OPINION OF MR ADVOCATE-GENERAL REISCHL

DELIVERED ON 11 JULY 1974 ( 1 )

Mr President,

Members of the Court,

Under Article 15 (1) of Regulation No 121/67 of the Council on the common organization of the market in pigmeat (OJ L 117 of 19. 6. 1967, p. 2283), because market prices in the Community are as a rule above the level of the world market due to the price of fodder, and to the extent necessary to enable the products listed in Article 1 of Regulation No 121/67 to be exported ‘on the basis of quotations or prices for those products on the world market, the difference between those quotations or prices and prices within the Community may be covered by an export refund’.

The general rules for granting export refunds on pigmeat are laid down in Regulation No 177/67 of the Council (OJ 130 of 28. 6. 1967, p. 2614). Under Article 6 (1) thereof the refund shall be paid

‘upon proof:

— that the products have been exported from the Community, and

— that the products are of Community origin, except where Article 7 applies.’

Article 7 provides:

‘No export refund shall be granted on products listed in Article 1 (1) of Regulation No 121/67/EEC which are imported from third countries and re-exported to third countries, unless the exporter proves:

— that the product to be exported and the product previously imported are one and the same, and

— that the levy was collected on importation.’

Regulation No 802/68 of the Council ‘on the common definition of the concept of the origin of goods’ (OJ L 148 of 28. 6. 1968, p. 1) must also be mentioned in connection with the above-cited Article 6 of Regulation No 177/67. The concept of the origin of goods is defined in Article 1 thereof for the purpose inter alia of ‘the uniform application of all measures adopted, in relation to the exportation of goods, by the Community or by the Member States’. So far as we are concerned here, it is then stated that goods wholly obtained or produced in one country shall be considered as originating in that country. Article 4 (2) further provides:

‘the expression “goods wholly obtained or produced in one country” means:

…

(d) products derived from live animals raised therein.’

Finally it remains to mention Regulation No 1041/67 of the Commission ‘on detailed rules for the application of export refunds on products subject to a single price system’ (OJ L 314 of 23. 12. 1967, p. 9). Under Article 6 (1) a refund is to be granted only in respect of products in free circulation within the Community.

The Firma Norddeutsches Vieh- und Fleischkontor, the plaintiff in the main action, which has led to the reference we have to deal with today, wished to benefit from the Community rules on export refunds. In June and July 1969 it had exported to Jugoslavia certain quantities of goods, which it had described as ‘swine bellies and cuts of bellies’. In its application for the grant of the export refund it claimed that the goods were of Community origin. Accordingly the application was, at least in part, acceded to. In April 1970 the plaintiff's business was subjected to an examination to ascertain whether the market regulations were being complied with, and the inspectors found that a part of the goods originated in the German Democratic Republic. The Hauptzollamt Hamburg — Jonas, the defendant in the main action, thereupon demanded repayment of the refund which had already been granted and rejected the part of the claim which was still pending.

In the ensuing proceedings commenced by the Firma Norddeutsches Vieh- und Fleischkontor in the Hamburg Finanzgericht, the plaintiff argued in justification of its claim that the refund must apply also to goods which had been brought from the German Democratic Republic into the Federal Republic of Germany within the framework of the so called inter-zonal trade. In support it referred to the Protocol on German Internal Trade and connected problems annexed to the EEC Treaty. In this it is stated:

‘Since trade between the German Territories subject to the Basic Law for the Federal Republic of Germany and the German territories in which the Basic Law does not apply is a part of German internal trade, the application of this Treaty in Germany requires no change in the treatment currently accorded this trade.’

The defendant Hauptzollamt on the other hand maintained its opinion that the conditions for the grant of a refund were not fulfilled. The deciding factor, since Article 7 of Regulation No 177/67 is ruled out, is whether the goods concerned had their origin in the Community. This is not so in the case of goods which have their origin in the German Democratic Republic, even if they have been brought into the Federal Republic of Germany within the framework of inter-zonal trade.

In view of this dispute as to the interpretation of provisions of Community law, the Hamburg Finanzgericht by Order dated 30 January 1974 stayed the proceedings and referred the following question for a preliminary ruling under-Article 177 of the EEC Treaty:

‘Are Articles 6 (1) or Article 7 of Regulation (EEC) No 177/67 and Article 4 (1) and (2) (d) of Regulation (EEC) No 802/68 in conjunction with the “Protocol on German Internal Trade and connected problems” to be interpreted as meaning that the products within the meaning of Article 1 (1) of Regulation (EEC) No 121/67, which have been brought from the German Democratic Republic into the Federal Republic of Germany under the terms of the agreement on inter-zonal trade, are eligible for export refunds on export from the Federal Republic to a third country?’

