JUDGMENT OF 30. 10. 1980 — CASE 3/80 MILCHFUTTER v HAUFTZOLLAMT GRONAU

In Case 3/80 REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht (Finance Court), Münster, for a preliminary ruling in the action pending before that court between

THE COURT (Second Chamber) composed of: P. Pescatore, President of Chamber, A. Touffait and O. Due, Judges, Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

II — Written observations submitted to the Court

A — Matters of fact

B — Matters of law

III — Oral procedure

Decision

Costs

I —. Facts and written procedure

II —. Written observations submitted to the Court

A —. Matters of fact

(a). It is appropriate to recall that, by its Regulation No 1824/77 of 4 August 1977 altering the monetary compensatory amounts applicable to milk and milk products (Official Journal L 203, p. 7), the Commission, as from 1977, ceased to apply monetary compensatory amounts to whey and that, by Regulation No 3005/77 of 22 December 1977 altering the monetary compensatory amounts for certain milk products and cereals (Official Journal L 354, p. 1), it excluded the powdered whey content from the calculation determining monetary compensatory amounts for animal feedingstuffs containing powdered whey. As from that date monetary compensatory amounts have been calculated by taking account of the actual percentage of skimmed-milk powder contained in the finished product, without other products derived from milk also being taken into consideration by means of a flat-rate calculation.

(b). Following upon the judgment of the Court of 3 May 1978 in Case 131/77 Milac, the Commission, by its Regulation No 1733/78 of 24 July 1978 amending Regulation No 1036/78 (Official Journal L 201, p. 36), excluded the whey content in milk and cream from the calculation of the monetary compensatory amount.

(c). The dairy constituents of the compound feedingstuffs imported by Milchfutter, amounting in all to 74-7 % by weight, included 65 2 % of skimmed-milk powder and 9-5 % of powdered whey.

(d). All these matters ought to be of decisive importance to the answer to be given in the main action.

B —. Matters of law

(a). The answer to be given to the question put by the Finanzgericht Münster must be based upon Regulation No 974/71 of the Council: the issue is to determine the manner of calculating the monetary compensatory amount applicable to the products in question and thus, at the same time to pronounce upon the interpretation and the application of Article 2 (2) of Regulation No 974/71 in terms of which, for products the price of which depends on that of products covered by intervention arrangements under the common organization of agricultural markets, the compensatory amount shall be equal to the incidence, on the price of the product concerned, of the application of the compensatory amount to the price of the product on which they depend. The monetary compensatory amount for a product intended for animal feeding which contains both skimmed-milk powder and powdered whey may therefore not be calculated only on the basis of the skimmed-milk powder; in particular, the same monetary compensatory amount may not be charged on both the powdered whey content and the skimmed-milk powder content.

(b). In its judgment of 4 July 1978 in Case 5/78 Milchfutter the Court recalled that the rules governing the determination of the products subject to the system of compensatory amounts are to be sought in the provisions of the regulations on the organization of the various agricultural markets, given that the products in question are designated according to the headings and subheadings of the Common Customs Tariff. The Court thus expressed the view that a flat-rate charge by way of monetary compensatory amounts which did not take account of the nature of the product is unlawful.

(c). Having regard to the higher authority of the rules of Regulation No 974/71, that conclusion, which is valid for the future, must be equally valid for the past. In so far as the Commission is not itself prepared to undertake the necessary corrections for products intended for animal feeding, it is incumbent upon the Court of Justice to do so in cases which are the subject of individual proceedings.

(d). The question put by the Finanzgericht Münster may properly be given the following answer:

(a). According to Regulation No 974/71 the price of compound foods, containing milk products and falling within tariff subheading 23.07 B I a 3 or 23.07 B I a 4 depends essentially on the content of the principal component, more precisely, the milk product content within the meaning of Article 11 (1) of Regulation No 823/68 and, especially, of skimmed-milk powder, being a product subject to the common organization of the market and covered by intervention measures. Originally, skimmed-milk powder represented the main part, in value and in quantity, of the milk product in compound foods. However, more and more, the manufacturers of compound foods are having recourse to the addition of whey, which is much less expensive. Whey is also a milk product. From the point of view of its composition, it is distinguishable from skimmed-milk powder by a lower protein and fat content as well as by a considerably higher lactose content.

(b). The method of calculation which was applied also had favourable effects for parties concerned. Until the beginning of 1978 the Community tolerated a situation in which, by reason of the powdered whey content of animal feedingstuffs, excessive monetary compensatory amounts had been granted. That fact confirms that the Commission's practice was not unilaterally directed against the trade but was motivated by objective difficulties of control.

(c). The fact that, at the end of 1977, the Commission decided no longer to take account of the powdered whey content in determining the monetary compensatory amounts applicable to compound foods does not call in question the validity of the system which applied until then. Because of the widening of the obligation to make the appropriate declarations imposed on exporters and importers, improvements in methods of analysis which had meantime taken place and the fact that the group of manufacturers and traders concerned is limited and may be regarded as trustworthy, the Commission considered it appropriate to draw distinctions between the constituents of the milk products on the basis of which compensatory amounts are calculated for compound foods and thenceforward to calculate those amounts only on the basis of the percentage powdered milk content of the final product.

