OPINION OF MR ADVOCATE-GENERAL REISCHL

DELIVERED ON 1 APRIL 1976 ( 1 )

Mr President.

Members of the Court,

The case on which I am giving my opinion today is concerned with the problems of export refunds under the common organization of the market in cereals.

The following has to be said briefly with regard to the facts:

From 26 to 29 July 1972 the company Merkur, which has its registered office in Hamburg, applied for export clearance for goods which it described as ‘flakes of barley not listed under subheading 11.02 E I b 1 aa of the customs tariff’ or as ‘barley flakes with a raw fibre content of more than 0.9 per cent by weight and an ash content of more than 1 % by weight in relation to dry matter’. The exports were made on the basis of licences in which the export refund was fixed in advance in respect of tariff heading 11.02 E I b 1 (‘flakes of barley’). Samples were taken of the goods and examined by the Zolltechnische Prüfungs- und Lehranstalt (Customs Technical Inspection and Training Institute) in Berlin. The examiners decided that owing to the high ash and raw fibre content of the exported goods they were rolled grains under tariff heading 11.02 E I a 1 and not barley flakes under tariff heading 11.02 E I b 1 . Since no refund was provided for rolled barley grains under the refund regulation applying at the time, Regulation No. 1383/72 of the Commission (JO L 149, 1972, p. 30), Merkur was refused the export refund it had applied for. The alternative application for the grant of a refund for barley of tariff heading 10.03 — a refund rate was provided for this tariff heading — was also rejected.

After unsuccessfully pursuing the procedure for objection Merkur brought the matter before the Finanzgericht Hamburg. In its action it is seeking in the first place the grant of an export refund for barley flakes and in the alternative for barley. It admits in its grounds of claim that the exported goods are not derived from hulled barley. It takes the view however that the concept of barley flakes does not require a hulling process; it is sufficient if in processing by the brushing and scouring machines part of the hulls, that is — as in its case — 20 % of all husks, are removed. In this connexion it relies on the Explanatory Notes to the Brussels Nomenclature.

In the event of the export's being held to be rolled barley Merkur claims that the refund is not dependent on the existence of an export licence for the goods in question. Accordingly, since no refund was provided for rolled barley at the time of the export, it can claim the refund for the basic product, namely barley.

Against this the defendant Hauptzollamt takes the view that as regards the product ‘barley flakes’ a prior hulling process is of importance. This may be inferred from the Explanatory Notes to tariff heading 11.02 E I b of the Common Customs Tariff and the date at which these notes were issued is unimportant. Since the exported goods were not subjected to a hulling process, it can only be assumed that they were rolled barley. Their export gives no right to a refund because at the time of the export no refund rate was provided for rolled barley. The refund for barley cannot be claimed because barley was not in fact exported.

By order dated 29 August 1975 the Finanzgericht stayed the proceedings and referred the following questions for a preliminary ruling under Article 177 of the EEC Treaty:

1. Does tariff subheading 11.02 E I a 1, ‘Rolled grains: Barley’, differ from tariff subheading 11.02 E I b 1, ‘Flaked Barley’, under tariff heading 11.02 of the Common Customs Tariff, in that in contrast to rolled barley grains, barley flakes must be produced from hulled (husked) grains of barley or does the difference between the two tariff subheadings lie merely in the fact that barley flakes are rolled (completely crushed or flat-rolled), without prior hulling of the grain, to a greater extent (with the loss of part of the hull during the processing) than rolled grains of barley?

2. If the first alternative in question 1 is answered in the affirmative: Does Article 12 (1) of Regulation No 120/67, whereby all exports from the Community of the products listed in Article 1 shall be subject to the submission of an export licence, in conjunction with Article 2 (1) of Regulation (EEC) No 1373/70, whereby the export licence shall authorize and require the exportation of the net quantity of the specified product during the period of validity of the licence, mean that a right to the grant of an export refund in accordance with Article 16 of Regulation No 120/67 and in accordance with Articles 1 and 3 of Regulation No 1041/67 also exist if a product has been exported other than that for which the export licence was granted?

3. If question 2 is answered in the affirmative: In a case where, at the relevant time, no rate of refund was fixed for the product that was actually exported (rolled grains of barley under tariff subheading 11.02 E I a I) does there exist a right to the grant of an export refund in respect of the basic product which is capable of giving rise to a refund (barley under tariff heading 10.03)?