On this I take the following view:

If Article 7 of Regulation No 177/67 is first considered, then it is clear from its wording — and all parties are agreed on this — that it cannot be the basis for a claim for a refund for goods which have been brought from the German Democratic Republic into the Federal Republic of Germany and thence exported to third countries. This view is beyond doubt, since a condition for a claim under Article 7 of Regulation No 177/67 is that the goods were imported from third countries and that levies were payable. There can be no question of this in respect of goods which have been brought out of the German Democratic Republic to the Federal Republic of Germany under the terms of the inter-zonal trade agreement, in view of the Protocol on German Internal Trade. Under the Protocol such trade is part of German internal trade and neither the application of the EEC Treaty nor its secondary law — it may be added — requires any change in the treatment currently accorded this trade. Accordingly, when goods come into the Federal Republic of Germany under this Protocol there can be no question of imports from third countries, since it is German internal trade, and it is not possible in view of the Protocol to impose levies on such goods.

If, in consequence, Article 7 of Regulation No 177/67 is ruled out, the settlement of the case in dispute in the main action can depend, as the plaintiff has rightly stressed, only on the interpretation of Article 6 of this Regulation, under which the claim to a refund depends on proof that the products have been exported from the Community, and that the products are of Community origin.

For the interpretation of this provision reference must be made in particular to Regulation No 802/68 of the Council on the common definition of the concept of origin of goods, since Article 1 thereof defines the origin of goods for the purpose of ‘the uniform application of all measures adopted, in relation to the exportation of goods, by the Community or by Member States’. The aforementioned Article 4 is important, since this provides that ‘goods wholly obtained or produced in one country shall be considered as originating in that country’ and that the expression ‘goods wholly obtained or produced in one country’ means products derived from live animals raised therein.

In relation to the Member States this means that goods have their origin in these countries if they have been obtained or produced in the territories to which the EEC Treaty applies. Without doubt, under Article 227 of the EEC Treaty the territory of the German Democratic Republic is not one of those. As the Federal Government has rightly stressed, no other interpretation is possible even with the help of the aforementioned Protocol on German Internal Trade. In truth the objective of the Protocol is only to release the Federal Republic of Germany from having to apply Community law to German internal trade. It does not, on the other hand, extend the territory to. which the EEC Treaty applies — its sovereign territory, if you will — to the German Democratic Republic; the Protocol is neither directly nor indirectly a basis for the membership by the German Democratic Republic of the European Economic Community.

The plaintiff in the main action does not seek to go so far as to doubt the correctness of this observation. It simply takes the view that Regulation No 802/68 must be interpreted in the light of the Protocol on German Internal Trade and that accordingly it may be taken that goods which have been brought in due course into the Federal Republic of Germany within the context of the so-called inter-zonal trade, have their origin there. When it is said that this trade is ‘part of German internal trade’ then the goods concerned must be treated as if they had been dealt with within the Federal Republic of Germany. From this it follows that they are to be considered under Regulation No 802/68 as having been obtained in the Federal Republic of Germany.

It is scarcely possible to support this view either.

As the Federal Government and the Commission have rightly stated, the Protocol has significance only for German internal trade. Its sole function is — and this leads certainly to a restrictive interpretation — to provide for the special relationship between the Federal Republic of Germany and the German Democratic Republic, that is, to avoid the division of Germany being deepened by the application of Community law to German internal trade. On the other hand, trade between countries of the Community and third countries lies certainly outside the sphere of the Protocol.

If the matter js seen in this light, it would mean going beyond the significance of the Protocol to derive from it any conclusion for the sphere of export refunds, which do not come within the terms of German internal trade, and, in particular, to try to read into it the fiction, supported by the plaintiff, with regard to the origin of goods in connexion with export refunds. The objective of the Protocol certainly does not extend so far.

To settle the present question it is important to consider the significance and objective of the system of refunds within the framework of the agricultural market regulations. As we have repeatedly seen, these market regulations contain price mechanisms, which are calculated to give the agricultural producers certain guarantees of income. In particular, for their benefit, there are the measures encouraging exports involving the guarantee of an outlet, which provide for a grant from Community resources on the export to third countries. From this point of view, it is quite understandable that in principle the only products which should benefit from such measures are those which come from the Community, that is from countries which participate in the financing of the Common Agricultural Policy. If, besides this, under Article 7 of Regulation No 177/67 a refund is in certain circumstances possible also for imported goods, which of course does not contribute to the income of the Community producers, it must not be overlooked that in such a case it is merely a question of refunding the levies imposed, in order to take account of a certain basic idea of equity.

These considerations are decisive in settling the question referred to us. It cannot materially depend, as the plaintiff thinks, on the fact that products from the German Democratic Republic have a similar effect on the market as domestic products with regard to supply and demand, because trade between the Federal Republic of Germany and the German Democratic Republic is carried out on the basis of common prices in the agricultural sphere. Such considerations would not only leave out of account the objective to which the Protocol on German internal trade is restricted, but would also involve the inadmissible inference, from the assimilation of prices of products from the German Democratic Republic, which is certainly beneficial to producers in the German Democratic Republic, that it is necessary to further the export of such products on the world market.

