C-114/99

I I — Facts

2. Between 1 and 7 March 1990 the appli- cant exported nine consignments of glucose 4. The applicant was unable to produce the evidence required since the glucose syrup at * Original language: German. 1 — OJ 1987 L 351, p. 1 (hereinafter also referred to as 'the issue had been used as a raw material in the Regulation'). manufacture of other products under a

I - 8825

OPINION OF MR ALBER — CASE C-114/99

customs procedure comparable to inward for free circulation was a condition of processing. 2The customs formalities for entitlement to the payment of export releasing the goods into free circulation, refunds. The national offices were which undoubtedly serve as evidence of requested to recover refunds paid out on importation, 3were therefore not comple- the basis of the abovementioned opera- ted. That the glucose syrup deliveries in tions. However, this was to apply only in question were used, at least in the main, for those cases in which the customs export manufacturing penicillin is undisputed. The formalities had been completed after end product was — at least in part — 1 March 1990, since from that point on a reintroduced into the Community. prudent economic operator could no longer have been unaware of the uncertainty surrounding his entitlement to a refund as a result of the Commission's communica- tion of 26 January 1990.

2 — The glucose syrup may also have been used for manufactur- 8. In its abovementioned letter dated ing citric acid and xanthan rubber, which does not affect the legal assessment of the economic process. 16 March 1990, the ONIC had already 3 — See Article 17(3) of Regulation No 3665/87. informed the applicant that evidence of

I - 8826

ROQUETTE FRÈRES

release for consumption was required to used by its foreign customer in the pre- justify the request for payment of refunds paration of another product, which was on exports of glucose syrup to Austria. itself liable to be re-exported to other When release of the security for deliveries Member States of the European Economic made prior to this communication was Community? refused, the applicant instituted legal pro- ceedings.

11. The applicant, the ONIC and the Commission participated in the written 9. In the court of first instance, its action procedure. The applicant, the French Gov- was partially successful. In the court that ernment and the Commission were repre- referred the case for a preliminary ruling sented at the hearing. I shall return to the the appeal proceedings have been stayed. In submissions of the parties in the context of the view of the latter court, the outcome of my legal analysis. the case depends on the interpretation of the substantive conditions which exports must satisfy in order to qualify for the refunds at issue. These, it believes, cannot be clearly inferred from the provisions in force at the material time, especially as they have been the subject of several successive I I I— The relevant provisions and contradictory directives from the Com- mission.

In the cases referred to in the first subpar- ' 1 . Payment of the differentiated or non- agraph, the provisions of Articles 17(3) and differentiated refund shall be conditional 18 shall apply. not only on the product having left the customs territory of the Community but also — save where it has perished in transit as a result of force majeure — on its having been imported into a non-mem- In addition, the competent authorities of ber country within 12 months following the the Member States may require that addi- date of acceptance of the export declara- tional evidence be provided such as to tion: satisfy them that the product has actually been placed on the market in the non- member country of import in the unaltered state.

(a) where there is serious doubt as to the true destination of the product 2. ...

Where there are serious doubts as to the or real destination of products, the Commis- sion may request Member States to apply the provisions of paragraph 1.

(b) where, by reason of the difference between the amount of the refund on 3. ...'

I - 8828

ROQUETTE FRÈRES

2. Where a single rate of refund applies in respect of all destinations on the day of advance fixing and a compulsory destina- tion is prescribed, the refund shall be treated as varying according to destination if the rate of refund applying on the day of 1. The applicant acceptance of the export declaration is lower than the rate fixed in advance, as adjusted, where appropriate, on the date of acceptance of the export declaration.' 17. Referring to the relevant provisions, 6 the applicant submits that, in cases invol- ving a non-differentiated export refund, entitlement to the refund depends on the 15. Article 17(3) reads: goods having been exported, as laid down in Article 4(1) of the Regulation. On the other hand, in the circumstances described in Article 5(1)(a) and (b) of the Regulation, payment of the refund is also made condi- 'A product shall be considered to have been tional on the product having been imported imported when it has been cleared through into a non-member country. Accordingly, customs for release for consumption in the where a non-differentiated export refund is non-member country concerned.' concerned, proof of release of the product