On this the following has to be said:

On the first question:

The first question asks whether it is essential that barley flakes should be derived from hulled barley or whether they differ from rolled barley only in that they are rolled to a greater extent.

The question is of importance for the export refund rules in the sector of products processed from cereals and rice which were adopted for the period in question here by Regulation No 1383/72 of the Commission of 30 June 1972.

With regard to this regulation it should first be observed that its annex, which contains the amounts of the refunds, refers to the nomenclature of the Common Customs Tariff. There is express reference to a ‘simplified version of the nomenclature of the tariff’. In so far as “flakes of barley” in particular are concerned, precise reference is made to tariff heading 11.02E I b 1 . From this it must be inferred that with regard to the descriptions of goods the regulation does not have its own definitions but uses those of the Common Customs Tariff. This is not contradicted by the fact that in the refund rules on barley flakes two special subheadings are provided according to the ash and raw fibre content, for there is nothing in the regulation to show that in this way it is intended to disregard the distinctions which plainly emerge from the Common Customs Tariff as regards barley flakes.

The Common Customs Tariff does not define in more detail what is to be understood by “flakes of barley” and “rolled barley grains”. According to the wording — as is apparent from subheading E “Rolled grains; flaked grains” — rolling also occurs in the production of flakes. On the other hand there is not to be inferred from it — overlooking the fact that flakes must obviously have the form of flakes — what additional characteristics there are for distinguishing barley grains which have merely been rolled.

In relation to the question which is of most concern, namely whether barley flakes presuppose a hulling process, there is nothing, contrary to the plaintiffs view, to be inferred from the system of tariff heading 11.02. As you know, the plaintiff in this respect refers to the main heading to tariff heading 11.02 which says “Cereal groats and cereal meal; other worked cereal grains (for example, rolled, flaked, polished, pearled or kibbled but not further prepared), except husked, glazed, polished or broken rice; germ of cereals, whole, rolled, flaked or ground”. It says that every element in the heading occurs again in a subheading each of which presupposes a particular form of processing.

Hulling, however, it points out, is mentioned only in subheading B in “hulled grains (shelled or husked), whether or not sliced or kibbled”.

In fact it does not necessarily follow from this that hulling is irrelevant in subheading E (“Rolled Grains: Flaked Grains”), for it is quite conceivable, as the Commission, too, stresses, that since the individual subheadings of tariff heading 11.02 relate to typical production processes in the milling of cereals, hulling is involved as a typical production process in the production of flakes even if it is not expressly mentioned. In addition it may be inferred from the expert's opinion produced by the plaintiff that owing to the characteristics of oats it is not possible to produce oat flakes, which also come under tariff heading 11.02 E I b, without previously hulling or husking.

As so often where the wording and system of the Common Customs Tariff do not allow an exhaustive answer and where no other measures of Community law shed any light, reference has to be made to the Brussels Explanatory Notes, which according to the case-law are an authoritative aid, to see what help may be obtained in answering the question. In relation to the problem which concerns us here it is the French version which is particularly useful for it contains clarifying references which are not found in the English version which is equally authentic. On tariff heading 11.02 it is stated under paragraph 6: “Les flocons (principalement d'avoine et d'orges), qui sont des grains ecrases ou aplatis conservant encore une partie de leur pellicule …” (English: “Rolled or flaked grain (principally barley and oats), obtained by crushing or rolling the whole grain …”).

