61994CJ0153_EN
Parties
Grounds
Decision on costs
Operative part
Parties
In Joined Cases C-153/94 and C-204/94,
REFERENCE to the Court under Article 177 of the EC Treaty by the High Court of Justice, Queen' s Bench Division (United Kingdom), for a preliminary ruling in the proceedings pending before that court between
The Queen
and
Commissioners of Customs and Excise,
Ex Parte: (1) Faroe Seafood Co. Ltd,
(2) Foeroya Fiskasoela L/F (Case C-153/94)
and between
The Queen
and
Commissioners of Customs and Excise,
Ex Parte: John Smith and Celia Smith trading as Arthur Smith (a firm) (Case C-204/94)
on the interpretation of Council Regulation (EEC) No 2051/74 of 1 August 1974 on the customs procedure applicable to certain products originating in and coming from the Faroe Islands (OJ 1974 L 212, p. 33), Commission Regulation (EEC) No 3184/74 of 6 December 1974 concerning the definition of the concept of "originating products" and methods of administrative cooperation for the application of the customs procedure applicable to certain products originating in and coming from the Faroe Islands (OJ 1974 L 344, p. 1), Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post-clearance recovery of import duties or export duties which have not been required of the person liable for payment on goods entered for a customs procedure involving the obligation to pay such duties (OJ 1979 L 197, p. 1) and Commission Regulation (EEC) No 2164/91 of 23 July 1991 laying down provisions for the implementation of Article 5(2) of Council Regulation (EEC) No 1697/79 (OJ 1991 L 201, p. 16),
THE COURT (Fifth Chamber),
composed of: D.A.O. Edward, President of the Chamber, J.C. Moitinho de Almeida, C. Gulmann (Rapporteur), P. Jann and L. Sevón, Judges,
Advocate General: P. Léger,
Registrar: L. Hewlett, Administrator,
after considering the written observations submitted on behalf of:
° Faroe Seafood Co. Ltd and Foeroya Fiskasoela L/F, by Richard Plender QC and Kevin Prosser, Barrister, instructed by Berwin Leighton, Solicitors,
° John Smith and Celia Smith, trading as Arthur Smith (a firm), by Richard Plender QC and Roger Thomas, Barrister, instructed by Grange and Wintringham, Solicitors,
° the United Kingdom, by Stephen Braviner of the Treasury Solicitor' s Department, acting as Agent, assisted by Derrick Wyatt QC and Sarah Lee, Barrister,
° the Commission of the European Communities, by Richard Wainwright, Principal Legal Adviser, and David McIntyre, a national official on secondment to the Legal Service of the Commission, acting as Agents,
having regard to the Report for the Hearing,
after hearing the oral observations of Faroe Seafood Co. Ltd and Foeroya Fiskasoela L/F, John Smith and Celia Smith, trading as Arthur Smith (a firm), the United Kingdom and the Commission at the hearing on 28 September 1995,
after hearing the Opinion of the Advocate General at the sitting on 9 November 1995,
gives the following
Judgmen
Grounds
1 By orders of 14 April 1994, received at the Court on 10 June 1994 and 14 July 1994, the High Court of Justice, Queen' s Bench Division, referred to the Court for a preliminary ruling under Article 177 of the EC Treaty five questions on the interpretation of Council Regulation (EEC) No 2051/74 of 1 August 1974 on the customs procedure applicable to certain products originating in and coming from the Faroe Islands (OJ 1974 L 212, p. 33), Commission Regulation (EEC) No 3184/74 of 6 December 1974 concerning the definition of the concept of "originating products" and methods of administrative cooperation for the application of the customs procedure applicable to certain products originating in and coming from the Faroe Islands (OJ 1974 L 344, p. 1), Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post-clearance recovery of import duties or export duties which have not been required of the person liable for payment on goods entered for a customs procedure involving the obligation to pay such duties (OJ 1979 L 197, p. 1) and Commission Regulation (EEC) No 2164/91 of 23 July 1991 laying down provisions for the implementation of Article 5(2) of Council Regulation (EEC) No 1697/79 (OJ 1991 L 201, p. 16).
2 Those questions have arisen in the course of two actions, the first brought by Faroe Seafood Co. Ltd ("Faroe Seafood") and Foeroya Fiskasoela L/F ("Foeroya Fiskasoela"), and the second by a married couple, John and Celia Smith, trading under the name of Arthur Smith ("Arthur Smith"), against post-clearance demands for payment of customs duties issued against them by the UK customs authorities.
3 Under Article 2(2) of Regulation No 2051/74 and Annex II thereto, crustaceans and molluscs originating in and coming from the Faroe Islands are imported into the United Kingdom free of customs duties. Under Article 5(2) of that regulation, now Article 4(2) pursuant to Article 1(2) of Council Regulation (EEC) No 2612/79 of 23 November 1979 (OJ 1979 L 301, p. 1), the benefit of tariff reductions is conditional upon the production of an EUR.1 movement certificate issued by the competent authorities of the Faroe Islands when the goods to which it refers are exported. Regulation No 3184/74 specifies the criteria which goods must satisfy in order to be regarded as originating in the Faroe Islands. Where the competent authorities of a Member State find that all or part of the amount of import duties legally due has not been required of the person liable for payment, they are to take action to recover the duties not collected, in accordance with Regulation No 1697/79.
4 Faroe Seafood, a company incorporated under English law, imported into the United Kingdom under cover of EUR.1 certificates shrimps and prawns which came, inter alia, from Foeroya Fiskasoela, a cooperative governed by Faroese law, of which Faroe Seafood is a wholly-owned subsidiary. Arthur Smith acted as shipping, stevedoring and forwarding agents in relation to a number of the consignments imported.
5 Between 16 September and 4 October 1991, a mission of enquiry conducted by the Commission in cooperation with the competent United Kingdom and Danish authorities visited the Faroe Islands. In its report, the mission concluded that the rules on origin laid down by Regulation No 3184/74 had not been complied with in respect of a number of EUR.1 certificates issued by the Faroese authorities between 1988 and 1991. For some fishing seasons, it found that the percentage of third country nationals ° namely Canadians ° on board the vessels exceeded the number permitted by the rules on origin. Secondly, two Faroese factories had processed shrimps and prawns of Faroese origin without physically separating them from shrimps and prawns coming from non-member countries. For those reasons, the mission took the view that the EUR.1 certificates specified in the annexes to the report were to be regarded as wholly or partially cancelled.
6 The order for reference shows that the competent Faroese authorities disputed the mission' s conclusions and maintained that the EUR.1 certificates were valid. Whilst conceding the facts as established in the report, they stated first of all that the high percentage of Canadian nationals on board fishing vessels in certain seasons could be explained by the fact that those vessels were fishing under an agreement with a Canadian partner in order to be able to fish inside Canada' s exclusive economic zone, and that that partner required, in accordance with the relevant Canadian legislation, that a number of Canadians be employed on board, particularly for training purposes. In the view of the Faroese authorities, the presence of the Canadians on board had resulted in an increase in the complement of the vessels as compared with the normal crew. Secondly, those authorities considered that separation of processed shrimps and prawns in accordance with bookkeeping principles was sufficient to comply with the origin rules in question. They referred in that respect to a circular of the Danish tax authorities of April 1989, indicating that such separation was authorized.
7 On the strength of the mission' s report, the United Kingdom customs authorities proceeded with the post-clearance recovery of uncollected customs duties on imports from the Faroe Islands between 9 May 1989 and 10 September 1991. Between 23 April and 11 May 1992, demands for payment of customs duties amounting to UK 493 888.44 were addressed to Foeroya Fiskasoela and Faroe Seafood. Similarly, on 21 September 1992, duties amounting to UK 1 158 030.14 were claimed from Arthur Smith.
