Opinion of Mr Advocate-General

Mr President

Members of the Court,

Although the problem created by this case is very complicated its origin is simple.

The Community sugar market is an organized market and, as you know, there is a levy on the import of sugar from third countries into the Community.

The fruit and vegetable market is likewise an organized market, but it is one of the few markets of this type in respect of which there are no levies or refunds, imports being subject only to customs duties laid down by the Common Customs Tariff.

To combine tnese two organizations ot the markets was both necessary and difficult.

That the sugar content of fresh fruit should be subjected to the levy never contemplated; however, there was apprehension lest, in default of any special provisions, the import of products processed from fruit should create a considerable breach in the protection and equalization system which was set up by the Community rules concerning sugar.

In fact all fruit products contain sugar, either simply natural fruit sugar or else sugar due in part to addition during the processing of the fruit.

Given tne considerable volume or imports of this type of product into the Community, if no action had been taken, large quantities of sugar added to fruit (40000 metric tons a year according to some estimates) would have been able to escape the Community levy on imports of sugar.

To deal with this situation the Council adopted several successive regulations: Regulation No 220/67 of 30 June 1967, Regulation No 789/67 of 31 October 1967 and then Regulation No 865/68 of 28 June 1968.

It is the application of Regulation No 865/68 which lies at the root of the proceedings, concerning which a German finance court has referred to this Court the question of interpretations which you now have to consider.

In September 1969 the Bagusat partnership submitted to a Berlin customs office considerable quantities of cherries in spirit from Yugoslavia.

These cherries are Known in German as Weichselkirschen, which was translated into French in the pleadings as griottes (morello cherries).

In fact, on inquiry, it appears that this is a variety of a species of cherry known as Santa Lucia which grows on the shores of the Adriatic and which is called in Italian amarasca and in French marasques from which presumably comes the name of the liqueur known as maraschino.

At first the German customs authorities took the view that whilst these cherries were liable to customs duty and to various related taxes, they could not give rise to the imposition of the levy on sugar.

However, when an analysis revealed that the sugar content of the goods exceeded the 9 % stipulated by Additional Note No 2 to Chapter 20 of the Common Customs Tariff, annexed to Regulation No 950/68 of the Council of 28 June 1968, the customs authorities changed their mind and took the view that the levy could be imposed.

The importer protested, maintaining that there had been no addition of sugar, and announced his readiness to bring evidence that this was so.

The German customs authorities, however, remained firm, maintaining that, once the sugar content was in excess of 9 %, the levy was payable even if there had been no actual addition of sugar, which they did not contest.

In pursuance ot Article 177 or the Treaty, the competent German finance court hearing this case has referred to this Court the following questions:

In my opinion the problem placed before the Court by the first of these questions has two aspects:

The first is to determine, to repeat traditional terminology, the chargeable event, the Steuertatbestand for the levy introduced by Regulation No 865/68.

Is it tne presence of sugar in excess or a certain percentage?

Is it, on the other hand, merely the actual addition of sugar during the processing of the product?

The second aspect of the problem concerns the procedure and the burden of proving that sugar has or has not been added to the processed product.

I

Regarding the first of the abovementioned aspects of the problem which this Court must solve, three arguments are placed before the Court:

The first is that of the importer, which claims that the levy can be imposed only if there has been an actual addition of sugar to the product.

The second is that pleaded by the German customs authorities before their national court; it consists mainly in the assertion that although there may be some doubt concerning the interpretation of Regulation No 865/68, this doubt is removed by the second paragraph of Additional Note No 2 to Chapter 20 of the Common Customs Tariff which provides expressly that The products classified under heading No 20.06 shall be considered as containing added sugar when the sugar content thereof exceeds … 9 %.

The third argument is that submitted to the Court by the Commission which regards Additional Note No 2 to Chapter 20 as only a quite secondary consideration but which considers that according to Regulation 865/68 itself, processed products must be subject to the levy even if in fact no sugar has been added to them, once their sugar content exceeds a certain percentage.

For my part I am or the opinion that the levy is applicable only when an actual addition of sugar has taken place during the processing of the imported product.

This interpretation appears to me in fact to follow, as I shall try to demonstrate, from:

1. The wording of Regulation No 865/68.

2. It is even more significant if not only the text but the purposes pursued by the regulation are considered.

3. In fact, the penultimate article of the regulation, Article 18, contains a provision, the usefulness of which is not apparent at first sight. It reads in fact: This regulation shall be so applied that appropriate account is taken, at the same time, of the objectives set out in Articles 39 and 110 of the Treaty.