5 — OJ 1990 L 38, p. 34. 6 — Article 1 of Regulation (EEC) No 2727/75 of the Council of 16. Article 18, which was amended by 29 October 1975 on the common organisation of the market in cereals (OJ 1975 L 281, p. 1), Article 6 of Commission Regulation (EEC) No 354/90 Regulation (EEC) No 2744/75 of the Council of 29 October 1975 on the import and export system for products processed from cereals and from rice (OJ 1975 L 281, p. 65) and Article 8 of Regulation (EEC) No 2746/75 of the Council of 29 October 1975 laying down general rules for 4 — Concerning the notion of a 'differentiated refund', see granting export refunds on cereals and criteria for fixing the paragraphs 38 et seq. below. amount of such refunds (OJ 1975 L 281, p. 78).

19. According to the applicant, in the present case these conditions are not ful- (b) by reason of the difference between the filled. There was neither doubt as to the refund rates and the import duties — destination of the glucose nor a risk of an that is, due to circumstances beyond identical product being reintroduced. There the exporter's control — there is a risk was nothing in Article 5 of the Regulation of fictitious exports followed by reim- to support the Commission's demand for portation, for the sole purpose of proof of the goods having been released for obtaining the difference between the consumption because of the risk of the two amounts. processed products being imported into the Community from an EFTA State at a zero rate of duty. A close reading of Article 5 of the Regulation suffices to provide an answer to the question posed by the national court, namely that entitlement to It should be borne in mind that this latter an export refund cannot be challenged on case concerns only refunds and duties in the sole ground that the foreign buyer of respect of identical products. The provision the goods has manufactured a product does not cover the importation of goods which is itself liable to be exported to into the Community which results from the Member States of the Community. processing of products previously exported under the refund regime.

20. This conclusion, based on a literal interpretation of Article 5 of the Regula- 18. The applicant argues that the ONIC's tion, is confirmed by the objective pursued refusal to release the security at issue is by that provision. It is an anti-fraud clearly prompted by the communications it measure intended to prevent the payment received from the Commission which, of refunds on goods that were not actually

24. The ONIC argues that evidence of importation can be demanded at any time before the refund is paid and is furnished by proving release for consumption 10 in the 22. The applicant also draws attention to non-member country of importation. the relevant provisions concerning amylac- eous products 7in order to illustrate the 8— OJ 1999 L 102, p. 11. 9 — See Article 20(4)(c). 7 — See Regulation No 2169/86 (OJ 1986 L 189, p. 12) and 10 — 'Mise à la consommation'. For an explanation of this Regulation No 3642/87 (OJ 1987 L 342, p. 10). concept see paragraph 59.

I-8831

OPINION OF MR ALBER — CASE C-114/99

25. The ONIC formulates the question 3. The French Government which, in its view, needs to be answered as follows:

27. The French Government did not submit any written observations, but it did make its views known at the hearing.

29. In this connection, the French Govern- 26. Moreover, the relevant provisions ment also referred to the replacement of require that the product leave Community Regulation No 3665/87 by Regulation territory in the unaltered state and be No 800/99 — just as Article 15(2) of the placed on the market in the non-member Regulation had previously been introduced country in the unaltered state. This condi- by Regulation (EC) No 313/97 12 — and tion is not fulfilled if the product is in particular to its Article 20 at the begin- reintroduced into the Community in the ning of Section 3 on 'Specific measures of altered state, even if this is the result of protection of the Community's financial processing. Placing on the market in the unaltered state should be understood as utilisation of the product in the non- 11 —See judgment of 9 August 1994 in Case C-347/93 Boterlux member country of importation. Utilisation [1994] ECR I-3933, paragraph 25. 12 — OJ 1997 L 51, p. 31. The provision reads: means that the product, even if processed, '2. Where it is found that the products exported are has been cleared for free circulation in the reimported into the Community: — after undergoing working or processing in a third country country of destination. This condition is without having attained the level of processing provided for in Article 24 of Regulation (EEC) No 2913/92, and not satisfied where the product finds its — attract a reduced or zero rate of import duty rather than way back on to the European Community the normal rate, no refund shall be paid or, if already paid, it shall be reimbursed by the exporter at the request of the market in the altered state. Member State. ...'