8 The actions before the High Court of Justice are directed against the issue of those demands for payment. The national court considered that the solution of the dispute between the parties required an interpretation of Community law and decided to refer the following questions to the Court of Justice for a preliminary ruling:
"1. (a) Where the competent authorities of a Member State claim post-clearance recovery of customs duties on imports pursuant to Council Regulation 1697/79 on the ground that the goods did not originate in the jurisdiction specified in the relevant EUR.1 certificate, is it for national law or for Community law to prescribe the rules determining
° the party bearing the burden of proving that the goods did not originate there; and
° the standard of proof applicable in the matter?
(b) If it is for Community law to prescribe those rules, what are those rules?
2. On the proper interpretation of Council Regulation 2051/74, Commission Regulation 3184/74 and Council Regulation 1697/79, may the competent authorities of a Member State levy post-clearance customs duties on consignments imported from the Faroe Islands, where
° those authorities did not levy customs duty at the time of importation in reliance on EUR.1 certificates declaring the consignments to be of Faroese origin;
° those EUR.1 certificates were issued in good faith by the competent Faroese authorities;
° a mission of enquiry comprising officials of the Commission accompanied by a Danish and a British official reported that the consignments in question did not meet the rules of origin because the factories supplying the consignments in question had processed originating and non-originating materials without segregating those materials and because documentation relating to the status of the raw materials used was not attached to the related application forms;
° the mission concluded that 'these certificates EUR.1 ... are wholly or partially cancelled' ;
° the Faroese authorities do not accept the conclusions of the mission of enquiry and maintain that the certificates are in force;
° there has been no reference to the Committee on Origin of the issues in the mission report disputed by the Faroese authorities;
° pursuant to the mission' s report, there has been a reference to the Committee on Origin of other issues arising from the mission of enquiry?
3. (a) Are the conditions which define Faroe Island vessels in Annex IV of Council Regulation 2051/74 and Explanatory Note 4 of Commission Regulation 3184/74 to be read conjunctively or disjunctively?
(b) If those conditions are to be read conjunctively, does the word "crew" when used in those contexts include persons not forming part of the normal complement of the vessel who are engaged on a particular voyage or part of a voyage, pursuant to a joint venture agreement with an undertaking in a third country, to work on the vessel as trainees or as unskilled hands working below decks, paid either by the operator of the vessel or by the undertaking in the third country?
(c) Where a fish processing factory fails to separate raw materials according to their several origins as defined by Regulation 3184/74, may the customs authorities in a Member State levy duty on imports derived from that factory in an amount equal to the duty that would have been payable if the origins of the goods in each consignment had been proportionally correspondent to the origins of the raw materials imported into the factory in the year in which the import occurred?
4. (a) Where the authorities of a Member State issue a single post-clearance demand note for a global sum and part of the sum so demanded is irrecoverable pursuant to Article 2(1) of Regulation 1697/79, is it for national law or for Community law to determine whether the demand note must be considered to be void in its entirety?
(b) If that matter is governed by Community law, under what circumstances (if any) must the demand note be considered as void in its entirety?
5. On the proper construction of Article 5(2) of Council Regulation 1697/79 and Article 4 of Commission Regulation 2164/91, are the competent authorities of a Member State free to proceed to post-clearance recovery of import duties which were not collected on the importation of goods, without first referring the matter to the Commission, where:
° the exporter, acting in good faith, declared the goods to be of Faroese origin;
° save in so far as the previous indent might be held to indicate otherwise, the exporter observed all the provisions in force concerning the customs declaration;
° the competent authorities of the jurisdiction from which the goods were exported, acting in good faith, certified on movement certificates 'EUR.1' that the goods originated there and continued at all material times to maintain those movement certificates in force;
° the competent authorities of the Member State to which the goods were imported, acting in good faith, originally accepted that the origin of the goods was as declared in the movement certificates;
° the persons liable for payment at all times believed in good faith that the origin of the goods was as declared in the movement certificates;
° the competent authorities of the Member State of importation do not claim to have considered the claim to waiver of customs duty before issuing demands for post-clearance recovery of duty;
° those competent authorities decided not to refer the matter to the Commission because they did not consider that the conditions for waiver of duties under Article 5(2) were satisfied inasmuch as the competent authorities considered that it is the importer or the agent which runs the risk of the EUR.1 certificate being found to have been wrongly issued and the competent authorities considered that an importer wholly owned by an exporter, and the agent for such an exporter, ought to be able to establish the origin of the goods in question?"
9 Before considering Question 1, it is necessary to examine Questions 2 and 3.
Question 2
10 In this question, the national court essentially asks whether Regulations Nos 2051/74, 3184/74 and 1697/79 are to be interpreted as meaning that the customs authorities of a Member State may, on the basis of the conclusions of a Community mission of enquiry, proceed with the post-clearance recovery of customs duties on goods imported from the Faroe Islands in circumstances where, in reliance on EUR.1 certificates issued in good faith by the competent Faroese authorities, they did not levy customs duties at the time of importation, the Faroese authorities dispute the conclusions of the mission of enquiry and maintain that the certificates are in force, and, even though other issues arising from the mission of enquiry were referred to the Committee on Origin established pursuant to Council Regulation (EEC) No 802/68 of 27 June 1968 on the common definition of the concept of the origin of goods (OJ, English Special Edition 1968 (I), p. 165), the issues disputed were not.
11 In order to answer that question, it is necessary first to examine the relevant provisions for applying the preferential system for certain goods originating in the Faroe Islands.
12 Regulation No 3184/74 provides that proof of the originating status of products is to be given by production of a movement certificate EUR.1 (Article 7(1)), issued by the competent Faroese authorities when the goods are exported (Article 10(1)). Furthermore, it is for those authorities to take any steps necessary to verify the origin of the goods and to check the other statements on the certificate (Article 22(2)). They are to issue the certificate if the goods to be exported can be considered products originating in the Faroe Islands for the purposes of the regulation (Article 23).
13 In order to ensure the proper application of the rules on origin, Member States and the Faroe Islands are to assist each other, through their respective customs administrations, in checking the authenticity and accuracy of EUR.1 certificates (Article 16). When asked to do so by the customs authorities of the importing Member State, the competent Faroese authorities are to carry out subsequent verifications of EUR.1 certificates to enable it to be established whether the EUR.1 certificate applies to the goods actually exported and whether those goods really are originating products (Article 46).
14 In addition, Article 15b(1) of Council Regulation (EEC) No 1468/81 of 19 May 1981 on mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission to ensure the correct application of the law on customs or agricultural matters (OJ 1981 L 144, p. 1), as inserted by Council Regulation (EEC) No 945/87 of 30 March 1987 (OJ 1987 L 90, p. 3), provides that the Commission may carry out Community administrative and investigative missions in third countries in coordination and close cooperation with the competent authorities of the Member States.
15 Finally, under Article 2(1) of Regulation No 1697/79, where the competent authorities of the importing Member State find that all or part of the amount of import duties legally due on goods entered for a customs procedure has not been required of the person liable for payment, they are to take action to recover the duties not collected.
16 It follows from those provisions as a whole that, whilst the EUR.1 certificate issued by the competent Faroese authorities constitutes the document evidencing the Faroese origin of the goods, it remains possible nevertheless to carry out subsequent verifications, including the dispatch of a Community mission of enquiry in order to check whether the origin indicated in such a certificate is correct. As the Court has already held in Case C-12/92 Huygen and Others [1993] ECR I-6381, in paragraphs 17 and 18 of the judgment, where a subsequent verification does not confirm the origin of the goods as stated in the EUR.1 certificate, it must be concluded that the goods are of unknown origin and that the EUR.1 certificate and the preferential tariff were thus wrongly granted. In principle, therefore, the customs authorities of the importing Member State must carry out post-clearance recovery of the customs duties which were not levied on importation.