II

This second aspect of the first of the questions which are submitted to you by the German court leads me to consider the relationships between Regulation No 865/68 and Additional Note No 2 to the Explanatory Notes to Chapter 20 of the Common Customs Tariff.

Note No 2 in its 1968 edition reads as follows:

The Berlin Customs Office, by a legally questionable argument but one which nevertheless had logic and simplicity on its side, had considered that this provision at the same time as fixing the applicable customs duty determined the products subjected to the levy.

The Commission has seen the dangers in this reasoning and has expressly set it aside.

In fact, it says, although they were adopted on the same day, the regulation relating to the Common Customs Tariff and Regulation No 865/68 have different fields of application.

Certainly Article 9 of Regulation No 865/68 does refer to the general rules and the special rules of interpretation of the Common Customs Tariff, but it refers to them only for the tariff classification of the products to which the regulation relates.

The Commission considers also that the common external tariff was not able to create a legal fiction in respect of the determination of the products subject to the levy, but Regulation No 865/68 itself did so.

The Commission pursues its argument by claiming that if, in accordance with what I was suggesting to you just now, you do not accept the creation of this legal fiction by Regulation No 865/68, the whole system created by Additional Note No 2 would collapse. The customs authorities would then have to determine in each case whether each product contains added sugar or not, which for both practical and scientific reasons they would be unable to do.

I hope that the Commission will not bear a grudge against me if I say that its argument reminds me of the proverb: Give a dog a bad name and hang it.

The Commission is so eager to have the Court interpret Regulation No 865/68 as enabling even products containing no added sugar to be subjected to the levy that it in my view exaggerates the consequences of a contrary interpretation.

If it is accepted that Regulation No 865/68 only enables products processed with the actual addition of sugar to be subjected to the levy, Additional Note No 2, to which Article 9 refers, not only does not become void, as the Commission maintains, but on the contrary it enables Regulation No 865/68 to be applied in a way which is both legally acceptable and takes account of the practical requirements of the customs authorities.

In fact, unlike the Commission, I feel that Additional Note No 2 does not create a legal fiction as the Commission says, that is to say, in other words an irrebuttable legal presumption but a mere presumption.

If the product contains less than 9 % sugar, it is presumed to contain only natural sugar and it would then be for the customs authority, if it had doubts on this point, to prove the addition of sugar. This last hypothesis is purely theoretical as regards products which come under heading 20.06, because the levy, although payable, would in such a case be nil and the customs authority would have no interest in proving the addition of sugar.

As I see it, three reasons appear to militate in favour of this method of interpretation of the Additional Note.

According to the information which I have been able to cull from various works of reference, and to the extent to which I have understood them correctly, it appears that both parties are partially right.

It appears in fact that to determine the quantity of added sugar in a product containing natural sugar is, as I have already said, if not impossible at least very difficult.

It appears on the other hand that specialized laboratories may in any case be able to detect added sugars in a product.

However that may be, if the Court accepts the interpretation which I suggest with reference to the method of proof, the question loses much of its importance.

If the sugar content of a product which comes under heading 20.06 exceeds 9 %, it will be for the importer to bring evidence that this sugar is natural sugar, and so the laboratories of the customs authorities will not need to carry out the necessary research.

To sum up I therefore propose to the Court that it should answer the first of the German finance court's questions by ruling that: The provisions of Article 2 of Regulation No 865/68 subject to the levy only the products enumerated in Article 1 of the said regulation which have been processed by the actual addition of sugar and that, by application of the Rules of Interpretation of the Common Customs Tariff (Additional Note No 2 to Chapter 20, heading 20.06 B), to which Article 9 of Regulation No 865/68 refers, when the sugar content of these products exceeds 9 %, it is for the importer to prove that they contain only natural sugar.

III

In conclusion let me say a word concerning the second and third questions referred by the German finance court.

Let us take note first of all that if this Court accepts the interpretation which I have just proposed, these questions become pointless and the Court has no need to reply to them.

If on the contrary you accept the interpretation proposed to you by the Commission, the validity of Regulation No 865/68 thus understood would appear to me very doubtful for at least two reasons:

I hope that the Court will consider, as I do, that it is not necessary for it to consider these questions or to order that measure of inquiry, and I conclude that you should hold that:

1 Translated from the French.

2 Finanzgericht Hamburg, 17 October 1969: concentrated orange juice without added sugar or spirit. Finanzgericht Baden-Württemberg, 11 February 1970: concentrated Brazilian orange juice. Finanzgericht Bremen, 21 January 1970: Spanish apricots without added spirit, but with added sugar.