Although the above considerations, which prompt a narrow interpretation of Article 6 of Regulation No 177/67 in conjunction with Regulation No 802/68, lead to answering the question referred by the Hamburg Finanzgericht in the negative, I would nevertheless like, for the sake of completeness, to consider certain additional matters put by the plaintiff.

The plaintiff stated in its pleading that goods imported from the German Democratic Republic into the Federal Republic of Germany were in free circulation in the Community, which is the condition for the granting of a refund under Article 6 of Regulation No 1041/67 of the Commission. The plaintiff states that with regard to free movement of goods, a distinction is made only between goods which originate in Member States and those which originate in third countries. Since with regard to goods imported from the German Democratic Republic the latter, namely the definition in Article 10 (1) of the EEC Treaty, is ruled out, it must be assumed that such products necessarily have the characteristics noted in Article 9 (2), (‘products originating in Member States’) and that they therefore must be regarded as having an origin in a Member country, as the French text of this provision makes clear.

This view seems at first attractive. I do not however consider it ultimately convincing. Whoever does so overlooks the fact that the Protocol on German Internal Trade, which has the same authority as the Treaty itself, provides a special system for the free movement of goods which are brought from the German Democratic Republic into the Federal Republic of Germany. Looking at the problem in this manner, I consider it highly dubious to decide questions relating to the origin of such goods exclusively by reference to the basic and general schemes contained in Articles 9 and 10 of the Treaty.

The plaintiff then seeks to support the result it champions by an interpretation of Articles 6 and 7 of Regulation No 177/67, read in conjunction. For this it states that a special reason has been given in the Regulation, that is in the last paragraph of the Recitals, only for Article 7. From this it follows that Article 6 serves no object of market regulation independent of Article 7. It is intended only to make clear that there should be no refund in respect of goods which have been imported from third countries. Proof that the reason for exclusion from refund specified in Article 7 does not apply can, seen in this light, be given by showing Community origin. If, however, goods do not come under Article 7 of Regulation No 177/67, then by converse reasoning it follows that they have their origin in the Community.

This interpretation too does not appear to me convincing. It completely disregards the system rooted in Articles 6 and 7 of Regulation No 177/67. As the Commission has rightly stressed, it is a question here not only of rules as to the formal burden of proof, but the laying down of the basic conditions for the grant of refunds. The main principle here, contrary to the plaintiff's view, is that a refund comes into question only in respect of goods which originate in the Community. There are, on the other hand, in principle no refunds for goods from third countries; they do however have the possibility of an export facility in the form of the repayment of levies already exacted. On this interpretation it is quite clear that proof that goods have their origin in the Community is not provided by showing that they are not imported from a third country.

Finally, I cannot agree with the subsidiary view of the plaintiff that Regulation No 177/67 reveals a lacuna with regard to products which are brought into the Federal Republic of Germany from the German Democratic Republic and therefore reference must be made to Article 7 of this Regulation by way of analogy. This view cannot be adopted because the draftsmen of Regulation No 177/67 were acquainted with the Protocol on German Internal Trade and the special status of goods brought from the German Democratic Republic into the Federal Republic of Germany. There can indeed be no question of a lacuna in the system, but rather the view must be taken that the Regulation laying down general rules for granting refunds contains a quite clear and complete system. Under this, refunds are granted only on the export of goods which originate in the Community, as well as on the export of products from third countries in so far as they have been subject to a levy.

This Regulation does not moreover — as the plaintiff maintained in the oral procedure — give rise to discrimination because refunds are granted on the re-exportation from other Member States of goods from the German Democratic Republic. Such different treatment is indeed justified because the other Member States impose levies on products from the German Democratic Republic. But to provide for the repayment of such levies is, beyond all doubt, not to be equated with the granting of an export subsidy from Community resources, or perhaps from national resources, which the plaintiff thinks should be done on the export of products brought into the Federal Republic of Germany from the German Democratic Republic, and so thinks solely on the ground that a system of assimilation of prices operate, on the dispatch of these goods into the Federal Republic of Germany.

I agree with the Federal Government and the Commission, and propose that the question put by the Hamburg Finanzgericht should be answered as follows:

Article 6 (1) and Article 7 of Regulation No 177/67 and Article 4 (1) and 2 (d) of Regulation No 802/68 in conjunction with the Protocol on German Internal Trade and connected problems are to be interpreted as meaning that products within the meaning of Article 1 (1) of Regulation No 121/67, which have been brought free of levy from the German Democratic Republic into the Federal Republic of Germany under the terms of the agreement on inter-zonal trade, are not eligible for refunds on export from the Federal Republic to a third country.

( 1 ) Translated from the German.