First it should be said that ‘hull’ does not — as the plaintiff thinks — include ‘husk’. It is true that the explanatory notes to tariff heading 10.03 — the plaintiff has referred to this — in connexion with the comment ‘Bracteiferous varieties of barley differ from most other cereals in that their husks (or hulls) become fused to the grain kernel in the course of growth and therefore cannot be separated by simple threshing or winnowing’, say that this kind of barley comes only within tariff heading 10.03 if complete with husk; ‘when this husk or hull has been removed bracteiferous barley grains are excluded (heading 11.02)’. This does not mean that under ‘hulled’ within the meaning of tariff heading 11.02 only ‘shelled or husked’ is always to be understood. In this respect a comparison with the terms used in the various notes to tariff heading 11.02 is significant. In one it is stated under paragraph 3, that is in connexion with hulled cereal grains: ‘Les grains mondés, c'est-a-dire les grains qui ont ete partiellement depouilles de leur pellicule propre (pericarpe) et, dans le cas particulier des grains d'orge vetue …, ceux qui ont ete depourvus de leurs enveloppes ou bractees, lesquelles adherent fortement aux graines même apres le battage ou le vannage …’. (‘Grain from which the pericarp (the skin beneath the husk) has been partially removed. Grains of the bracteiferous varieties of barley are also classified in this heading if their husks (or hulls) have been removed; … (The husks can be removed only by grinding since they adhere too firmly to the grain kernel to be separated by mere threshing or winnowing…’). On the other hand under paragraph 6, that is in the notes on flakes, significantly the word ‘pellicule’ is used and not the word ‘enveloppe’ or ‘bractee’.

It is moreover relevant that the phrase used in connexion with the concept of flakes in subparagraph 6 of the Explanatory Notes to the Brussels Nomenclature is 'grain which still retains part of its husk. ( 2 ) It presupposes that part of the husk has been removed for obviously it would have no meaning if it were possible to obtain flakes from grain which had not been hulled. The wording presupposes further that there has been processing in which the husk has been removed to an extent worthy of mention, for only on this basis is the use of the word “still” comprehensible. Moreover the said phrase — as the Commission has rightly stressed — is explicable on the ground that owingto the characteristics of the grain in question here — it is pointed at the ends and the husk is fused with the pericarp — but even with intensive threshing it is not possible to remove the whole husk.

It therefore seems quite plausible for the Commission to draw the conclusion from the Explanatory Notes to the Brussels Nomenclature that the production of flakes presupposes some working of the grain in which not only the husk but also a considerable part of the pericarp is removed since in normal and thorough husking this is unavoidable.

Further in this connexion it is clearly of interest, even if it cannot be decisive in the present case by reason of the date of their adoption, that such a conclusion is in accordance with the Explanatory Notes of the Committee on Nomenclature of the Common Customs Tariff, that is the explanatory notes of Community law. The notes state in respect of tariff heading 11.02 E I b: “Barley flakes are hulled (shelled or husked) and rolled grains which often still retain part of their husks …”.

A series of objections put forward by the plaintiff are scarcely calculated to invalidate the conclusion reached so far.

This applies on the one hand to the observations relating to the characteristics of oat flakes and the regulations applying to them. In this respect it is in my view sufficient to state that every kind of cereal obviously has its own peculiarities and therefore it is not possible simply to apply findings which have been made in respect of one kind of cereal and of the rules relating thereto to another kind of cereal.

Further, there is no need to go into the plaintiff s observations according to which the latest development in the production of flakes goes beyond the condition stated in the Explanatory Notes to the Brussels Nomenclature and according to which today there are not only flakes for human consumption but also cheaper flakes for animal feed on the market. The crucial factor in this respect is that this cannot simply be taken into account without a clear alignment of the existing regulations and explanatory notes if there is not to be intolerable uncertainty in the tariff law.

In so far as the plaintiff refers to the fact that in the Annex to Regulation No 1383/72 no provision was made, as regards a second class of barley flakes, for a marginal figure relating to ash and raw fibre content whereas according to the refund rules applicable in 1968 a raw fibre content was important even in a fourth class of barley flakes, which presupposes a certain husking, this cannot lead to any other conclusion. For against the conclusion that the absence of an upper limit for ash and raw fibre content in Regulation No 1383/72 shows that a preliminary husking is not necessary it suffices in my opinion to refer to the already-mentioned fact that the refund rules in Regulation No 1383/72 clearly refer to the Common Customs Tariff. The criterion is thus the concept of flakes in the Common Customs Tariff especially as there is no evidence of any departure from this and in particular for the assumption that Regulation No 1383/72 was intended to eliminate the distinction vis-à-vis other tariff headings such as those applicable to rolled barley.