17 It remains to be examined whether that finding still applies in circumstances where the Faroese customs authorities dispute the conclusions of the Community mission of enquiry and, despite that objection on their part, reference was not made to the Committee on Origin established by Regulation No 802/68.
18 On that question, the Court has interpreted provisions similar to those at issue in this case in its judgments in Case 218/83 Les Rapides Savoyards and Others v Directeur des Douanes et Droits Indirects [1984] ECR 3105, in Huygen and Others, cited above, and in Case C-432/92 Anastasiou and Others [1994] ECR I-3087. Those three judgments concerned, respectively, the free-trade Agreement between the European Economic Community and the Swiss Confederation, signed at Brussels on 22 July 1972 (OJ, English Special Edition 1972 (31 December), p. 190), the free-trade Agreement between the European Economic Community and the Republic of Austria, signed at Brussels on 22 July 1972 (OJ, English Special Edition 1972 (31 December), p. 3), and the Agreement of 19 December 1972 establishing an Association between the European Economic Community and the Republic of Cyprus (OJ 1973 L 133, p. 1), each of which contains a protocol concerning the definition of the concept of "originating products" and methods of administrative cooperation, and relating in particular to the issue and subsequent verification of EUR.1 certificates.
19 It follows from that case-law that determination of the origin of goods is based on a division of powers between the authorities of the exporting country and those of the importing country, inasmuch as origin is established by the authorities of the exporting country and the proper working of that system is monitored jointly by the authorities concerned on both sides. As the Court pointed out, that system is justified by the fact that the authorities of the exporting country are in the best position to verify directly the facts which determine origin.
20 In the same judgments, the Court also considered that that mechanism can function only if the customs authorities of the importing country accept the determinations legally made by the authorities of the exporting country.
21 It is necessary to examine whether the latter assertion is also borne out in this case.
22 The Court explained in paragraph 27 of its judgment in Les Rapides Savoyards that recognition of the decisions of the authorities of the exporting country by the customs authorities of the Member States is necessary in order that the Community can, in turn, demand that the authorities of other countries with which it has concluded free-trade agreements accept the decisions taken by the customs authorities of the Member States concerning the origin of products exported from the Community to those non-member countries. The Court also pointed out that the functioning of that system does not encroach on the fiscal autonomy of the Community and its Member States or of the non-member countries concerned, since the rules laid down in the free-trade agreement in question were established on the basis of reciprocal obligations placing the parties on an equal footing in their dealings with each other (paragraph 29).
23 In paragraph 28 of the same judgment, moreover, the Court found there was no danger that the application of those provisions might encourage abuses, since Articles 16 and 17 of the protocol in question had set out in detail the methods of cooperation between the customs authorities concerned, where the origin was contested or where the exporters or importers had acted fraudulently.
24 It follows from those considerations, first of all, that the need for the customs authorities of the Member States to recognize the assessments made by the customs authorities of the exporting country does not arise in the same way where the preferential system is established not by an international agreement binding the Community to a non-member country on the basis of reciprocal obligations, but by a unilateral Community measure.
25 That is the case a fortiori where the competent authorities of a non-member country are disputing not the facts found by a mission of enquiry, but that mission' s assessment of those facts in the light of the relevant customs rules. There is nothing to suggest that the authorities of the non-member country have the power to bind the Community and its Member States in their interpretation of Community rules of the kind at issue in this case.
26 Furthermore, the second factor on which the Court based its interpretation in the Rapides Savoyards judgment, namely the existence of a procedure for settling disputes concerning origin, is missing in this case.
27 As the Advocate General points out in point 63 of his Opinion, although Article 46 of Regulation No 3184/74 substantially incorporates the provisions on administrative cooperation in matters of subsequent verification set out in Article 17 of Protocol No 3 to the EEC-Switzerland Agreement, to which the Court referred in its aforesaid judgment, it does not incorporate the principle of settling disputes by a joint customs committee, as provided for by the second subparagraph of Article 17(3) of the Protocol. That subparagraph provides that disputes which cannot be settled between the customs authorities of the importing country and those of the exporting country or which raise a question as to the interpretation of the Protocol are to be submitted to the customs committee established under the Agreement.
28 Moreover, the rules at issue in this case differ in that respect from those which apply under the free-trade Agreement concluded subsequently to the events material to this case between the European Economic Community of the one part and the Government of Denmark and the Home Government of the Faroe Islands of the other part, approved on behalf of the Community by the Council Decision of 2 December 1991 (OJ 1991 L 371, p. 1). The annexes to that Agreement contain a Protocol No 3 concerning the definition of the concept of "originating products" and methods of administrative cooperation, Article 25(5) of which lays down the principle that disputes are to be settled by a joint customs committee.
29 As for the question whether, under the rules at issue in this case, disputes as to origin must be submitted to the Committee on Origin established by Regulation No 802/68 and referred to in the national court' s question, the answer must be in the negative.
30 According to the eleventh recital in the preamble to Regulation No 802/68, the purpose of establishing that Committee on Origin was to provide for a Community procedure enabling the necessary provisions to be adopted for ensuring the uniform application of the regulation, and to organize close and effective cooperation between the Commission and the Member States. Under Article 12 of that regulation, the committee is to consist of representatives of the Member States, chaired by a representative of the Commission. Under Article 13, the committee may examine all questions relating to the application of the regulation referred to it by its chairman, either on his own initiative or at the request of a representative of a Member State. In addition, Article 14 requires the committee to state its opinion on draft provisions for adoption which are submitted to it by the Commission' s representative, the subsequent adoption of implementing provisions being left to either the Commission or the Council.
31 Article 4(1) of Regulation No 2051/74 provides that, subject to certain reservations, the concept of original products is to be defined according to the procedure provided for in Article 14 of Regulation No 802/68.
32 Those provisions show that the tasks entrusted to the Committee on Origin are concerned with the general definition of the concept of original products and form part of a procedure involving cooperation between the Commission and the Member States. However, there is nothing in those rules which obliges the customs authorities of the importing Member State to refer to that committee any disputes as to the origin of goods which may arise between those authorities and the competent Faroese authorities.
33 That conclusion is not affected by the fact that, in the circumstances, a number of questions raised by the Community mission of enquiry were referred to the committee.
34 Finally, as the Advocate General pointed out in point 68 of his Opinion, the interpretation whereby the customs authorities of the importing Member State may maintain a different assessment from that of the competent Faroese authorities preserves the possibility of resolving any disputes which might arise; a trader may challenge decisions taken by the customs authorities of the importing Member State in proceedings before the national courts, while the uniformity of Community law can subsequently be ensured by the Court in the context of the preliminary ruling procedure.
35 For the aforesaid reasons, the answer to Question 2 must be that Regulations Nos 2051/74, 3184/74 and 1697/79 are to be interpreted as meaning that the customs authorities of a Member State may, on the basis of the conclusions of a Community mission of enquiry, proceed with the post-clearance recovery of customs duties on goods imported from the Faroe Islands, even if, in reliance on EUR.1 certificates issued in good faith by the competent Faroese authorities, they did not levy customs duties at the time of importation; even if the Faroese authorities dispute the conclusions of the mission of enquiry in so far as they relate to the interpretation of the relevant Community customs legislation and maintain that the certificates are in force; and even if the issues disputed were not referred to the Committee on Origin established pursuant to Regulation No 802/68.
