it No 1964/82 and in particular Article 1 could not be saved. thereof, to be construed as meaning that [trimmings/detached pieces of meat] of greater than 100 grams when rolled up inside a cut of plate or flank from fresh or chilled hindquarter of adult male cattle, which rolled up cut is 30. The Minister appealed against that then wrapped, do or do not qualify for judgment of the High Court to the Supreme special export refunds pursuant to the Court. said regulation?

IV — Questions referred for a preliminary 3. Is Commission Regulation (EEC) ruling No 1964/82 and in particular Article 1 thereof, to be construed as meaning that each piece or cut of plate and flank must be individually wrapped or that in addition, trimmings may be rolled up 31. The Supreme Court, against whose inside a piece or cut of plate and flank decisions there is no judicial remedy, deci- and such rolled up piece or cut may ded to refer the following nine questions to then be wrapped? the Court of Justice for a preliminary ruling:

5 (a) Where upon examination of one or more boxes of meat placed under 5 (c) Where upon examination of one or customs control for the purpose of more boxes of meat placed under obtaining special export refunds customs control for the purpose of p u r s u a n t to R e g u l a t i o n obtaining special export refunds No 1964/82, it is discovered that p u r s u a n t to R e g u l a t i o n the contents of such boxes include No 1964/82, it is discovered that trimmings rolled within plate and the contents of such boxes include flank or mid rib and if the inclu- non-individually wrapped pieces of sion of such trimmings is contrary meat contrary to Regulation to Regulation No 1964/82, do No 1964/82, do Regulations Regulations No 565/80 and No 565/80 and No 3665/87 per- No 3665/87 permit the competent mit the competent authority to authority to reject the contents of reject the contents of the entire the entire box as not qualifying for box as not qualifying for special special export refunds and to for- export refunds and to forfeit the feit the security given for the security given for the advance advance payment made in respect payment made in respect of such of such box plus 20%? box plus 20%?

5 (b) Where upon examination of one or 6 (a) Where upon an examination of one more boxes of meat placed under or more boxes of meat placed in customs control for the purpose of store under Regulation obtaining special export refunds No 2675/88 for the purpose of p u r s u a n t to R e g u l a t i o n obtaining private storage aid, it is No 1964/82, it is discovered that discovered that the contents of the contents of such boxes include such boxes include trimmings separate pieces of fat rolled within rolled within plate and flank or plate or flank or mid rib contrary mid rib and if the inclusion of such to Regulation No 1964/82, do trimmings [is] contrary to Arti- Regulations No 565/80 and cle 4 ( 4 ) of Regulation

No 2675/88, do Regulations cular production plants, is the compe- No 2220/85 and No 2675/88 per- tent authority authorised pursuant to mit the competent authority to Regulations No 565/80, No 3665/87 reject the contents of the entire and No 1964/82 to extrapolate the box for the purposes of private results of the sample across the pro- storage aid and to forfeit the secur- duction of such cuts in the particular ity for the [advance] payment made production units and to reject as eligi- in respect of such box plus 20%? ble for export refunds, a quantity of meat based on such extrapolation and to forfeit the security for the advance payment made in respect of such quan- tity plus 20% or is the competent authority confined to extrapolating the results of the examination of boxes 6 (b) Where upon an examination of one in one export refund bond across the or more boxes of meat placed in production of the relevant cuts within store under Regulation that export refund bond as the case No 2675/88 for the purpose of may be? obtaining private storage aid, it is discovered that the contents of such boxes include separate pieces of fat rolled within plate and flank or mid rib contrary to Article 4(4) of Regulation No 2675/88, do Regulations No 2220/85 and No 2675/88 permit the competent authority to reject the contents of the entire box for the purposes of private storage aid and to forfeit the security for the advance pay- ment made in respect of such box 8. Where boxes placed in storage under plus 20%? Regulation No 2675/88 for the pur- pose of obtaining private storage aid have been examined and a certain number of such boxes have been found to contain ineligible material contrary to Regulation No 2675/88 and there is evidence of a deliberate and persistent 7. Where upon such an examination of policy of including such ineligible boxes placed under customs control for material rolled up inside particular cuts the purpose of obtaining special export in particular production plants, is the refunds pursuant to Regulation competent authority entitled pursuant No 1964/82, it is discovered that a to Regulations No 2220/85 and certain number of boxes contain ineli- No 2675/88 to extrapolate the results gible material rolled up inside a cut of of such examination across the produc- meat and there is evidence of a delib- tion of such cuts in the particular erate persistent policy by the operator production plants and to reject as of rolling up such ineligible material eligible for private storage aid a quan- inside particular cuts of meat in parti- tity of meat based on such extrapola-