(d). The question put by the Finanzgericht Münster admits of the following answer:

III —. Oral procedure

1. By order of 20 November 1979, which was received at the Court on 8 January 1980, the Finanzgericht Münster submitted for a preliminary ruling under Article 177 of the EEC Treaty a question on the validity of certain provisions of Regulation No 2547/74 of the Commission of 4 October 1974 (Official Journal L 272, p. 1) and Regulation No 539/75 of the Commission of 28 February 1975 (Official Journal L 57, P. 2) fixing the monetary compensatory amounts and certain rates for their application.

2. That question has been raised in the context of a dispute concerning the determination of the monetary compensatory amounts applicable on the importation into Germany of a consignment of compound feedingstuffs from the Netherlands which falls within tariff subheading 23.07 BI a of the Common Customs Tariff.

3. It should be recalled that at an earlier stage in the same dispute the Finanzgericht submitted certain questions on the tariff classification of the product concerned, which the Court answered in its judgment of 4 July 1978 in Case 5/78 Milchfutter GmbH & Co. KG v Hauptzollamt Gronau [1978] ECR 1597.

4. The classification of the product being now settled, the plaintiff in the main action has raised an issue concerning the calculation of the monetary compensatory amounts applicable in this case. From the order seeking the preliminary ruling, it appears that the plaintiff considers, with reference to the judgment of the Court of 3 May 1978 in Case 131/77 Milac v Hauptzollamt Saarbrücken [1978] ECR 1041, that the charging of a monetary compensatory amount is contrary to Regulation No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (Official Journal, English Special Edition 1971 (I), p. 257), in so far as account is taken, in the calculation of that amount, of the quantity of powdered whey contained in the compound feedingstuffs in question. According to information supplied by the plaintiff, those feedingstuffs contain 652% skimmed-milk powder and 95% powdered whey.

5. The plaintiff considers that, in accordance with the principle which emerges from the Milac judgment, the whey content ought to be excluded from the calculation of the monetary compensatory amounts applicable to compound feedingstuffs.

6. It is with a view to deciding this dispute that the Finanzgericht has submitted the following question:

7. In the proceedings before this Court the Commission argued, in substance, that the principles of the Milac judgment, which is concerned with the application of monetary compensatory amounts to pure whey falling within tariff heading 04.02, may not be extended to fodder preparations. In fact, even if those feedingstuffs contain a more or less significant proportion of whey, their price is essentially dependent on other basic products which are subject to the common organization of the market. Moreover, according to the Commission, account must be taken of the fact that the classification of those mixtures for the purpose of applying monetary compensatory amounts gives rise to very special problems of assessment and control. It is for that twofold reason that, for an initial period, the Commission followed the trend in the prices of the feedingstuffs in question without permitting the whey content to be excluded in applying monetary compensatory amounts. It was only following observations which had been made and as a result of recent improvements in methods of analysis and control that, as from the beginning of 1978, the Commission introduced differentiating rules which permitted the proportion of whey to be left out of the calculation of monetary compensatory amounts.

8. The question put by the Finanzgericht must be answered in the light of the guidance provided by Regulation No 974/71, Article 1 (2) of which makes the application of monetary compensatory amounts subject to a twofold condition. In effect, it is necessary

9. Having regard to the criteria adopted by the regulation, the implementation by the Commission of that provision in accordance with the provisions of Article 6 implies a wide discretionary power as respects the dependence of the price of the products in question in the price of one or more agricultural products covered by intervention arrangements in the context of the common organization of the market and as respects the ascertainment or anticipation of disturbances in trade in the product or products concerned.

10. Precisely because of the nature of compound feedingstuffs falling within tariff subheading 23.07 Bla, evaluation of these matters gives rise to special difficulty, not only as regards the assessment of economic data, but also as regards the opportunities for practical application and control. The fact that particular feedingstuffs contain a more or less substantial percentage of a product which does not satisfy the condition of dependence contained in Article 1 (2) (b) of Regulation No 974/71 does not have the result of imposing on the Commission an automatic duty to exclude that element from the calculation of monetary compensatory amounts. In fact, the determination of those amounts is subject to a complex assessment made up of various factors related to the nature of the feedingstuffs and the relationship, in terms of volume and value, of their various constituents.

11. It therefore appears that the Commission did not exceed its discretionary power by refraining from excluding the whey content from the basis of calculation of the monetary compensatory amount applicable to fodder preparations falling within tariff subheading 23.07 Bla, even at a time at which it had become apparent that whey falling within tariff heading 04.02 must be exempt from the application of such an amount. The fact that the Commission subsequently introduced methods of fixing which drew finer distinctions and permitted the whey content to be excluded from the calculation is the result of an assessment which is both economic and practical and which the Commission properly carried out within the framework of its discretionary power in this matter.

12. Accordingly, neither the principles underlying the Milac judgment nor even the fact that the Commission subsequently introduced a method of calculation which allowed the whey content in fodder mixes to be excluded from the fixing of monetary compensatory amounts can provide any argument which allows the validity of the statutory provisions disputed before the national court to be called in question.

13. The answer to the question raised should therefore be that consideration of the provisions of Commission Regulations Nos 2547/74 of 4 October 1974 and 539/75 of 28 February 1975 has disclosed no factor of such kind as to affect the validity of those provisions in so far as, in the calculations of the monetary compensatory amounts, they do not make it possible to eliminate the content by weight of any whey in compound feedingstuffs falling within tariff subheadings 23.07 B I a 3 and 4 of the Common Customs Tariff.

14. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT (Second Chamber) in answer to the question submitted to it by the Finanzgericht Münster by-order of 20 November 1979, hereby rules: