Report for the Hearing delivered in Case 385/85
I — Facts and procedure
1. (a) Council Regulation (EEC) No 3570/83 of 16 December 1983 applying generalized tariff preferences for 1984 to textile products originating in developing countries (Official Journal 1983, L 362, p. 92) provided, as had the corresponding regulations in respect of previous years, for the total suspension of Common Customs Tariff duties within the framework of Community tariff ceilings in respect of certain products originating in specified countries (Article 1). According to Annex A to the regulation such was the case in relation to sails falling within heading No 62.04 of the Common Customs Tariff originating in, inter alia, Hong Kong. According to Article 1 (3) of the regulation Preferential entry as provided for in this Regulation shall be subject to conformity with the concept of “ originating products' as determined in accordance with the procedure laid down in Article 14 of Regulation (EEC) No 802/68. On the basis of Regulation No 3570/83, the Commission adopted Regulation No 3749/83 of 23 December 1983 on the definition of the concept of originating products for purposes of the application of tariff preferences granted by the European Economic Community in respect of certain products from developing countries. Article 1 (1) thereof provides as follows: For the purpose of implementing the provisions concerning tariff preferences granted by the Community to certain products originating in developing countries, the following shall be considered as products originating in a country enjoying those preferences ... provided that these products have been transported direct, within the meaning of Article 6, to the Community: (a) products wholly obtained in that country; (b) products obtained in that country in the manufacture of which products other than those referred to in (a) are used, provided that the said products have undergone sufficient working or processing within the meaning of Article 3. Article 3 (1) provides as follows: For the purposes of implementing the provisions [of] Article 1 (b), the following shall be considered as sufficient working or processing: (a) working or processing as a result of which the products obtained receive a classification under a tariff heading other than covering each of the products worked or processed, except, however, working or processing specified in List A, where the special provisions of that list apply; ... Annex A to the regulation includes, as did Annex A to the corresponding regulations adopted by the Commission each year since Regulation No 1371/71 of 30 June 1971 on the definition of the concept of originating products for purposes of the application of tariff preferences granted by the European Economic Community in respect of certain products from developing countries (Journal Officiel 1971, L 146, p. 1), sails falling within heading No 62.04 of the Common Customs Tariff and specifies Manufacture from single unbleached yarn as the condition which must be met for working or processing to confer the status of originating products. According to Article 5 derogations to the provisions of the regulation may be made in favour of the countries mentioned in a list of less developed countries, which does not include Hong Kong, when the development of existing industries or the creation of new industries justifies them. (b) Article 5 of Regulation (EEC) No 802/68 of the Council of 27 June 1968 on the common definition of the concept of the origin of goods (Official Journal, English Special Edition 1968 (I), p. 165) provides as follows: A product in the production of which two or more countries were concerned shall be regarded as originating in the country in which the last substantial process or operation that is economically justified was performed, having been carried out in an undertaking equipped for the purpose, and resulting in the manufacture of a new product or representing an important stage of manufacture. Article 14 (1) provides for the adoption of the provisions required for applying Article 5 by the Commission in accordance with the procedure laid down in Article 14 (2) and (3). According to Article 2 of Regulation No 802/68, as amended by Regulation (EEC) No 1318/71 of the Council of 21 June 1971 amending Regulation (EEC) No 802/68 (Official Journal, English Special Edition 1971 (II), p. 394), the provisions of Regulation No 802/68 shall be without prejudice to the special rules concerning: ... trade to which preferences granted by the Community unilaterally in derogation from the most-favoured-nation clause are applicable. Pursuant to Article 14 of Regulation No 802/68, the Commission adopted Regulation (EEC) No 749/78 of 10 April 1978 on the determination of the origin of textile products falling within Chapters 51 and 53 to 62 of the Common Customs Tariff (Official Journal 1978, L 101, p. 7). According to Article 2 thereof, in conjunction with Annex A thereto, manufacture from yarn constitutes the working or processing that confers the status of originating products on the products falling within heading No 62.04 of the Common Customs Tariff, which include sails. That rule was repealed in relation to sails by Commission Regulation (EEC) No 1520/79 of 20 July 1979 amending in respect of sails and tents Regulation (EEC) No 749/78 (Official Journal 1979, L 185, p. 16). The reason for that change was, according to the fifth recital in the preamble to the regulation, that in the case of the manufacture of sails and tents by cutting and making-up from fabric, it is considered that such products have undergone one complete process constituting a stage of manufacture ...
2. During 1984 S. R. Industries Béthune, which manufactures sailboards, imported into France from Hong Kong sails falling within heading No 62.04 of the Common Customs Tariff. The sails were made from fabric which had been imported from Japan and which had been cut and made up in Hong Kong.
3. S. R. Industries brought an action against the customs authorities before the tribunal d'instance, Béthune, for an order for reimbursement of the customs duties on the basis that Regulation No 3749/83 was invalid.
4. The judgment of 21 November 1985 was registered at the Court on 29 November 1985. In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by S. R. Industries, represented by Jean-Pierre Spitzer, of the Paris Bar, by the French Government, represented by its Agent, Régis de Gouttes, and by the Commission of the European Communities, represented by Jörn Sack, a member of its Legal Department.