Question 3
36 The national court' s third question concerns the interpretation of Annex IV to Regulation No 2051/74, which defines the term "originating products" for products covered by the common organization of markets in the fishery products sector. That annex provides that:
"I. ... the following products ... shall be considered as originating in the Faroe Islands:
(a) ...
(b) products taken from the sea by Faroe Island vessels;
...
The term 'Faroe Islands' shall apply only to vessels:
° which are registered in the Faroe Islands;
° which sail under the flag of the Faroe Islands;
° which are at least 50% owned by nationals of Member States of the Community or of the Faroe Islands or by a company with its head office in one of those States ...;
° of which the captain and all the officers are nationals of the Member States of the Community or of the Faroe Islands;
° of which at least 75% of the crew are nationals of the Member States of the Community or of the Faroe Islands."
37 The national court also refers to Explanatory Note 4 in Annex I to Regulation No 3184/74, which essentially incorporates the criteria for defining "Faroe Island vessels" set out in Annex IV to Regulation No 2051/74.
38 The question is in three parts.
Question 3a
39 In Question 3a, the national court asks whether the criteria for defining "Faroe Island vessels", referred to above, are to be read conjunctively or disjunctively.
40 Suffice it to note, in that regard, that the preferential customs system in question was established in order to promote exports from the Faroe Islands to the Community and thereby contribute to the economic and social development of those islands (see the first recital in the preamble to Regulation No 2051/74). Having regard to that aim, an interpretation applying the five defining criteria for "Faroe Island vessels" disjunctively would lead to unacceptable results. Thus, a vessel would not need to be registered in the Faroe Islands and fly their flag in order to be regarded as a Faroe Island vessel; it would be enough for its crew to be composed of nationals of Member States.
41 The answer to Question 3a must therefore be that the criteria for defining "Faroe Island vessels" set out in Annex IV to Regulation No 2051/74 and Explanatory Note 4 of Annex I to Regulation No 3184/74 are to be applied conjunctively.
Question 3b
42 In Question 3b, the national court asks whether the word "crew", as used in the fifth criterion for defining "Faroe Island vessels" referred to above, includes persons not forming part of the normal complement of the vessel who are engaged on a particular voyage or part of a voyage, pursuant to a joint venture agreement with an undertaking in a non-member country, to work on the vessel as trainees or as unskilled hands working below decks, paid either by the operator of the vessel or by the undertaking in the non-member country.
43 As stated above, the first recital in the preamble to Regulation No 2051/74 shows that measures for progressively eliminating customs duties on imports of products originating in and coming from the Faroe Islands were adopted in order to promote exports from the Faroe Islands to the Community and thereby contribute to the economic and social development of those islands.
44 With that purpose in mind, the criteria for defining "Faroe Island vessels" set out in Annex IV to Regulation No 2051/74 and Explanatory Note 4 of Annex I to Regulation No 3184/74 seek to ensure that vessels whose cargoes are exempted from customs duties have a genuine economic link with the Faroe Islands.
45 That link is not called in question where, on a particular voyage or part of a voyage and in addition to its normal crew, a vessel takes on board a number of third-country nationals to work as trainees or as unskilled hands below decks, particularly for training purposes, in order to comply with a joint venture agreement entered into with an undertaking in a non-member country for the purpose of enabling the vessel to fish inside the exclusive economic zone of that country. The question whether, under the terms of the joint venture agreement, the third-country nationals are paid by the operator of the vessel or by the undertaking in the non-member country is immaterial.
46 It is for the national court to determine whether those circumstances have arisen in this case, and in particular whether nationals of non-member countries were taken on board in addition to the normal crew.
47 The answer to Question 3b must therefore be that the word "crew" in Annex IV to Regulation No 2051/74 and Explanatory Note 4 of Annex I to Regulation No 3184/74 does not include persons not forming part of the vessel' s normal complement who are engaged in addition thereto on a particular voyage or part of a voyage to work as trainees or as unskilled hands below decks, particularly for training purposes, in order to comply with a joint venture agreement entered into with an undertaking in a non-member country for the purpose of enabling the vessel to fish inside the exclusive economic zone of that country, whether those persons are paid either by the operator of the vessel or by the undertaking in the non-member country.
Question 3c
48 In Question 3c, the national court essentially asks whether, in order to enjoy preferential customs treatment pursuant to Regulation No 2051/74, raw materials of Faroese origin within the meaning of Regulation No 3184/74 must be kept physically separate during their processing in a Faroese factory from products coming from non-member countries. The court also asks whether, in the absence of such separation, the customs authorities of the importing Member State may levy duty on imports derived from the factory in question in an amount equal to the duty that would have been payable if the origins of the goods in the consignment in question had been proportionally correspondent to the origins of the raw materials brought into the factory in the year in which the import occurred.
49 As has already been stated, the purpose of the preferential treatment introduced by Regulation No 2051/74 is to promote the economic and social development of the Faroe islands by encouraging the importation into the Community of products originating in and coming from those islands.
50 Contrary to the Commission' s contention, that aim must be regarded as having been achieved if, when processing takes place in a Faroese factory, shrimps and prawns of Faroese origin are separated under bookkeeping principles from those coming from non-member countries in such a way that preferential treatment is granted only in respect of such quantity of processed products as corresponds proportionally to the quantity of raw materials entitled to such treatment under the rules on origin laid down by Regulation No 3184/74.
51 The documents before the Court show that, in this case, there is no difference in the nature or method of processing according to the origin of the shrimps and prawns. It might therefore, as the plaintiffs in the main proceedings have argued, appear disproportionate to require the Faroese undertakings to bear the considerable burden which, in their view, physical separation would entail.
52 Neither Regulation No 2051/74 nor Regulation No 3184/74 expressly provides that, in order to retain the possibility of benefiting from preferential treatment, shrimps and prawns of Faroese origin must be physically separated during processing from those that come from non-member countries.
53 Nevertheless, it must be pointed out, first, that Annex IV to Regulation No 2051/74 defines originating products as "products taken from the sea by Faroe Island vessels", and that Article 2(1)(a) of Regulation No 3184/74 provides that the products which are to be regarded as originating products are those which are "wholly obtained in the Faroe Islands". Article 3(f) of the latter regulation also provides that products "wholly obtained ... in the Faroe Islands" include "products of sea fishing and other products taken from the sea by their vessels". In the absence of further particulars, those provisions show that preferential treatment is restricted to products which genuinely originate in the Faroe Islands.
54 Secondly, the Court accepts the Commission' s view that separation based on bookkeeping principles requires detailed rules for its application to be clearly and specifically laid down, as is the case, for example, with agreements between the Community and the countries of the European Free Trade Association.
55 The conclusion must therefore be that, in the absence of an express provision authorizing separation based on bookkeeping principles between shrimps and prawns of Faroese origin and those coming from non-member countries, and laying down detailed rules for its application, such separation is not sufficient to enable preferential treatment under Regulation No 2051/74 to be applied.
56 The Danish authorities' internal circular of April 1989, which the plaintiffs in the main proceedings argue authorizes the use of accounting principles, cannot be taken into consideration in that respect. It is not necessary to determine its precise content, or to rule on whether its application extends beyond products imported from the Faroe Islands into the other regions of Denmark under the national customs procedure applicable since 1 January 1973, which are not regarded as being in free circulation (see the second recital in the preamble to Regulation No 2051/74). A derogation from the Community rules on origin cannot be granted unilaterally by a Member State.
57 It follows that, if the shrimps and prawns are processed without physical separation according to their origin, imports derived from the factory in question cannot qualify for the preferential treatment provided for by Regulation No 2051/74. In principle, therefore, the customs authorities of the importing Member State may levy customs duties on the whole of those imports. However, Community law does not prevent those authorities, with the agreement of the Commission, from deciding in the interests of fairness to levy duty only in an amount equal to that which would have been payable if the origins of the goods in the consignment in question had been proportionally correspondent to the origins of the raw materials brought into the factory in the year in which the import occurred.