9. Where there is evidence of a persistent and deliberate policy by an operator to 33. HMIL also takes the view (paragraph include in boxes of particular cuts of 7.14 of its observations) that Question 9 boneless meat in particular production has no bearing on the outcome of the plants, material which may not be dispute and is clearly hypothetical, because stored pursuant to Article 4(4) of Reg- it has never been alleged that HMIL ulation No 2675/88 and the APS con- intended to defraud the competent autho- tract entered into by the operator with rities with regard to the payment of storage the competent authority and examina- aid, nor does the evidence show that tion revealed significant quantities of significant quantities of ineligible material such ineligible material has been were stored. stored, does Regulation No 1091/80, and in particular Article 5(2)(c) thereof, authorise the competent authority to forfeit the amount of the contract securities referable to the production of the relevant cuts of meat in such production plants?' 34. In the present case, the national court analyses the way in which the results of the sampling checks carried out were extrapo- lated and sets out the related submissions of both the Minister and HMIL. I therefore consider that it explains the reasons why an answer to those questions is needed in V — Answers to the questions submitted

35. First I will consider together, as they are connected, Questions 1, 2 and 3, which concern issues of interpretation of Regula- 37. As is explained both by the national tion No 1964/82 — more specifically, court and in the observations submitted by issues relating to the need for individual the parties, the reason for the distinction wrapping and to the 100 gram rule (1). I which is drawn in Questions 1 and 2 will then consider Question 4, which is between trimmings of less than 100 grams concerned with the interpretation of Reg- and trimmings or detached pieces of meat ulation No 2675/88, more specifically with of more than 100 grams is that, in the the question of whether it is permitted to course of the investigation carried out in store trimmings weighing less than 100 1989, the Minister determined that trim- grams (2). Next, I will consider Question 5 mings were scraps or pieces of meat which is concerned with the interpretation weighing 100 grams or less. 18 of Regulations No 1964/82, No 565/80 and No 3665/87 and with the issue of the permissible unit of disallowance for mate- rial examined (3). Question 6 concerns the interpretation of Regulations No 2675/88 and No 2220/85 and, once more, relates to the issue of the permissible unit of disal- lowance (4). I will examine together Ques- 38. HMIL maintains (paragraph 7.5 of its tions 7, 8 and 9, which are concerned with observations) that it follows from the the interpretation of provisions of Regula- Community legislation on the grant of tions No 1964/82 and No 2675/88 as well export refunds (Regulation No 1964/82) as of Regulations No 565/80, No 2220/85, No 3665/87 and No 1091/80 and pertain to the issue of the permissible unit for 18 — Financial corrections were not made so far as concerns special export refunds for pieces of meat, if individually extrapolating sampling results (5). wrapped, in excess of 100 grams.

1 9 — I n addition, it follows from the title of Regulation No 1964/82 that the system of special export refunds concerns only 'certain' cuts of honed meat of bovine animals. In the second recital in the preamble, it was specified that the conditions under winch such special (a) The need for individual wrapping refunds could be granted related to 'certain cuts of meats produced by boning hindquarters of male cattle'. That is to say, the Community legislature wished only beef of a certain quality to be brought within the special system of special export refunds. This requirement leads the Minister to point out (paragrapli 4.6 et seq. of his observations) that the purpose of Regulation No 1964/82 is to grant a special export refund for a high quality product. That is clear from an analysis of the following conditions which are laid down: lai only meat from adult male cattle, which is considered to he of higher quality than that from female cattle, confers entitlement to special refunds; ib) only Inndquarter meat, considered to he of higher quality than 40. In my view, it is clear from Regulation forequarter meat, confers such entitlement; and (c) the second paragraph of Article 1 specifically defines hind- No 1964/82 that every piece ['morceau'] of quarters as 'unseparated or separated hindquarters... with meat for export needs to be individually a maximum of nine ribs or nine pairs of ribs'.

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authority one or more 'boned meat certifi- 42. The above principles mean in practice cates', 20 on which the number of the that, should a cut of meat, such as plate or certificate referred to in Article 2(2), flank, be cut up for the purpose, for describing the products to be boned and example, of improved wrapping and/or specifying their quantity, is to be entered (in because of commercial requirements, each box 7). Fourth, it is of fundamental impor- of the pieces must be individually wrapped, tance to ensure that there is no possibility be identified and have its weight estab- of substitution of wrapped pieces of meat, lished, in order that the conditions laid in particular by identifying them, 21 as is down by Regulation No 1964/82 are fully expressly stated in Article 8. 22 met. 24

Those small 21 — This is also clear from the eighth recital in the preamble to pieces, of considerable commercial value, the regulation, where it is stated that 'in view of the special are called 'trimmings' and must be distin- nature of this refund, no substitution should be permitted and means of identification of the products in question guished from 'scraps', for example large should be provided for'. tendons, cartilage, and pieces of fat or 22 — The second paragraph of Article 8 provides that the bags, cartons or other packaging material in which the boned other bits which fall onto the floor during cuts are placed are to be officially sealed by the competent deboning, which are not marketable pro- authorities and to bear particulars enabling the boned meat to be identified, in particular the net weight, the type and the number of cuts and a serial number.

No 1964/82. That nomenclature was laid down by absurd and unjustifiable, would amount to needless work Commission Regulation (EEC) No 3846/87 of 17 Decem- and, inter alta, would increase the risk of spoilage and food ber 1987 establishing an agricultural product nomencla- poisoning, is not sufficient, in my view, to alter the ture for export refunds (OJ 1987 L 366, p. 1). In the annex conclusion set out above which follows from provisions of to Regulation No 3846/87 under code 0201 30 00 headed Regulation No 1964/82 interpreted in conjunction with 'Boneless' — which appears under heading 0201 entitled each other. I consider that, since Article 6 of Regulation 'Meat of bovine animals, fresh or chilled', in section 6 of No 1964/82 allows traders to sell within the Community the annex, entitled 'Beef and veal' — subheading (product bones, large tendons, cartilages, pieces of fat and other code) 0201 30 00 100 is as follows: 'From the hindquar- scraps left over from boning, traders who wished to export ters of male adult bovine animals with a maximum of nine such scraps to non-member countries, taking advantage of ribs or nine pairs of ribs (3), each piece individually the special export refunds paid by the Community, had to

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HMIL

is a lower quality cut which in practice is synonymous with the term 'cuts', that is to rolled and then wrapped in polythene. It is say that it meant only large pieces of meat, normal trade practice for trimmings to be so that trimmings were not required to be placed inside a cut of plate and flank; the individually wrapped but could be wrapped whole is then rolled up and wrapped as a within a cut of plate and flank, the effect single cut. HMIL maintains that the possi- would be to distort the application of bility accorded to traders by the second Regulation No 1964/82. paragraph of Article 6 of Regulation No 1964/82 of selling within the Commu- nity bones, large tendons, cartilages, pieces of fat and other scraps left over from boning relates only to scraps and not to trimmings which must be exported in any event.

49. I also reach that conclusion on inter- preting the second paragraph of Article 6 of Regulation No 1964/82. Certainly, the 50. In my view, the provisions of the first paragraph of Article 6 provides that Community legislature relate to a whole, the grant of the special export refund is to to be exact the hindquarters of adult male be conditional 26 on exportation of the total cattle. 29 They also regulate what happens quantity of meat produced by boning, 27 to that whole after deboning: while the that is to say the quantity constituted by the total quantity of meat, that is to say all the meat from the hindquarters of adult male pieces of meat, separately wrapped, quali- cattle which are subject to control in fies for special refunds if exported, the remaining products arising from deboning may be sold within the Community. More 25 — The Court has frequently dealt with the issue of linguistic specifically, according to the second para- divergences in the rendering of terms or expressions in Community legislation. For example, it held in Case 29/69 graph of Article 6 the operator may, how- Stauder v Ulm [1969] ECR 419, at paragraph 3, that 'when a single decision is addressed to all the Member ever, sell within the Community bones, States the necessity for uniform application and accord- ingly for uniform interpretation makes it impossible to large tendons, cartilages, pieces of fat and consider one version of the text in isolation but requires other scraps left over from boning. As is that it be interpreted on the basis of both the real intention of its author and the aim he seeks to achieve, in the light in correctly pointed out by the Minister particular of the versions in all [the] languages' (see also (paragraph 4.20 of his observations) and Case 19/67 Sociale Verzekeringsbank v van der Vecht [1967] ECR 345). The Court then stated: 'It cannot, the Commission (paragraph 10 of its obser- moreover, be accepted that the authors of the decision intended to impose stricter obligations in some Member vations), the word 'however' means that States than in others' (Stauder v Ulm, paragraph 4). the second paragraph constitutes an excep- Furthermore, the Court held in Case C-372/88 Milk Marketing Board v Cricket St Thomas [1990] ECR tion to the first. It is designed, therefore, to I-1345, at paragraph 18, that the version in one of the Community languages (in that case, English) '[could] not allow operators to sell within the Commu- serve as the sole basis for the interpretation of [the nity meat as well, because otherwise there provision in question], or be made to override the other language versions in this regard. Such an approach would be incompatible with the requirement for the uniform application of Community law'. 26 — Except in circumstances of force majeure. 28 — See point 11 of the Opinion of Advocate General Darmon 27 — The Court found to that effect in Case C-101/88 Gause- in Gausepohl, cited in footnote 27 above. pohl v Hauptzollamt Hamburg-Jonas [1990] ECR I-23, 29 — See also the second and fourth recitals in the preamble to paragraphs 17, 18 and 19. Regulation No 1964/82.

52. The issues raised by the existence of a linguistic divergence in the rendering in English of the term 'chutes de parage' as 'scraps', which is verbally different from the term 'parures' — a term rendered in (c) The 100 gram rule English as 'trimmings' ('trims') — must also be resolved having regard to the broad logic of the provision and the objective pursued by Regulation No 1964/82. 30 55. I now come to consideration of the question whether a Member State, to be specific Ireland, could, in accordance with Regulation No 1964/82, lay down a limit, in this instance 100 grams, enabling it to 53. Since the Community legislature exclude pieces/trimmings below the limit enacts, in the second paragraph of Arti­ from special export refunds. cle 6, an exception to the rule which it lays down in the first paragraph, it must, in my view, be found that the English term 'scraps' does not refer to waste, that is to say to pieces not fit for human consump­

56. The solution to that question is con­ 30 — In Danish the term 'afpudsning' is used, whose meaning is nected with the interpretation of Articles 7 similar to that of the English term 'scraps'. In German the term 'Abschnitte' is used, in Greek 'απορρίμματα, που and 8 of Regulation No 1964/82, as the έχουν υποστεί κατάλληλη προετοιμασία' and in Italian 'ritagli di pesatura'. In Dutch, however, the term 'afvallen' Commission correctly points out (para­ is used, that is to say literally 'waste'. graph 10 of its observations).

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58. It is apparent from Articles 7 and 8, interpreted together, that the Member States have the power to exclude from special export refunds trimmings below a defined weight, having regard to the prac- tical difficulty of identifying every more or 61. According to HMIL, the issue as to less small piece of meat. whether or not trimmings qualify for private storage aid does not turn on their weight. It considers that Article 4(4) of Regulation No 2675/88 permits the storage of trimmings resulting from cutting and deboning. In its submission, Article 4(4) must be interpreted in a manner consistent with Article 6 of Regulation No 1964/82. 59. I have already stated that, in order to Finally, it contests the validity of the 100 qualify for a special export refund, every gram rule, under which trimmings of less piece of meat should be individually than 100 grams did not qualify for aid, wrapped, irrespective of its size and weight. because, apart from being arbitrary, it However, it was open to a Member State, would, if applied, infringe the principle of such as Ireland in this instance, to lay down legal certainty and the prohibition on a lower limit of 100 grams below which retroactivity: the rule was not made known pieces of meat did not qualify for a special to HMIL since it was not adopted by the Minister before the placing into storage but while the investigation was being con- 31 — By way of derogation from Articles 2(3) and 4(1). ducted.