II — Written observations
1. The observations submitted by S. R. Industries
S. R. Industries emphasizes that the application of the system of tariff preferences for developing countries was refused in this case solely on the ground that the sails are included in List A of Regulation No 3749/83. According to the general rule set out in Article 5 of Regulation No 802/68, as is clear from Regulation No 1520/79, the sails originate in Hong Kong where the last substantial operation that is economically justified was performed. In its view the cutting and making up of fabric in order to make sails from it accords completely with that definition. By adopting Regulation No 3749/83 the Commission has therefore infringed the basic regulation in the matter, Regulation No 802/68 of the Council, and in particular Article 5 thereof.
S. R. Industries also refers to the third recital in the preamble to Regulation No 3749/83 which is worded as follows:
From that recital S. R. Industries concludes that the Commission has set itself the objective of laying down, for the benefit of developing countries, rules which are more flexible than those deriving from Article 5 of Regulation No 802/68, whereas it has in fact done the opposite in this case by laying down that a stricter requirement must be met before sails may be treated as originating in Hong Kong. By so doing the Commission had, in its view, acted contrary to Regulation No 802/68 and the resolutions adopted by GATT and Unctad.
In the alternative, S. R. Industries argues that the Commission has infringed the principles of legal certainty and the protection of legitimate expectations. It contends that the concept of the last substantial process or operation that is economically justified, within the meaning of Article 5 of Regulation No 802/68, has been well established in Community law and the Court's case-law for a long time and that legal position is well known to Community importers (see the Court's judgment of 14 July 1983 in Case 224/82 Meiko-Konservenfabrik v Federal Republic of Germany [1983] ECR 2539).
Finally, S. R. Industries submits that the French customs authorities have infringed the principles of legal certainty and the protection of legitimate expectations and refers to the situation in which it found itself when setting up business in 1982 and to the advice it received from its customs forwarding agent. Its impression that the sails could be imported free of customs duties was confirmed by what was said in certain conversations with officials of the customs authorities and by the fact that for more than 14 months until December 1984 the customs authorities had accepted the customs declarations submitted by S. R. Industries without raising any objection. By imposing customs duties in respect of the whole of the preceding period the customs authorities were endangering the survival of its business. That infringement of the aforementioned principles of Community law stemmed from the Commission's conduct.
S. R. Industries therefore proposes that the answer to the question referred to the Court must be that Article 3 (1) (a) of Regulation No 3749/83 is invalid.
2. The observations submitted by the French Government
The French Government observes that it is necessary to draw a distinction between the criteria for the determination of origin where imports are effected under the ordinary customs procedure and those applicable where imports are effected within the framework of the system of generalized preferences.
As regards imports effected under the ordinary customs procedure, the rules to be applied are those contained in Regulation No 802/68. According to Article 5 of that regulation and the implementing regulation, No 749/78, as amended by Regulation No 1520/79, sails manufactured in Hong Kong from Japanese fabric are products originating in Hong Kong.
As regards imports effected within the framework of generalized preferences, the relevant rules are those contained in Regulation No 3749/83 which require that the product must have undergone further processing in addition to that required under the ordinary customs procedure and are based on more stringent criteria. Article 2 of Regulation No 802/68 expressly permits such rules. The Community may require goods imported from non-member countries within the framework of tariff preferences to satisfy stricter requirements regarding origin than those laid down in the ordinary customs procedure. Regulation No 3749/83, which was adopted in accordance with the procedure provided for in Article 14 of Regulation No 802/68, is therefore completely compatible with the provisions of the latter regulation.
The derogations from Article 5 of Regulation No 3749/83 cannot be applied to products from Hong Kong.
Consequently, the French Government proposes that the reply to the question referred to the Court should be that Regulation No 3749/83 is valid.
3. The observations submitted by the Commission
The Commission does not dispute that the provisions of Regulation No 3749/83 are more strict, with regard to sails, than Article 5 of Regulation No 802/68. Nevertheless, in its opinion, the reservation set out in Article 2 of Regulation No 802/68 with regard to generalized preferences enables the application of those preferences to be subject to special rules concerning the concept of origin, which it is for the Commission to adopt under Article 1 (2) of Regulation No 3570/83.
The third recital in the preamble to Regulation No 3749/83 refers to the least developed of the developing countries, of which Hong Kong is not one, as is clear from Annex E to Regulation No 3570/83; it relates to the possibility, provided for in Article 5 of Regulation No 3749/83, of seeking derogations to the rules concerning the concept of origin contained in that regulation. This case does not relate to such possibility of derogation.
Even in the extreme case that the specific rule concerning sails originating in Hong Kong should be regarded as discriminatory with regard to Hong Kong, which is in fact not the case, such discrimination would not confer on the person affected a right to challenge it (see the Court's judgment of 28 October 1982 in Case 52/81 Firma Werner Faust v Commission [1982] ECR 3745 and the judgment of 15 July 1982 in Case 245/81 Edeka Zentrale AG v Federal Republic of Germany [1982] ECR 2745).
In its view the Court should rule, in reply to the question referred to it, that consideration of the question raised has disclosed no factor of such a kind as to call into question the validity of Regulation No 3749/83.
1 Language of the Case: French.