58 The answer to Question 3c must therefore be that, in order to enjoy preferential customs treatment pursuant to Regulation No 2051/74, raw materials of Faroese origin within the meaning of Regulation No 3184/74 must be kept physically separate during their processing in a Faroese factory from products coming from non-member countries. In the absence of such separation, however, the customs authorities of the importing Member State may, with the agreement of the Commission, decide in the interests of fairness to levy duty on imports derived from the factory in question only in an amount equal to that which would have been payable if the origins of the goods in the consignment in question had been proportionally correspondent to the origins of the raw materials brought into the factory in the year in which the import occurred.
Question 1
59 In Question 1, the national court essentially asks whether, for the purposes of applying Regulations Nos 2051/74 and 3184/74, the rules concerning the burden and means of proof of the originating status of goods imported from the Faroe Islands are a matter for Community law or for the law of the importing State. If the former, the court asks what rules apply in a case such as this.
60 Rules as to the burden and means of proof of the originating status of goods are governed by national law only in so far as they are not covered by Community law.
61 It is necessary, therefore, to examine whether such rules may be deduced from the Community rules which apply in this area. In that respect, Article 9 of Regulation No 3184/74 provides that an EUR.1 certificate is to be issued on application in writing by the exporter, who is required by Article 21(2) of the same regulation to submit any appropriate supporting document proving that the goods to be exported qualify for the issue of a certificate.
62 As is apparent from the answer to Question 2, it follows from the Community provisions examined in that context that where a subsequent verification, including an enquiry by a Community mission, does not confirm that the rules on origin were complied with, the conclusion must be drawn that the EUR.1 certificate and the preferential tariff were wrongly granted.
63 Accordingly, having regard to the answers to Question 3, where shrimps and prawns of Faroese origin have been processed in a Faroese factory which also processes shrimps and prawns coming from non-member countries, it is for the exporter to show proof, by producing all appropriate supporting documents, that the shrimps and prawns of Faroese origin were physically separated from those of other origins. In the absence of such proof, the shrimps and prawns can no longer be regarded as being of Faroese origin, and the EUR.1 certificate and the preferential tariff must therefore be regarded as having been wrongly granted.
64 The answer to Question 1 must therefore be that it follows from Regulations Nos 2051/74 and 3184/74 that, where shrimps and prawns of Faroese origin have been processed in a Faroese factory which also processes shrimps and prawns coming from non-member countries, it is for the exporter to show proof, by producing all appropriate supporting documents, that the shrimps and prawns of Faroese origin were physically separated from those of other origins. In the absence of such proof, the shrimps and prawns can no longer be regarded as being of Faroese origin, with the result that the EUR.1 certificate and the preferential tariff must be regarded as having been wrongly granted.
Question 4
65 By this question, the national court essentially asks whether it is for national law or Community law to determine the circumstances in which a post-clearance demand for payment of a global sum, part of which is irrecoverable for exceeding the three-year time-limit laid down by Article 2(1) of Regulation No 1697/79, must be considered void in its entirety.
66 It is apparent from the Court' s case-law that, in the absence of relevant provisions of Community law, it is for the national legal system of each Member State to lay down the detailed rules and conditions for the collection of Community revenues, although such procedures and conditions may not render the system for collecting Community charges and dues less effective than that for collecting national charges and dues of the same kind, or render virtually impossible or excessively difficult the implementation of Community legislation (see the judgments in Case 265/78 Ferwerda v Produktschap voor Vee en Vlees [1980] ECR 617, paragraph 12; in Joined Cases 66/79, 127/79 and 128/79 Amministrazione delle Finanze v Salumi and Others [1980] ECR 1237, paragraphs 18 and 20; and in Case C-212/94 FMC and Others v Intervention Board for Agricultural Produce [1996] ECR I-0000, paragraph 52).
67 The first subparagraph of Article 2(1) of Regulation No 1697/79 requires the competent authorities of a Member State who find that import duties legally due have not been collected to take action to recover those duties. Under the second subparagraph, action for the recovery of uncollected duties may not be taken after the expiry of three years from the date of entry in the accounts of the amount originally required of the person liable for payment, or, where there is no entry in the accounts, from the date on which the customs debt was incurred. Under Article 2(2) of the regulation, action for recovery is to be taken by notifying the person concerned of the amount of duties for which he is liable. Article 4 provides generally that the action is to be taken subject to the relevant provisions in force.
68 In the absence of other provisions governing the conditions for the validity of measures taken by the authorities for the post-clearance recovery of import duties, the determination of the circumstances, if any, in which a post-clearance demand for payment of a global sum, part of which is time-barred, must be regarded as invalid in its entirety is a matter for national law, within the limits set by the case-law referred to above.
69 The plaintiffs in the main proceedings maintain that there is a procedural rule of English law, which applies in cases such as this, whereby a single demand for payment of a global sum is to be regarded as invalid in its entirety if it covers, either wholly or in part, duties which are no longer recoverable following the expiry of a limitation period. In their view, the issuance of an invalid demand for payment of a global sum does not preclude the customs authorities from issuing a new demand complying with English procedural rules and excluding the entries which were out of time.
70 Whilst it is not for the Court to determine the precise scope of a national rule of that kind, or to decide whether it covers demands for payment such as those issued in this case, it should nevertheless be noted that a national rule which concerns the form of measures taken by the authorities for the post-clearance recovery of import duties, and which, when applied, may invalidate such measures without thereby extinguishing the Community debt with which those measures are concerned, does not call into question the fundamental basis of the rule requiring post-clearance recovery, or render such recovery virtually impossible or excessively difficult.
71 The answer to Question 4 must therefore be that, under Community law as it now stands, it is for national law to determine in what circumstances a post-clearance demand for payment of a global sum, part of which is irrecoverable for exceeding the three-year time-limit laid down by Article 2(1) of Regulation No 1697/79, must be considered void in its entirety, subject, however, to the limits imposed by Community law, namely that the application of national law may not render the system for collecting Community charges and dues less effective than that for collecting national charges and dues of the same kind, or render virtually impossible or excessively difficult the implementation of Community legislation.
Question 5
72 Question 5, referred by the national court, concerns the interpretation of the first subparagraph of Article 5(2) of Regulation No 1697/79, and the provisions for its implementation laid down by Regulation No 2164/91. Article 5(2) provides as follows:
"The competent authorities may refrain from taking action for the post-clearance recovery of import duties or export duties which were not collected as a result of an error made by the competent authorities themselves which could not reasonably have been detected by the person liable, the latter having for his part acted in good faith and observed all the provisions laid down by the rules in force as far as his customs declaration is concerned."
73 That question is in three parts, each of which has to be dealt with in turn.
The first part of Question 5
74 In the first part of Question 5, the national court essentially asks whether the competent authorities of the importing Member State are required, before issuing post-clearance demands for payment of customs duties, to determine whether it is possible to refrain from taking action for recovery pursuant to Article 5(2) of Regulation No 1697/79.
75 The rules in question contain no provision from which such a requirement could be inferred.
76 The answer to the first part of Question 5 must therefore be that the competent authorities of the importing Member State are not required, before issuing post-clearance demands for payment of customs duties, to determine whether it is possible to refrain from taking action for recovery pursuant to Article 5(2) of Regulation No 1697/79.
The second part of Question 5
77 In the second part of Question 5, the national court essentially asks whether Article 4 of Regulation No 2164/91 is to be interpreted as meaning that the competent authorities of the importing Member State are not required to refer a matter to the Commission for a decision as to the possibility of refraining from taking action for post-clearance recovery of customs duties if they do not consider that the conditions laid down in Article 5(2) of Regulation No 1697/79 are satisfied.