30. The French Government also com- ments on the modalities of cooperation 32. The Commission also notes that the between the Commission and the agency of fourth subparagraph of Article 5(1), the Member State. Without being legally according to which the competent autho- binding, the communications addressed by rities of the Member States 'may' 'in the Commission to the ONIC were per- addition' require that additional evidence fectly capable of determining the ONIC's be provided, is applied only in exceptional attitude since otherwise, when the expen- cases when the grounds for suspicion are diture accounts of the European Guidance more compelling. and Guarantee Fund came to be settled, it would not have been in a position to justify the payment of the export refunds. Finally, it is a matter for the national court to review the precise circumstances of the 33. The provision is so structured as to specific business transaction. The French imply a gradation, as between its third and Government suggests that the question fourth subparagraphs, in the degree of referred to the Court be answered in the actual risk of fraud. This heightened risk negative in the manner already indicated, it is not present in the case under considera- being for the court of the Member State to tion, which should therefore be considered decide in each case, in the light of the actual against the background of the third sub- circumstances, whether all the conditions paragraph of the provision, according to for establishing entitlement to export which proof of release for consumption is refunds have been satisfied. to be provided by producing the customs documents. 13

of Article 4(1) and Article 5(1) of Regula- which expressly 'reserves' 15 the case of tion No 3665/87. Whereas in the present substantial processing or working. 16 case there is no doubt that the goods left the customs territory of the Community, it is uncertain whether the criterion of impor- tation into a non-member State had been met, in so far as importation has to be understood as completion of the customs 36. Finally, letter (b) of the first subpara- formalities. It is, however, impossible to graph of Article 5(1) of the Regulation, provide this proof for goods subject to the which is to be regarded as an anti-fraud special customs regime of inward proces- provision, does not remove the need to sing. Proof that the goods have been examine the specific circumstances of the imported into a non-member country is case. The object of the provision is not to required when one of the sets of suspicious make recourse to the inward processing circumstances mentioned in letters (a) and procedure impossible or excessively diffi- (b) of the first subparagraph of Article 5(1) cult. The measures can only be justified to is present. The mere fact that the product the extent that they are necessary to protect has been processed cannot be sufficient to the financial interests of the Community, call the refund into question. A comparison that is to say, to prevent fraud. It is of the refund rates in effect at the time therefore impossible to disregard the fact suggested that the risk of the goods being that the product exported no longer existed reimported could be more or less ruled out and therefore could not, in actual fact, be in the light of the facts. 14 In any event, reintroduced into the Community. fraudulent reimportation was not commer- cially profitable in view of the transport costs. Moreover, the very feasibility of reimportation is highly doubtful since, in the Commission's view, the glucose syrup at issue had been substantially processed and no longer existed as such. The processed 37. The Commission proposes that the product 'penicillin' cannot be converted reply to the question referred for a pre- back into glucose. liminary ruling should be that entitlement to export refunds cannot be challenged on the grounds that proof of clearance through customs for release for consumption could not be produced, if it has been established that for the products in question the risk of their being reintroduced into the Commu- nity, after leaving its customs territory, could be ruled out in view of the specific 35. In addition, the Commission also cites circumstances surrounding the commercial Article 20(1) of Regulation No 800/99, operation.

V — Opinion The raison d'être of the system of varying the refund would be disregarded 'if it sufficed, in order to qualify for payment of the refund at a higher rate, for the goods simply to be unloaded, without reaching 38. As is already clear from the submis- the market of the territory of destina- sions of the parties, as far as the payment of tion'. 19 That is the reason for which export refunds is concerned, it makes a Community law 'makes payment of the fundamental difference whether the refunds variable refund subject to the completion of are 'differentiated' or 'non-differenti- customs formalities for entry into free ated'. 17 In the case of a non-differentiated circulation in the non-member country, refund, it is essentially a matter of whether since the completion of those formalities the goods have left the customs territory of is normally sufficient to ensure that the the Community, whereas in the case of a goods have actual access to the market of differentiated refund the main considera- the territory of destination'. 20 tion is the destination of the goods. There- fore the Community control mechanisms for differentiated refunds are tighter and/or different in nature.