Finally, there is no significance in the plaintiff's argument relating to the rules on the import and export of products derived from processing cereals and the fixing of the quantities of the basic products which form the basis of the assessment of the variable component of the levy for processed products. In this connexion the plaintiff, as is known, has taken the proportion of barley by weight constituted by the husk and pericarp (namely on average 11 % and 8 %). It has claimed that if a conversion ratio of 100:102 (processed product: basic product) applies to barley flakes of inferior quality, it can in no way be assumed that a process of husking in the sense described always precedes the production of barley flakes. More correct, taking as a basis the argument of the Commission, would be a ratio of 100:110 — where barley from which the husk has been removed is used — or 100: 102 — where in addition the pericarp has been removed beforehand. Against this argument in my view it may simply be said that the ratios mentioned in the rules on refunds provide only guide lines and that they represent only one of several of the factors to be taken into account in fixing the refund. Further, the regulation which contains the conversion rate of 102 for barley flakes (No 360/67, JO L 174, 1967, p. 13) was replaced by Regulation No 1052/68 (OJ, English Special Edition 1968 (II), p. 323) before the present exports were made. According, however, to its annex a much higher coefficient must be taken in the case of barley flakes, namely that 200 kg of barley is required to produce 100 kg of flakes.

Accordingly as regards the first question, and without its being necessary to go into the in any case uncertain criterion of trade practice and also without going into an exhaustive description of barley flakes, it may be taken its production depends on a normal husking process in which the grain is thoroughly husked and in which also a considerable part of the pericarp is removed.

On the second question

The second question asks whether the right to the grant of an export refund exists if a product has been exported other than that for which the export licence was granted, that is whether an export refund is dependent upon the production of an export licence.

On this it may be said that the law on refunds and the rules on licences are basically separate matters, two instruments of market organization independent of one another having their own legal basic — Articles 12 and 16 of Regulation No 120/67 (OJ, English Special Edition 1967, p. 33) — and special implementing provisions. Licences, to the grant of which every one in principle has a right and which basically are also required for exports, are for the purposes of assessing and checking market conditions. Export refunds are assessed according to the difference between world market prices and the prices in the Community. Their function is to make possible the sale of Community products on the world market.

If goods are exported which do not correspond to the descriptions in the licence then all that is provided — in Article 14 (2) of Regulation No 1373/70 (OJ, English Special Edition 1970 (II), p. 439) is that the Member States shall inform the Commission of it. The deposit which must be lodged on application for a licence may fall to be forfeited. On the other hand there are no other sanctions in the licence rules. It is rightly stressed that the loss of the right to the refund would not be appropriate to the objective pursued by the licence rules.

On the other hand, according to the rules applying for refunds it is clear that the actual export, proof that the products in question have left the geographical territory of the Community, and completion of the export formalities are the conditions precedent to the claim arising. Under Article 1 of Regulation No 1041/67 (OJ English Special Edition 1967, p. 323) completion of the export formalities is to be understood as acceptance by the customs office of the declaration by which the declarant states his intention to make the export and qualify for a refund. Production of the licence is certainly not included; as appears from Article 5 of Regulation No 1041/67, the licence is not even proof of export.

Furthermore, any other assessment would scarcely be understandable in view of the way corresponding matters are dealt with in the case of imports. The import levy, as was decided in Case 35/71, Schleswig-Holsteinische landwirtschaftliche Hauptgenossenschaft GmbH v Hauptzollamt Itzehoe ([1973] ECR 1083), is not dependent upon production of an import licence. Moreover it should not be forgotten that numerous agricultural products do not require an export licence but refunds are still granted. This is so, as was explained to us, with regard to beef (Regulation No 805/68, OJ English Special Edition 1968 (I), p. 187), pigmeat (Regulation No 121/67, English Special Edition 1967, p. 46), eggs (Regulation No 122/67, English Special Edition 1967, p. 55) and poultrymeat (Regulation No 123/67, English Special Edition 1967, p. 63).

With regard to the second question it may thus be said that apart from the advance-fixing of the refund which is done in the licence and for which the licence is the instrument containing the claim to the refund, there is no connexion between the licence rules and the claim to the refund and the latter does not depend on the production of the licence.

On the third question

Finally the third question asks whether a refund has to be made in respect of a basic product which is capable of giving rise to a refund — in this case barley — if no rate of refund was fixed for the product that was actually exported — in the present case rolled grains of barley.

In reliance on the system of the refund rules the Commission and the defendant in the main action take the view that this question must be answered in the negative. The plaintiff on the other hand advocates an answer in the affirmative and points out that barley and rolled grains of barley are almost the same composition. Moreover regard should be had to the need to protect exporters who have exported a product in reliance on its being capable of giving rise to a refund.

Article 16 of Regulation No 120/67 is the relevant basic provision for refunds in the sector covered by the organization of the market in cereals. It is an “enabling” provision, that is it contains simply a power to grant refunds. Therefore it provides inter alia that the Council shall adopt general rules for refunds, that detailed rules shall be adopted in accordance with the procedure laid down in Article 26, that is the Management Committee procedure, and that refunds shall be fixed in accordance with this procedure. From this it must be inferred that there is no general right to a refund on the export of agricultural products, but only in so far as this is expressly provided for in a legal measure of a Community institution.

General rules for granting export refunds on cereals and criteria for fixing the amount of such refunds were laid down in Regulation No 139/67 of the Council of 21 June 1967 (OJ English Special Edition 1967, p. 88). For products processed from cereals reference must further be made to Regulation No 1052/68 of the Council of 23 July 1968 (OJ English Special Edition 1968 (II), p. 323). According to these, account has to be taken — I shall not now give a full list of all the factors — of the existing situation and the future trend with regard to the prices and availability of cereals on the Community market, prices for cereals on the world market, the aim to ensure equilibrium of markets and the natural development of prices and trade on the market, the need to avoid disturbances on the Community market and the economic aspect of the proposed exports. The second regulation referred to is mainly concerned — I will limit myself to this — with the outlets and conditions of sale for processed products on the world market.

Regulation No 1383/72 of the Commission of 30 June 1972 (JO L 149, 1972, p. 30) which is the relevant one here, was adopted on this basis. It sets out in the annex thereto, as is provided for in the system just indicated above, the relevant products in detail and the amounts of the refunds. No rate of refund was fixed for rolled grains of barley because this product — the plaintiff has moreover confirmed this — was not involved in the trade at the time.

In view of these rules and the criteria contained in them it is undoubtedly necessary to proceed from the principle that a refund is granted only if the exported goods fall within one of the descriptions of goods laid down in the catalogue of refunds. Otherwise the very detailed rules would have no reasonable meaning and the individual considerations of market policy on which it was based could easily be frustrated. In my opinion it is therefore not possible to consider always granting at least the refund fixed for the basic product if — as in the present case — a refund was not provided for the exported processed product. Nowhere in the said rules is there any indication of such a principle which, moreover, in the case of mixed products could lead to considerable difficulties. Further in my view one should hesitate to allow such a remedy in a particular case on grounds of equity, even in cases in which a processed product is derived from only one basic product and is only slightly different from it. This arises from the fact that there is no such principle, as the Commission has shown, either in national or Community law on the organization of the market. Moreover it may be said that there is no genuine need for such equitable solutions. The catalogue of refunds with its individual descriptions of goods is known in detail to the interested trade circles. They can be guided by it if they wish to claim such export subsidies inter alia by applying for the refund to be fixed in advance in the export licence. If the exporters resolve on trading transactions which do not clearly come within the catalogue of refunds, that is where a claim for a refund is dubious, this is their responsibility and is at their risk. This does not need, however, to be made good by the authorities of the organization of the market subsequently applying a rate of refund which is clearly intended for another product.

I would therefore, like the Commission, answer the third question of the Finanzgericht in the negative.

Summary

After all this I propose that the questions referred by the Finanzgericht Hamburg for a preliminary ruling should be answered as follows:

(a) Tariff subheading 11.02 E I a 1, ‘Rolled grains — Barley’, differs from tariff subheading 11.02 E I b 1, ‘Flaked Barley’, above all in that the production of barley flakes is preceded by normal hulling during which the cereal grains are thoroughly husked and a considerable part of the pericarp is also removed.

(b) A right to a grant of an export refund in accordance with Article 16 of Regulation No 120/67 may, apart from cases where it is fixed in advance, exist even if the goods exported do not correspond with those described in the licence used for that export.

(c) Where, at the relevant time, no rate of refund was fixed for the processed product that was actually exported there is no right to the grant of the export refund applying to the basic product which is capable of qualifying for a refund.

( 1 ) Translated from the German.

( 2 ) Translator's Note: This is a translation of the non-authentic German text. The authentic English version simply has whole grain.