78 First of all, in cases where the uncollected amount is equal to or greater than ECU 2 000, Article 4 of Regulation No 2164/91 provides as follows:
"Where ... the competent authority of the Member State in which the error was committed either considers that the conditions laid down in Article 5(2) of the basic regulation are fulfilled or is in doubt as to the precise scope of the criteria of that provision with regard to a particular case, that authority shall submit the case to the Commission, so that a decision may be taken in accordance with the procedure laid down in Articles 5 to 7...".
79 It appears from the Court' s case-law on Article 4 of Commission Regulation (EEC) No 1573/80 of 20 June 1980 laying down provisions for the implementation of Article 5(2) of Council Regulation (EEC) No 1697/79 (OJ 1980 L 161, p. 1), which was replaced first by Commission Regulation (EEC) No 2380/89 of 2 August 1989 (OJ 1989 L 225, p. 30) and then by Regulation No 2164/91, that the power of decision conferred on the Commission by Article 4 of the latter regulation does not cover a case in which the competent authorities are persuaded that the terms of Article 5(2) of Regulation No 1697/79 are not fulfilled and therefore consider themselves bound to effect post-clearance recovery (see the judgments in Case C-64/89 Hauptzollamt Giessen v Deutsche Fernsprecher [1990] ECR I-2535, paragraph 12, and in Case C-348/89 Mecanarte v Chefe do Serviço da Conferência Final da Alfândega, Oporto [1991] ECR I-3277, paragraph 32).
80 As the Court stated in relation to Regulation No 1573/80, that interpretation is in conformity with the purpose of Regulation No 2164/91, which is to ensure the uniform application of Community law. That is likely to be jeopardized in cases where an application to waive post-clearance recovery is allowed, since the assessment which a Member State may make in taking a favourable decision is likely, in reality, owing to the probable absence of any appeal, to escape any review by means of which the uniform application of the conditions laid down in the Community legislation may be ensured. On the other hand, that is not the case where the national authorities proceed to effect recovery, whatever the amount in issue. It is then open to the person concerned to challenge such a decision before the national courts. As a result, it will be possible for the uniformity of Community law to be ensured by the Court of Justice through the preliminary ruling procedure (see the judgments in Deutsche Fernsprecher, cited above, paragraph 13, and in Mecanarte, cited above, paragraph 33).
81 The answer to the second part of Question 5 must therefore be that Article 4 of Regulation No 2164/91 is to be interpreted as meaning that the competent authorities of the importing Member State are not required to refer a matter to the Commission for a decision as to the possibility of refraining from taking action for post-clearance recovery of customs duties if they do not consider that the conditions laid down in Article 5(2) of Regulation No 1697/79 are satisfied.
The third part of Question 5
82 In the third part of Question 5, the national court further asks the Court to specify the conditions for applying Article 5(2) of Regulation No 1697/79 in circumstances such as those of this case, in order to determine whether the plaintiffs in the main proceedings were entitled to the waiver of post-clearance recovery.
83 Article 5(2) of Regulation No 1697/79 lays down three cumulative conditions for waiver by the competent authorities of post-clearance recovery of import duties, namely that non-collection must have been due to an error by the authorities, that the person liable must have acted in good faith, or in other words that he must not have been reasonably able to detect the error of the authorities, and that he must have complied with all the provisions laid down by the legislation in force so far as his customs declaration is concerned.
84 The Court has consistently held that, if those three conditions are satisfied, the person liable is entitled to waiver of recovery (see, in particular, the judgments in Mecanarte, cited above, paragraph 12, and in Case C-292/91 Weis v Hauptzollamt Wuerzburg [1993] ECR I-2219, paragraph 15).
85 Each of those three conditions has to be examined in detail in the light of the information supplied by the national court.
Error on the part of the competent authoritie
86 On this aspect, the national court is essentially asking whether there was an error on the part of the competent authorities within the meaning of Article 5(2) of Regulation No 1697/79 where the exporter, acting in good faith, declared the goods to be of Faroese origin, the competent Faroese authorities, acting in good faith, certified in the EUR.1 certificates that the goods originated there and continued at all material times to maintain those certificates in force, and the competent authorities of the importing Member State, also acting in good faith, initially accepted that the origin of the goods was as declared on the certificates.
87 A preliminary point to note in answering that question is that, according to the Court' s case-law, Article 5(2) of Regulation No 1697/79 is intended to protect the legitimate expectation of the person liable that all the information and criteria on which the decision whether or not to proceed with recovery of customs duties is based are correct (see the Mecanarte judgment, cited above, paragraph 19).
88 It therefore follows, as the Court held in paragraph 22 of its judgment in Mecanarte, that since no precise and exhaustive definition of the "competent authorities" is provided in Regulation No 1697/79 or in the regulation adopted in implementation thereof, not only the authorities competent for taking action for recovery but any authority which, acting within the scope of its powers, furnishes information relevant to the recovery of customs duties and which may thus cause the person liable to entertain legitimate expectations must be regarded as a "competent authority" within the meaning of Article 5(2) of Regulation No 1697/79. The Court considered that this applied in particular to the customs authorities of the exporting Member State which deal with the customs declaration.
89 The Commission argues that the term "competent authorities" does not, however, cover the customs authorities of a country to which the Treaty does not apply. It argues in particular that, in a case such as this, which concerns autonomous Community rules, the authorities of such a country are not deemed to have a sufficiently high degree of knowledge and understanding of those rules for a trader to be entitled to place full confidence in those authorities and to rely for protection of his expectations on the principle of the protection of legitimate expectations.
90 That argument cannot be accepted. Under Regulation No 3184/74, it is for the competent Faroese authorities to take any steps necessary to verify the origin of the goods and to check the other statements on the EUR.1 certificate (Article 22(2)), to issue the EUR.1 certificate if the goods to be exported can be considered products originating in the Faroe Islands within the meaning of Article 2(1) of the regulation (Article 23), and to call for any documentary evidence or to carry out any check which they consider appropriate in order to verify whether the latter condition has been met (Article 25). The Faroese authorities are thus entrusted by the Community with the task of furnishing information relevant to the recovery of customs duties and may thereby arouse legitimate expectations in the person liable. In those circumstances, they must be regarded as "competent authorities" within the meaning of Article 5(2) of Regulation No 1697/79.
91 Next, it follows from the wording of Article 5(2) itself that the legitimate expectations of the person liable attract the protection provided for in that article only if it was the competent authorities "themselves" which created the basis for those expectations. Thus, only errors attributable to acts of the competent authorities confer entitlement to the waiver of post-clearance recovery of customs duties (judgment in Mecanarte, cited above, paragraph 23).
92 As the Court pointed out in paragraph 24 of Mecanarte, that condition cannot be regarded as fulfilled where the competent authorities have been misled ° in particular as to the origin of the goods ° by incorrect declarations on the part of the exporter whose validity they do not have to check or assess. In those circumstances, it is the person liable who must bear the risks arising from a commercial document which is found to be false when subsequently checked.
93 Moreover, it is apparent from the Court' s case-law that the person liable cannot entertain a legitimate expectation with regard to the validity of certificates by virtue of the fact that they were initially accepted by the customs authorities of a Member State, since the role of those authorities in regard to the initial acceptance of declarations in no way prevents subsequent checks from being carried out (see the judgment in Joined Cases 98/83 and 230/83 Van Gend & Loos and Expeditiebedrijf Wim Bosman v Commission [1984] ECR 3763, paragraph 20).