'... in view of the objectives of the system of variable refunds, it is essential that pro- ducts subsidised by such refunds should 39. The Court has described the character- actually reach the market of destination istics of the different kinds of refunds as and be marketed there'. 21 follows:

40. From a comparison of the two methods of making refunds it follows that 'payment of a differential refund is in principle conditional on proof that the product has been released into free circulation in the 42. At the time of the events which gave non-member country of destination' and rise to the litigation, as shown by the that 'Member States may also require such documents produced to the Court, the proof before granting a non-differentiated Commission obviously assumed that the refund if there is suspicion or proof that additional proof mentioned in Article 5 of abuses have been committed'. 25 the Regulation could be demanded at any time. In the proceedings before the Court, however, the Commission took the view that there must at least be discernible grounds for suspecting 26 fraudulent prac- tices for Article 5 of the Regulation to enter 41. That the present case is concerned with into effect. Thus, in accordance with the 'non-differentiated refunds' is beyond dis- case-law cited, the parties to these proceed- pute. At the material time, Austria was not ings assume that Article 5 of the Regulation yet a member of the European Community will apply only where there is suspicion or so that with respect to exports it is to be proof that abuses have been committed. regarded as a non-member country. Never- theless, at that time Austria, as a member of EFTA, enjoyed special status with respect to imports, which made the importation of processed products into the Community commercially attractive. Under Article 4(1) of the Regulation, entitlement to the pay- 43. The circumstances in which additional ment of a refund arises if the products for evidence may be required are described in which the export declaration was accepted the wording of the provision applicable to have left the customs territory of the the dispute as 'serious doubt as to the true destination of the product' 27 or the possi- bility of the product being re-introduced 23 — See judgment C-347/93 (cited in footnote 11), paragraph into the Community 'by reason of the 22. 24 — See judgment C-347/93 (cited in footnote 11), paragraph 27. 25 — Case C-347/93 (cited in footnote 11), paragraph 30 and 26 — 'Degré de suspicion élevé'. point 1 of the operative part. 27 — See Article 5(1)(a) of Regulation No 3665/87.

45. It would be conceivable, for example, in relation to Article 4(2) of the Regula- tion, according to which 'for the purposes of this Regulation, products delivered as catering supplies to drilling or extraction 47. The same is true of the conditions of rigs as defined by Article 42(1 )(a) shall be applicability of the second alternative, deemed to have left the customs territory of namely, reintroduction of the goods. It is the Community', to regard such circum- the common purpose of both alternatives to stances — that is, not just importation into ensure that the goods arrive in a non- a non-member country — as the 'destina- member country and stay there, with the tion of the product' within the meaning of concomitant effect of relieving pressure on the provision. However, special control the Common Market. mechanisms are provided precisely for this

29 — See judgment of 21 January 1999 in Case C-54/95 28 — See Article 5(1)(b) of Regulation No 3665/87. Germany v Commission [1994] ECR I-35, paragraph 45.

I - 8837

OPINION OF MR ALBER — CASE C-114/99

48. If Article 5(1)(b) were interpreted lit- is taken into account. Thus, Arti- erally, the provision would not be applic- cle 20(1)(c) of the Regulation reads: able in the present case, firstly, because — as the Commission has argued 30 — the refund rates were not such as to create a serious risk of identical goods being reim- ported and, secondly, because the raw ' 1 . Where: material exported and the processed pro- duct imported were not 'identical pro- ducts' 3 1 within the meaning of the provi- sion. *

I - 8838

ROQUETTE FRÈRES

meaning of Article 24 of Regulation 53. In the present case, all the parties are (EEC) No 2913/92; 32 agreed that during the processing opera- tion, in which penicillin was manufactured using glucose syrup, the glucose syrup disappeared. Thus, the processing of the starting product, namely glucose syrup, was irreversible and hence substantial, so that there can be no question of its being (ii) ...' reintroduced into the Community in the guise of the drug penicillin.

51. Even though this provision did not 54. Even the Commission, in the above- enter into force until 1 July 1999, it mentioned fax 33 dated 12 July 1993 provides a clue to the solution of the requesting that the previously ordered problem. The deciding factor is the degree measures be withdrawn, expressly main- of processing or working, as follows from tained that the exportation 34 of glucose the use of the adjective 'substantial' and the syrup to non-member countries belonging reference to Article 24 of Regulation to EFTA for processing, under the inward No 2913/92. processing procedure, into citric acid which, for its part, could be introduced into the Community at a zero rate of duty, was perfectly legal.

56. The applicant has rightly pointed out that the Community legislature did not wish to prevent the export of Community products for processing or working in a non-member country of importation. This is all the more compelling in that in these 59. The 'proof of release for consump- cases the purpose of the regulations, that is, tion' 3 7 required in the present proceedings, relieving the Common Market of the pro- which as such is not mentioned in the duct exported under the export refund Regulation, shows that it is a question of system, enters into play. the product being utilised in the non- member country. No matter whether this process is described as 'consumption', 38 'utilisation' 39 or 'actually ... placed on the market ... in the unaltered state', 40 the intention is clear. Substantial processing or 57. Against this background, it is useful to working of the product satisfies the utilisa- refer to the fourth subparagraph of Arti- tion requirements and the customs regime cle 5(1) of the Regulation, which allows the under which the processing takes place competent authorities of Member States to should be of no consequence. Therefore, in require additional evidence such as to the case in question evidence of substantial satisfy them 'that the product has actually processing or working should satisfy the been placed on the market in the non- requirements of Article 5 of the Regulation. member country of import in the unaltered state'. Moreover, under the second subpar- agraph of Article 5(2) of the Regulation the Commission may request Member States to apply the provision. The request made in the present case for the applicant to provide proof of the release of the goods for consumption must be viewed within this 60. Finally, certain observations concerning legal context. the appropriate time of notification of the evidence to be provided under Article 5 of Regulation No 3665/87 are called for. It should be borne in mind that the economic operator claiming the export refund must 58. Irrespective of whether it is applicable be informed in good time of the evidence only if there are strong grounds for suspi- cion, 35 the provision implies that evidence other than customs documents certifying 36 — Case C-54/95 (cited in footnote 29). 37 — 'Preuve de la mise à la consommation'. 38 — 'Consommation'. 39 — 'Exploitation'. 35 — As argued by the Commission. 40 — '... a été effectivement mis en état sur le matche'.

61. This requirement is based on the gen- eral principle of legitimate expectations. In the present factual context, this means that an exporter who meets all the regular requirements for an export transaction can rely on being entitled to a refund. 64. In the present case, the economic operator could not have known anything about the requirement of additional evi- dence prior to the ONIC's letter of 16 March 1990. The Commission's letter to the ONIC dated 26 January 1990 was expressly designated confidential. More- 62. This idea also finds expression in over, in accordance with settled case-law, Regulation No 800/99. For example, such exchanges of official correspondence according to recital 66 of the preamble: between the Commission and Member State administrations have no direct legal consequences for the economic operator. 44 It is therefore necessary to proceed on the basis that, even if Article 5 of Regulation No 3665/87 could have fallen to be applied — which, on the basis of the 'Whereas, in order to ensure uniform solution I have prepared, should not be application throughout the Community of assumed — the applicant was not the principle of legitimate expectation informed in good time of the evidence it where amounts over-paid are recovered, would be required to provide.

41 — Possibly as a result of a contractual commitment, see Case 43 — Emphasis added. C-347/93 (cited in footnote 11), paragraph 35. 44 — See judgment of 27 March 1980 in Case 133/79 Sucrimex 42 — Other than the case of force majeure. v Commission [1980] ECR 1299, paragraph 16.