Report for the Hearing delivered in Case 270/87

I — The relevant provisions

1. Article 10(1) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176), as amended by Regulation (EEC) No 465/75 of the Council of 27 February 1975 (Official Journal 1975, L 52, p. 8) provides that aid is to be granted for inter alia skimmed milk and buttermilk produced in the Community and used for feedingstuffs if those products comply with certain conditions.

2. Pursuant to Article 10(2) of Regulation No 804/68 the Council adopted Regulation (EEC) No 986/68 (Official Journal, English Special Edition 1968 (I), p. 260), Article 1 of which, as amended by Regulations Nos 472/75 of 27 February 1975 (Official Journal 1975, L 52, p. 22) and 876/77 of 26 April 1977 (Official Journal 1977, L 106, p. 24), is worded as follows:

3. Pursuant to the power conferred upon it by Article 10(3) of Regulation No 804/68 the Commission adopted Regulation (EEC) No 1105/68 of 27 July 1968 (Official Journal, English Special Edition (II), p. 379), Article 1(2) of which provides that aid shall be granted only for quantities of skimmed milk mixed with feed milk.

4. Article 1(4), (5) and (6) of Regulation No 1105/68, as amended by Regulation (EEC) No 2114/75 of 11 August 1975 (Official Journal 1975, L 215, p. 12) and Regulation (EEC) No 1645/78 of 13 July 1978 (Official Journal 1978, L 191, p. 23), are worded as follows:

5. According to the order for reference, Article 1 of the Netherlands Zuivelverordening (Dairy Regulation) 1968, which, according to its preamble, is intended to implement the aforesaid Regulations Nos 986/68 and 1105/68 in Netherlands legislation, reproduces the terms of Article 1 of Regulation No 986/68.

II — The facts of the case before the national court and the question it has referred for a preliminary ruling

1. Pursuant to the Community provisions referred to above, the plaintiff in the main proceedings, Coöperatieve Melkverwerkingsvereniging DOC wa, a dairy cooperative (hereinafter referred to as the Cooperative), requested the aid provided for therein for buttermilk produced by it for feedingstuffs.

2. By two decisions dated 24 September and 24 October 1985, the defendant in the main proceedings, the Produktschap voor Zuivel (Dairy Board), which was responsible for the grant of that aid (hereinafter referred to as the Produktschap), refused to grant the aid requested for the period from 30 June to 13 July 1985 in respect of a quantity of 70840 kg of buttermilk and for the period from 28 July to 10 August 1985 in respect of 79900 kg of buttermilk. From supplementary documents it appears that the reason for those decisions was ultimately that a condensed milk product had been added to the buttermilk.

3. By a third decision of 25 October 1985 on the same grounds, the Produktschap demanded the repayment of aid already granted to the Cooperative for the period from 16 to 29 June 1985 in respect of 88320 kg of buttermilk.

4. The Cooperative lodged objections against those decisions which were dismissed. The Cooperative thereupon appealed to the College van Beroep voor het Bedrijfsleven, The Hague.

5. Before the national court the Cooperative claimed that in order to qualify for the aid buttermilk must in principle have a dry-matter content of 8%. To achieve that content the following process is applied: After the butter is made, the waste water remaining in the buttermilk is separated from the remaining sweet buttermilk. The condensed sweet buttermilk thus obtained is then remixed with the sour buttermilk residue remaining after the buttermaking. The sour buttermilk itself cannot be condensed. No objections had been made against this process. The Cooperative maintained that the process involved no unauthorized addition of substances even if part of the quantity of buttermilk concerned is extracted from the buttermilk and remixed with it in condensed form.

6. The College van Beroep concluded that pursuant to Article 1 of the Zuivelverordening no aid is to be granted for buttermilk obtained from the processing of milk when something has been added to that buttermilk.

7. Since those provisions are intended to transpose the Community rules into Netherlands legislation and they use the same formulation, the College van Beroep decided to stay proceedings and refer the following question to the Court of Justice for a preliminary ruling:

8. The order for reference was received at the Court Registry on 9 September 1987.

III — Written procedure

1. In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted on 16 December 1987 by Cooperative Melkverwerkingsvereniging DOC wa, the plaintiff in the main proceedings, represented by O. C. A. Millaard, Advocaat of Zwolle, and on 17 December 1987 by the Commission of the European Communities, represented by its Legal Adviser, R. C. Fischer.

2. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, it invited the Commission to reply in writing to two questions.

3. By decision of 27 October 1988, the Court assigned the case to the Fourth Chamber.

Observations of the parties

4. The Cooperative points out first that Article 1 of Regulation No 986/68 provides that nothing may be added to milk whereas no such condition is expressly laid down for buttermilk. In any event nothing is added to the milk used by it.

5. The Cooperative describes the procedure it uses as follows: First of all cream is made from the milk received. The cream is then soured after which the cream is churned. The churning yields butter and buttermilk. The butter and the buttermilk are then separated. This buttermilk has a dry-matter content of 8% and a water content of 92%.

6. The butter is then washed with water. The mixture of buttermilk and water that results contains approximately 4% dry matter and 96% water. The surplus water is then removed from the mixture so that the dry-matter content is raised to 8%. This buttermilk, with the same composition as the original buttermilk, is now added to the latter.

7. The reason for applying that process is that the consumer obtains buttermilk containing no excess water.

8. The process outlined above is in no way prohibited by the definition of buttermilk contained in Article 1 of Regulation No 986/68. It is only for technical reasons that the butter is washed with water and the surplus water is subsequently removed. It would only be possible to speak of addition if some other substance were added but in this case nothing is added to the buttermilk finally obtained. There is thus no question of any addition.

9. The Cooperative therefore proposes that the question referred by the national court should be answered in the negative.

10. The Commission considers that the condition set out in the definition of milk in Article 1 of Regulation No 986/68 as a product to which nothing has been added also applies, as the national court notes, to the definition of skimmed milk and buttermilk which are precisely the products derived from milk which qualify for aid whereas milk itself does not.

11. However, that is not the only condition for the grant of the aid in question.

12. According to the definition contained in the abovementioned provision, buttermilk can only be the byproduct of the manufacture of butter from milk or cream, even though naturally or artificially soured. It follows from that definition that no product that is produced from further processing of the buttermilk thus obtained can be classified as buttermilk; in particular the procedure applied by the Cooperative, which is intended to increase the dry-matter content by condensing buttermilk, is thereby excluded.

13. It is thus not merely a question of whether that result is obtained by first of all separating the buttermilk remaining and condensing and then remixing it with the remaining sour buttermilk since direct condensing of buttermilk also constitutes processing; buttermilk processed in that way cannot therefore qualify for aid.

14. That conclusion is borne out by Article 1(4), (5) and (6) of Regulation No 1105/68 according to which the water content and the dry-matter content resulting from the application of the production technology used cannot be altered by other processing which is, moreover, unnecessary, since even for buttermilk having a dry-matter content of less than 8% but not less than 4% aid is granted at a reduced rate.

15. The prohibition of any further processing of the buttermilk is also justified in view of the inspection techniques used, as is borne out by the difficulties of establishing the facts in this case.

16. The Commission therefore considers that the buttermilk obtained using the procedure applied by the Cooperative does not comply with the conditions laid down for the aid in question. It therefore proposes that the following answer should be given to the national court's question:

17. The Commission was invited by the Court to reply in writing to the following questions :

18. The Commission gave the following reply to the Court's first question:

19. The Commission gave the following reply to the second question:

1 Language of the case: Dutch.