94 It follows that the fact that the competent Faroese authorities certified in the EUR.1 certificates that the goods originated there or the fact that the competent authorities of the importing Member State initially accepted that the origin of the goods was as declared on those certificates is not sufficient for there to be an error made by the competent authorities within the meaning of Article 5(2) of Regulation No 1697/79.
95 However, where the exporter has declared that the goods are of Faroese origin in reliance on the actual knowledge by the competent Faroese authorities of all the facts necessary for applying the customs rules in question, and where, notwithstanding such knowledge, those authorities have raised no objection concerning the statements made in the exporter' s declarations, thereby basing their certification of the Faroese origin of the goods on a misinterpretation of the rules on origin, it must be considered to be the result of an error on the part of the competent authorities themselves in initially applying the relevant rules that no duty was charged when the goods were imported (see, in that respect, the judgments in Case 314/85 Foto-Frost v Hauptzollamt Luebeck Ost [1987] ECR 4199, paragraph 24, and in Case C-250/91 Hewlett Packard France v Directeur Général des Douanes [1993] ECR I-1819, paragraph 21).
96 It is for the national court to determine whether in this case such an error was made by the competent authorities, on the basis of which the three plaintiffs in the main proceedings may claim entitlement to waiver.
97 As for the first condition, therefore, the answer to the question must be that the fact that the competent Faroese authorities certified in the EUR.1 certificates that the goods originated there or the fact that the competent authorities of the importing Member State initially accepted that the origin of the goods was as declared on those certificates does not constitute an "error made by the competent authorities" within the meaning of Article 5(2) of Regulation No 1697/79. It is otherwise, however, where the exporter has declared that the goods are of Faroese origin in reliance on the actual knowledge by the competent Faroese authorities of all the facts necessary for applying the customs rules in question, and where, notwithstanding such knowledge, those authorities have raised no objection concerning the statements made in the exporter' s declarations, thereby basing their certification of the Faroese origin of the goods on a misinterpretation of the rules on origin.
Whether the error on the part of the competent authorities could have been detected by the person liable
98 So far as concerns the second condition, it is clear from Question 5 that the national court considers that, in this case, the persons liable for payment at all times believed in good faith that the origin of the goods was as declared in the EUR.1 certificates.
99 Nevertheless, the Court has consistently held that the condition in question implies that the national court must enquire whether the persons liable might not reasonably have been able to detect the error made by the competent customs authorities, having regard to the nature of the error, the professional experience of the traders concerned and the degree of care which they exercised (see the judgments in Deutsche Fernsprecher, cited above, paragraph 24; in Case C-371/90 Beirafrio v Alfândega do Porto [1992] ECR I-2715, paragraph 21; in Case C-187/91 Belovo [1992] ECR I-4937, paragraph 17; and in Hewlett Packard France, cited above, paragraph 22).
100 As regards the nature of the error, the Court pointed out in the above cases that it is necessary to consider in each case whether the rules concerned are complex or simple enough for an examination of the facts to make an error easily detectable. As regards the degree of care shown, if the traders concerned have doubts as to the definition of the origin of the goods, they must make inquiries and seek the greatest clarification possible in order to ascertain whether those doubts are well founded.
101 It is for the national court to establish whether, on the basis of that interpretation, the criteria for determining the extent to which a possible error by the competent Faroese authorities was capable of being detected by the persons liable are satisfied in the particular circumstances of this case.
102 It should be noted, however, that, in the cases before it, as they have been presented to the Court, there are a number of factors which may be taken into consideration as indicating, if taken as a whole, that any error which may have been made by the Faroese authorities was not capable in the circumstances of being detected, even by experienced professional traders such as the plaintiffs in the main proceedings.
103 First, as is clear from paragraphs 49 to 52 of this judgment, it is not possible merely by reading the rules in question to exclude the possibility that separation under bookkeeping principles between shrimps and prawns of Faroese origin and those coming from non-member countries might be sufficient to satisfy the rules on origin. It must also be borne in mind in this context that, according to the information available to the Court, which it is, however, for the national court to verify, the use of bookkeeping principles was authorized for imports from the Faroe Islands into other regions of Denmark.
104 In addition, on several occasions and over a relatively long period, the traders concerned obtained the issue of certificates repeatedly confirming as well founded a stance which subsequently turned out to have been mistaken. Moreover, the competent Faroese authorities maintained their position even after they became aware of the contrary interpretation of the mission of enquiry.
105 Finally, account must also be taken of the fact that if, in this case, the traders concerned had had any doubts as to the interpretation of the rules in question, they could have had the shrimps and prawns of Faroese origin processed separately, thereby retaining the possibility of qualifying for the preferential customs treatment. The fact that they did not attempt to have that physical separation carried out by the Faroese factories tends in practice to demonstrate their good faith in that respect.
106 As regards the second condition laid down by Article 5(2) of Regulation No 1697/79, the answer to the question must therefore be that, in order to determine whether the error which may have been made by the Faroese authorities could not reasonably have been detected by the persons liable within the meaning of that provision, account must be taken, in particular, of the nature of the error, the professional experience of the traders concerned and the degree of care which they exercised. It is for the national court to establish whether, on the basis of that interpretation, the criteria for determining the extent to which a possible error by the competent Faroese authorities was capable of being detected by the persons liable are satisfied in the particular circumstances of this case.
Whether all the provisions laid down by the legislation in force concerning customs declarations have been complied with
107 The national court observes in Question 5 that the exporter complied with all the provisions in force concerning its customs declaration, unless the contrary is to be inferred from the fact that the latter, acting in good faith, declared the goods to be of Faroese origin.
108 It is settled case-law that the person making the declaration must supply the competent customs authorities with all the necessary information as required by the Community rules, and by any national rules supplementing or transposing them, in relation to the customs treatment requested for the goods in question (see the judgment in Case 378/87 Top Hit Holzvertrieb v Commission [1989] ECR 1359, paragraph 26).
109 The Court has held, however, that this obligation may not go beyond production of the information that the person making the declaration may reasonably be expected to possess and obtain, with the result that it is sufficient for such information, even if incorrect, to have been provided in good faith (see the judgments in Mecanarte, cited above, paragraph 29, and in Hewlett Packard France, cited above, paragraph 29).
110 With regard to the third condition laid down by Article 5(2) of Regulation No 1697/79, the answer to the question must therefore be that that provision applies to a situation in which the person liable has complied with all the requirements laid down by the Community rules, and by any national rules supplementing or transposing them, so far as his customs declaration is concerned, even if he has, in good faith, supplied the competent authorities with inaccurate or incomplete information, where that was the only information which he might reasonably be expected to possess or obtain.
The right to property and the principle of proportionality
111 In case the national court should consider that the conditions for applying Article 5(2) of Regulation No 1697/79 are not fulfilled in this case, it is necessary to examine the argument put forward by the plaintiffs in the main proceedings that post-clearance recovery of import duties in this case would constitute an infringement of the right to property laid down by Article 1 of Protocol No 1 to the European Convention on Human Rights and Fundamental Freedoms of 4 November 1950, as interpreted by the European Commission and Court of Human Rights, and which is guaranteed in the Community legal order (see the judgment in Case 44/79 Hauer v Land Rheinland-Pfalz [1979] ECR 3727, paragraph 17).