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64. The similarity of the wording of Arti- cle 4(4) of Regulation No 2675/88 and the second paragraph of Article 6 of Regula- tion No 1964/82 is clear. However, it must be remembered that the two schemes — special export refunds under Regulation No 1964/82 and private storage aid under Regulation No 2675/88 — constitute two separate legal systems with different objec- tives, even though it was legally possible at the time of the facts of the case for the special export refunds scheme and the APS scheme to be applied in respect of the same

legislation. Regulation No 2651/86, after the prohibition was enacted 35 — Similarly, Commission Regulation (EEC) No 2651/86 of whereby trimmings from the cutting or boning of meat 22 August 1986 providing for the grant of private storage were excluded the minimum yield was reduced to 6 7 % but aid fixed at a standard rate in advance in respect of the maximum yield was kept at 7 7 % . As the Minister carcases, half-carcases, hindquarters and forequarters from states, it was only after representations by the traders adult bovine animals (OJ 1986 L 241, p. 14), which was concerned, for whom it was now difficult to achieve the applicable previously, prohibited (Article 4(3)(c)) the sto- maximum yield of 7 7 % , that Commission Regulation rage not only of large tendons, cartilages and pieces of fat (EEC) No 2437/87 of 11 August 1987 (OJ 1987 L 225, but also of other scraps left over front boning. p. 13) reduced the maximum yield to 7 5 % .

69. Furthermore, it is apparent on examin- ing the other language versions of the term 'scraps' in Article 4(4) of Regulation No 2675/88 that the term used is the same

67. That is to say, by Article 6(1) of 39 — As amended by Commission Regulation (EEC) No 2629/80 of 14 October 1980 amending Regulation Regulation No 2675/88, which was pub- (EEC) No 1091/80 laying down detailed rules for granting lished in the Official Journal on 30 August private storage aid in respect of beef and veal (OJ 1980 L 270, p. 9). 1988 and entered into force on the same 40 — The aggregation was first permitted pursuant to Arti- day (Article 14), an exception was enacted cle 6(1) of Commission Regulation (EEC) No 2267/84 of 31 July 1984 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from beef (OJ 1984 L 208, p. 31). 38 — It is also specified that Member States may require that the 41 — It is to be remembered that the present case concerns two operations referred to in the first subparagraph are to actions on the part of HMIL which are referable to the commence simultaneously. period from September to December 1988.

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as that in the second paragraph of Article 6 rules binding the Member States, 43 must be of Regulation No 1964/82. 42 applied in all respects and it is not open to the Member States to lay down that trimmings, however small, and regardless of whether or not they are fit for human consumption, qualify for APS.

71. Besides, Regulation No 2675/88 did 73. Question 5, which is in three parts, not contain provisions equivalent to Arti- concerns the interpretation of Regulations cles 7 and 8 of Regulation No 1964/82 No 1964/82, No 565/80 and No 3665/87 enabling the Member States to adopt and, more specifically, the issue of the implementing measures. Thus Regulation No 2675/88, which lays down relevant 43 — It is, in my view, that element which distinguishes the matter at issue from that in Ellnukn Dimosio (Creek Suite) v Ellurika Dinustriaka, cited in footnote 33 above (para- graphs 23, 24 and 2 5 ) ,where rules relating to the import 42 — The term is rendered m French as 'chutes de parage', in of certain categories of agricultural products were applied German as 'anfallende Anschnitte', in Dutch as 'afvallen', by analogy to refunds on the export of similar products to in Danish as 'afpudsning', in Spanish as 'caídos' and in non-memher countries. See also paragraph 76 of the Portuguese as 'aparas'. In Italian, however, the terni 'ritagli judgment in Case C-235/97 France v Commission [1998] di apprestamento' is used while m Article 6 the term used ECR I-7555 concerning the clearance of accounts of the is 'ritagli di pessatura'; the word 'ritagli' nevertheless European Agricultural Guidance and Guarantee Fund ('the remains the same. EAGGF') (refund on the export of processed cheese).