112 The plaintiffs argue that the possibility provided for in the second paragraph of Article 1 of enforcing provisions necessary to secure the payment of taxes or other contributions must be used in such a way as to comply with the principle of proportionality. They contend that the Court of Justice has elevated that principle to a general principle of law which must be complied with, whatever the type of law concerned. In circumstances such as those of this case, recovery would infringe the principle of proportionality, since:
° the imports were made in good faith, in reliance on certificates issued in good faith by the competent authorities of the exporting territory, none of the plaintiffs had any doubts as to the correctness of those authorities' interpretation of the rules in question or any financial interest in preferring one particular interpretation to another, and the duties would be applied retroactively for, if payment had been demanded at the date of importation, the exporter would have been faced with a choice between selling his goods elsewhere and bearing that charge,
° the duties are no longer recoverable from the buyer of the imported products, who would have had to bear them if they had been levied at the time of importation,
° the amount claimed from Arthur Smith is excessive and exposes the firm to the risk of insolvency.
113 The matters relied on by the plaintiffs in the main proceedings and referred to in the first indent above are taken into account under Article 5(2) of Regulation No 1697/79. Indeed, it follows from that provision that it may be disproportionate to take action for post-clearance recovery where, following an error by the competent authorities, the duties were not collected at the time of importation and the traders concerned acted in good faith.
114 However, where the conditions for applying Article 5(2) of Regulation No 1697/79 are not fulfilled, the fact that action for post-clearance recovery is taken does not constitute an infringement of the principle of proportionality, even if the duties claimed are no longer recoverable from the buyer of the imported products. It is the responsibility of professional traders to make the necessary arrangements in their contractual relations in order to guard against such risks.
115 Moreover, a customs agent such as Arthur Smith renders itself liable, by the very nature of its functions, both for the payment of import duty and for the validity of the documents which it produces to the customs authorities. Therefore, even the fact that the amount claimed is a large one comes within the category of professional risks which the agent undertakes.
116 It must therefore be held that requirements arising from the right to property and the principle of proportionality do not prevent the competent authorities from taking action for the recovery of import duties where the conditions for applying Article 5(2) of Regulation No 1697/79 are not fulfilled, even though the duties are no longer recoverable from the buyer of the imported products and the amount in question is a large one.
Decision on costs
Costs
117 The costs incurred by the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court
Operative part
On those grounds,
THE COURT (Fifth Chamber)
in answer to the questions referred to it by the High Court of Justice, Queen' s Bench Division, by orders of 14 April 1994, hereby rules:
1. Council Regulation (EEC) No 2051/74 of 1 August 1974 on the customs procedure applicable to certain products originating in and coming from the Faroe Islands, Commission Regulation (EEC) No 3184/74 of 6 December 1974 concerning the definition of the concept of "originating products" and methods of administrative cooperation for the application of the customs procedure applicable to certain products originating in and coming from the Faroe Islands, and Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post-clearance recovery of import duties or export duties which have not been required of the person liable for payment on goods entered for a customs procedure involving the obligation to pay such duties, are to be interpreted as meaning that the customs authorities of a Member State may, on the basis of the conclusions of a Community mission of enquiry, proceed with the post-clearance recovery of customs duties on goods imported from the Faroe Islands, even if, in reliance on EUR.1 certificates issued in good faith by the competent Faroese authorities, they did not levy customs duties at the time of importation; even if the Faroese authorities dispute the conclusions of the mission of enquiry in so far as they relate to the interpretation of the relevant Community customs legislation and maintain that the certificates are in force; and even if the issues disputed were not referred to the Committee on Origin established pursuant to Council Regulation (EEC) No 802/68 of 27 June 1968 on the common definition of the concept of the origin of goods.
2. The criteria for defining "Faroe Island vessels" set out in Annex IV to Regulation No 2051/74 and Explanatory Note 4 of Annex I to Regulation No 3184/74 are to be applied conjunctively.
3. The word "crew" in Annex IV to Regulation No 2051/74 and Explanatory Note 4 of Annex I to Regulation No 3184/74 does not include persons not forming part of the vessel' s normal complement who are engaged in addition thereto on a particular voyage or part of a voyage to work as trainees or as unskilled hands below decks, particularly for training purposes, in order to comply with a joint venture agreement entered into with an undertaking in a non-member country for the purpose of enabling the vessel to fish inside the exclusive economic zone of that country, whether those persons are paid either by the operator of the vessel or by the undertaking in the non-member country.
4. In order to enjoy preferential customs treatment pursuant to Regulation No 2051/74, raw materials of Faroese origin within the meaning of Regulation No 3184/74 must be kept physically separate during their processing in a Faroese factory from products coming from non-member countries. In the absence of such separation, however, the customs authorities of the importing Member State may, with the agreement of the Commission, decide in the interests of fairness to levy duty on imports derived from the factory in question only in an amount equal to that which would have been payable if the origins of the goods in the consignment in question had been proportionally correspondent to the origins of the raw materials brought into the factory in the year in which the import occurred.
5. It follows from Regulations Nos 2051/74 and 3184/74 that, where shrimps and prawns of Faroese origin have been processed in a Faroese factory which also processes shrimps and prawns coming from non-member countries, it is for the exporter to show proof, by producing all appropriate supporting documents, that the shrimps and prawns of Faroese origin were physically separated from those of other origins. In the absence of such proof, the shrimps and prawns can no longer be regarded as being of Faroese origin, with the result that the EUR.1 certificate and the preferential tariff must be regarded as having been wrongly granted.
6. Under Community law as it now stands, it is for national law to determine in what circumstances a post-clearance demand for payment of a global sum, part of which is irrecoverable for exceeding the three-year time-limit laid down by Article 2(1) of Regulation No 1697/79, must be considered void in its entirety, subject, however, to the limits imposed by Community law, namely that the application of national law may not render the system for collecting Community charges and dues less effective than that for collecting national charges and dues of the same kind, or render virtually impossible or excessively difficult the implementation of Community legislation.
7. The competent authorities of the importing Member State are not required, before issuing post-clearance demands for payment of customs duties, to determine whether it is possible to refrain from taking action for recovery pursuant to Article 5(2) of Regulation No 1697/79.
8. Article 4 of Commission Regulation (EEC) No 2164/91 of 23 July 1991 laying down provisions for the implementation of Article 5(2) of Council Regulation (EEC) No 1697/79 is to be interpreted as meaning that the competent authorities of the importing Member State are not required to refer a matter to the Commission for a decision as to the possibility of refraining from taking action for post-clearance recovery of customs duties if they do not consider that the conditions laid down in Article 5(2) of Regulation No 1697/79 are satisfied.
9. The fact that the competent Faroese authorities certified in the EUR.1 certificates that the goods originated there or the fact that the competent authorities of the importing Member State initially accepted that the origin of the goods was as declared on those certificates does not constitute an "error made by the competent authorities" within the meaning of Article 5(2) of Regulation No 1697/79. It is otherwise, however, where the exporter has declared that the goods are of Faroese origin in reliance on the actual knowledge by the competent Faroese authorities of all the facts necessary for applying the customs rules in question, and where, notwithstanding such knowledge, those authorities have raised no objection concerning the statements made in the exporter' s declarations, thereby basing their certification of the Faroese origin of the goods on a misinterpretation of the rules on origin.
10. In order to determine whether the error which may have been made by the Faroese authorities could not reasonably have been detected by the persons liable within the meaning of Article 5(2) of Regulation No 1697/79, account must be taken, in particular, of the nature of the error, the professional experience of the traders concerned and the degree of care which they exercised. It is for the national court to establish whether, on the basis of that interpretation, the criteria for determining the extent to which a possible error by the competent Faroese authorities was capable of being detected by the persons liable are satisfied in the particular circumstances of this case.
11. Article 5(2) of Regulation No 1697/79 applies to a situation in which the person liable has complied with all the requirements laid down by the Community rules, and by any national rules supplementing or transposing them, so far as his customs declaration is concerned, even if he has, in good faith, supplied the competent authorities with inaccurate or incomplete information, where that was the only information which he might reasonably be expected to possess or obtain