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permissible unit of disallowance for mate- material is not necessary for the achieve- rial examined in the case of payment of ment of that objective. special export refunds. The subdivision of the question relates to whether the answer differs according to the nature 44 of the material found in each unit of packaging, in this instance cartons. 75. The Minister considers that where ineligible material is found in a carton, Council Regulation No 565/80 and Com- mission Regulations No 2220/85 and No 3665/87 permit the competent author- ity to reject the contents of the entire carton as not meeting the conditions for the grant (a) Issues raised of special export refunds and to forfeit the security given for the advance payment in respect of the carton plus 20%.

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special export refunds and to forfeit the tion No 565/80 and Commission Regula- security given for the advance payment in tions No 2220/85 and No 3667/87. respect of the carton plus 20%.

77. Also, as I mentioned earlier, the desig- nation of the goods on the declaration 79. The basic principle applicable to the submitted by the trader in advance, pur- advance payment of special export refunds suant to Article 2 of Regulation may be derived from Articles 5 and 6 of No 1964/82, in order to obtain special Regulation No 565/80. Article 5 allows export refunds had to correspond to the their advance payment by means of the nomenclature for special export refunds lodging of a security guaranteeing reimbur- which was used in 1988 for products sement of the amount paid, increased by an exported in accordance with that regula- additional amount, in this instance 20% as tion. 48 If, by reason of the breach which laid down in Regulation No 3665/87. 49 It has been recorded, the product does not was also provided (Article 6 of Regulation correspond to the official nomenclature, No 565/80) that the security could be there is a further reason why the breach forfeited in whole or in part if there proved cannot be regarded as being of secondary to be no right to the export refund or if importance, as the Commission correctly there was a right to a smaller refund. points out (paragraph 16 of its observa- tions). That is all the more so inasmuch as fat does not amount to meat which may, if the conditions of Regulation No 1964/82 are met, qualify for special export refunds.

export refund which may be granted defi- (d) Cartons as units of disallowance nitively on the basis of the declaration submitted by the exporter in accordance w i t h A r t i c l e 2(1) of R e g u l a t i o n No 1964/82 and, second, provision is made for recovery of the amount paid in advance where the refund which may be granted 82. In the present case, the issue is raised of definitively is lower than the advance whether each carton had to or could be payment, the competent national authority regarded as the basic unit to which regard may make financial corrections. 51 Where would be had when excluding ineligible the trader/exporter concerned does not material. prove that he is entitled to the whole of special refunds paid in advance, because of a failure to fulfil in their entirety the obligations which he assumed, the compe- tent intervention authority, in this instance the Minister, is obliged to forfeit the security in an amount equal to the differ- ence between the amount paid in advance 83. As to that issue, it is sufficient to note and the amount of the special refund in that, in accordance with the second para- respect of which entitlement is proved, plus graph of Article 8 of Regulation 20%, in accordance with Article 33(1) 52 No 1964/82, 'the bags, cartons or other and Article 33(3)(d) 53 of Regulation packaging material in which the boned cuts No 3665/87. are placed shall be officially sealed by the competent authorities and bear particulars enabling the boned meat to be identified, in particular the net weight, the type and the number of cuts and a serial number'.

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(e) Application of the principle of propor- to the seriousness of the infringement, but tionality did so because, first, only a negligible part of the total quantity was missing and, second, there was an absence of bad faith on the part of the trader, who did not act with intent to defraud; 58 had the contrary 85. The issue is also raised as to whether it applied, it would have found that the is possible to forfeit the whole of the requirement of exportation was not met security in respect of the entire carton, as in respect of the remaining quantity of the Minister asserts, or only in proportion meat. In other words it held, having regard to the amount of infringing material in the to factors in the case before it, that over- carton, as the Commission maintains (para- riding reasons of equity led to that solu- graph 17 of its observations).55 tion. 59

55 — It will be recalled that, in HMIL's submission, the disallowance of eligible material within a carton contain- 58 — See point 19 of the Opinion of Advocate General Darmon ing ineligible material infringes the principle of propor- in Gausepohl, cited in footnote 27 above. tionality. 59 — See point 18 of the Opinion of Advocate General Darmon. 56 — Cited i n footnote 27 above. 60 — According to Advocate General Darmon (point 20), that is 57 — Paragraph 19. what occurred in Gausepohl.

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to the declarations submitted by the trader (a) Grant of private storage aid itself. 61

89. As I have stated in previous points of my analysis, given the interdependence of the two schemes for the payment of special export refunds and of APS, identification of each piece of meat stored was also a (4) Question 6: the unit of disallowance in fundamental element of the scheme for the case of storage payment of APS, and such identification was possible only if each piece was indivi- dually wrapped.

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of the aid may be made, at the storer's entitlement to the sum paid in advance; if request, on condition that he lodges a they fail to do so, the competent authority security equal to the advance payment plus is obliged to demand that sum and, if it is 20%. not paid within 30 days, to declare forfeit the security provided.

94. With regard to advance payments, a system is laid down in Articles 19(1) 63 and 29 64 of Regulation No 2220/85 under which traders are required to establish final 96. Since, in accordance with considera- tions previously set out, the wrapping of 63 — Specifically, it is provided that the security is to be released trimmings or pieces of fat inside plate, when (a) final entitlement to the sum granted hy way of flank and mid rib constitutes a serious advance has been established or (b) the sum granted, plus any addition provided for in the specific regulation, has breach of the storer's contractual obliga-

Where payment has not been made at the end of lots, on which the weight and date of entry into store are this period, the competent authority is without delay to clearly marked (Article 3(2)(d)) and to permit the inter- require the guarantor envisaged in Article 8(1)(b) to pay, vention agency at all times to check that all the obligations allowing up to 30 days from the day of issue of demand for laid down in the contract are being observed (Arti- payment. cle 3(2)(e)).

100. The final three questions submitted by the national court are concerned with the interpretation of provisions both of Regu- 98. Also, under Article 6(3) a payment lations No 1964/82 and No 2675/88 and declaration 66 is to be submitted for each of Regulations No 565/80, No 2220/85, lot on the day of its entry into storage. The No 3665/87 and No 1091/80, and relate final subparagraph of Article 6(3) specifies to the issue of the permissible unit for that 'lot' is to be taken to mean 'a quantity extrapolating sampling results. The ques- which is placed in storage on a given day'. tions are put on the basis that there was evidence of a deliberate and persistent policy on the part of HMIL to include 66 — Payment declarations are referred to in Article 25 of ineligible material inside particular cuts of Regulation No 3665/87; see the corrigendum at OJ 1988 L 279, p. 20. beef in particular production plants.

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102. HMIL, relying on the judgment of the High Court, considers (paragraph 6.9.6 of its observations) that the unit for extrapo- lating the sampling results must be the contract, which is the legal unit under the applicable regulations, and that the provi- sion of security relates to the contract, that is to say a specific contract each time. It 104. The Court has repeatedly accepted that sampling results may be extrapolated. 67— The cartons inspected related to 67 or the 138 storage contracts, as is stated by the Minister (paragraph 8.3 or his observations) and by HMIL, which adds (paragraph 2.6.2 68 — As the Minister explains (paragraph 9.2 of his observa- of its observations) that production covered by 120 of the tions), APS contract securities were given to guarantee 363 export refund bonds was inspected. performance of the APS contract entered into by the trader.

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It has thus held that the Commission may 105. In addition, the Court has held that, in rely on the results of sampling checks the absence of specific rules governing the carried out in a sufficiently reliable manner way in which sampling checks are carried and on the conclusions of experts — that out, 72 the Commission may apply the is to say scientists with specialist knowl- methods of checking which it considers edge who would be in a position to the most appropriate, 73 a power which is, evaluate fully the situation under consid- however, counterbalanced by the general eration 69 — and, on the basis of those requirement that the methods chosen must findings, adopt a measure relating to a be reliable. 74 whole 70 of which parts have been checked. 71

In that case, the Court held that, Germany v Commission, cited in footnote 70 above. In the in the context of the supervision to be carried out by the course of the proceedings, the Commission had explained competent national intervention agency, the concept of that, where a company submitted an application for aid for 'regular supervision' within the meaning of Article 3(3) of 100 batches which, according to the samples taken by way Regulation (EEC) No 756/70 of the Commission of of internal check, complied with the requirements of the 24 April 1970 on granting aid for skimmed milk processed regulation, and on the official check the authorities took into casein and caseinates (OJ, English Special Edition ten samples of which one was unsatisfactory, the German 1970 (I), p. 201) requires that, when the official checks authorities refused aid solely for the batch whose sample reveal that some or the batches which satisfied the had given a negative result, while granting the aid for the processor's internal checks do not in fact comply with remaining 99 batches, although the negative sample the requirements of that regulation and are therefore not represented 10% of the official samples.

The Court (paragraphs 11 71 — In Case C-385/89 Greece v Commission [1992] ECR and 12) accepted the Commission's argument and held I-3225, concerning the clearance of EAGGF accounts, the (paragraph 13) that since 10% of the batches did not Court examined the legality of the Commission decision in satisfy the requirements laid down the German authorities the matter, which was adopted after sampling had been were obliged either to extrapolate the result or to check carried out, and held that 'although the Commission must further batches. adopt appropriate and reliable methods of inspection, it is for the applicant Member State.

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the basis of course that the sample taken results for the whole of the production of for the relevant check may be regarded as particular pieces of beef provided that the representative given that, according to the checks are systematic 76 and the results national court, there was evidence of a reliable, and provided additionally that persistent and deliberate policy on the part there is evidence of a deliberate and persis- of the operator. tent policy on the part of the trader as stated in the order for reference.

. . to the Commission attests, the Italian administration has itself acknowledged that its officials bad found shortcomings and encountered diffi- culties when inspecting the accounts of the farms'. That is to say, the Court accepted the legality of the financial corrections made by the Commission on the basis of the 108. Thus, the competent national author- extrapolation method following checks carried out by Commission inspectors, since the checks were systematic. ity may draw conclusions from sampling Consequently (paragraph 22), since the checks carried out by the Commission in the seven regions were systematic, 'the conclusions which they reached could be generalised to all the regions in which they were carried out.

. . established the existence of irregula- recital in its preamble. It is laid down in Article 2(1) and rities in the seven regions which were the subject or the (2) that for the purposes of physical checks, samples are to checks in question, it is for the Italian State to prove that consist of two full cartons collected from two different the Commission committed an error in evaluating the parts of the consignment. The first carton is intended for consequences to be attributed to those irregularities' the authorities responsible for the checks while the second (paragraph 23). It thus found: 'In so far as it has confined is to be kept in reserve under the supervision of the itself to stating that the checks carried out by the customs authorities. The quantity of products covered by a Commission constituted mere indicia which were objec- declaration as referred to in Article 3(1) or, as regards tively uncertain and proved absolutely nothing as regards storage only, Article 25(1) of Regulation (EEC) the payments made by Italy, the Italian Republic has not No 3665/87 that has been accepted is to be deemed to adduced proof of such an error' (paragraph 24). comprise a consignment.

(3) Article 6 of Regulation No 1964/82 is to be interpreted as meaning that trimmings constitute 'scraps' and may be sold within the Community. I - 10592

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(4) Article 4(4) of Commission Regulation (EEC) No 2675/88 of 29 August 1988 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals is to be interpreted as meaning that scraps or trimmings/trims cannot qualify for private storage aid, irrespective of whether or not they are fit for human consumption.

OPINION OF MR COSMAS — CASE C-436/98

accordance with Article 5(2)(c) of Commission Regulation (EEC) No 1091/80 of 2 May 1980 laying down detailed rules for granting private storage aid for beef and veal, as amended by Regulation (EEC) No 2826/82 of 22 October 1982, if there is evidence of a persistent and deliberate policy on the part of the operator.

(7) Regulations No 1964/82 (the first paragraph of Article 1 and Article 2(1)), No 2675/88 (Article 4(4)), No 565/80, No 2220/85, No 3665/87 and No 1091/80 (Article 5(2)(c)) are to be interpreted as meaning that, when officials of a Member State carry out systematic checks on a representative sample of cartons of beef and find evidence of a persistent and deliberate policy on the part of the trader comprising the commission of irregularities such as those which are said by the national court to have occurred in the present case, the Member State in question is entitled to extrapolate the results of the check carried out across cartons other than those examined, including cartons covered by different private storage contracts or export refund bonds.

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