Judgment of the Court (First Chamber) of 18 January 1990. - SA Nicolas Corman & Fils v Belgian State and Grand Duchy of Luxembourg. - Reference for a preliminary ruling: Cour d'appel de Bruxelles - Belgium. - Agriculture - Export refunds and monetary compensatory amounts - Goods imported under an incorrect tariff heading. - Case C-295/88.



European Court reports 1990 Page I-00129



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

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1.Agriculture - Products not covered by Annex II to the Treaty - Determination on the basis of the Common Customs Tariff - Treatment as a basic product included in Annex II for the purpose of applying export refunds and monetary compensatory amounts to a product extracted by processing - Not permissible

( EEC Treaty, Annex II )

2.Agriculture - Common organization of the markets - Export refunds - Exclusion of goods not covered by Annex II to the Treaty imported, put into free circulation and re-exported with or without further processing - Limits - Basic products resulting from the processing of previously imported products not covered by Annex II

( Council Regulation No 2682/72, Art . 9 )

3.Agriculture - Common organization of the markets - Milk and milk products - Export refunds - Exclusion of products originating outside the Community - Exceptions - Products on which the import levy has been collected and which are then re-exported without processing

( Council Regulation No 876/68, Art . 7 )

4.Agriculture - Monetary compensatory amounts - Grant - Exportation from the Community of a product originating outside the Community derived from goods not covered by Annex II to the Treaty - Conditions - Calculation

( Regulation No 974/71 of the Council; Commission Regulation No 1380/75 of the Commission, Art . 12(1 ) )

Summary

1.The classification of goods with regard to Annex II to the Treaty depends solely on their tariff classification according to the Brussels Nomenclature . It follows that neither the incorrect classification of goods upon their importation into the Community, a bona fide mistake by the purchaser as to the origin of the goods, the nature of the product extracted from those goods by processing, nor the fact that the product cannot be considered to be of Community origin because of the insubstantial character of the processing carried out can cause goods not falling under Annex II to the Treaty to be regarded as a basic product covered by that annex for the purposes of the subsequent application of the rules on the grant of export refunds and compensatory amounts in trade with non-member countries upon the exportation from the Community of substances extracted from those goods by processing .

2.Article 9 of Regulation No 2682/72 must be interpreted as precluding export refunds only in respect of goods not covered by Annex II, exported unprocessed or after processing, which have previously been imported as such from non-member countries and put into free circulation in the Community . Article 9 does not, however, apply to the exportation of a basic product resulting from the processing of goods not covered by Annex II which have previously been imported .

3.In accordance with the fundamental principle in that regard, to the effect that only products originating in the Community are entitled to a refund, Regulation No 876/68 laying down general rules for granting export refunds on milk and milk products and criteria for fixing the amount of such refunds precludes entitlement to refunds in respect of exports from the Community of a basic product extracted by processing from goods not covered by Annex II which cannot be considered to be of Community origin . Article 7 makes only one exception to that exclusion, in relation to products of non-Community origin on which the import levy has been collected and which are then re-exported without processing .

4.The exportation from the Community of a basic product extracted by processing from goods not covered by Annex II which cannot be considered to be of Community origin may give rise to the grant of monetary compensatory amounts under the conditions laid down in Regulation No 974/71 and the last subparagraph of Article 12(1 ) of Regulation No 1380/75 . The monetary compensatory amounts which may be due are not to be limited on the basis of the duties actually levied on importation into the Community of the goods in question or on the basis of the duties which should have been levied on that occasion in accordance with the correct tariff position .

Parties

In Case C-295/88

REFERENCE to the Court under Article 177 of the EEC Treaty by the Seventh Chamber of the cour d' appel ( Court of Appeal ), Brussels, for a preliminary ruling in the proceedings pending before that court between

Nicolas Corman et fils SA

and

Belgian State and Grand Duchy of Luxembourg

on the interpretation of the rules relating to the grant of export refunds and of monetary compensatory amounts in trade with non-member countries, in particular Article 9 of Regulation ( EEC ) No 2682/72 of the Council of 12 December 1972 laying down general rules for granting export refunds on certain agricultural products exported in the form of goods not covered by Annex II to the Treaty, and the criteria for fixing the amount of such refunds ( Official Journal, English Special Edition 1972, 9 to 28 December, p . 42 ), Article 12 of Regulation ( EEC ) No 1380/75 of the Commission of 29 May 1975 laying down detailed rules for the application of monetary compensatory amounts ( Official Journal 1975, L 139, p . 37 ) and Regulation ( EEC ) No 1059/69 of the Council of 28 May 1969 laying down the trade arrangements applicable to certain goods resulting from the processing of agricultural products ( Official Journal, English Special Edition 1969 ( I ), p . 240 ), as amended by Council Regulation ( EEC ) No 2670/76 of 25 October 1976 ( Official Journal 1976, L 302, p . 1 ).

THE COURT ( First Chamber )

composed of : Sir Gordon Slynn, President of Chamber, R . Joliet and J . C . Rodríguez Iglesias, Judges,

Advocate General : C . O . Lenz

Registrar : B . Pastor, Administrator

after considering the observations submitted on behalf of

the Belgian Government and the Luxembourg Government by Pierre Legros and Serge Dufrene, of the Brussels Bar,

the Commission of the European Communities by Patrick Hetsch, a member of its Legal Department, acting as Agent,

Nicolas Corman et fils SA by Pierre Van Ommeslaghe, admitted to practise before the Belgian Court of Cassation, and Bernard van de Walle de Ghelcke, of the Brussels Bar,

having regard to the Report for the Hearing and further to the hearing on 27 September 1989,

after hearing the Opinion of the Advocate General delivered at the sitting on 9 November 1989,

gives the following

Judgment

Grounds

1 By an interlocutory judgment of 29 September 1988, which was received at the Court on 11 October 1988, the cour d' appel ( Court of Appeal ), Brussels, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty four questions on the interpretation of several Community provisions relating to the grant of export refunds and monetary compensatory amounts .

2 Those questions were raised in proceedings between Nicolas Corman et fils SA ( hereinafter referred to as "Corman ") and the Belgian State and the Grand Duchy of Luxembourg concerning Corman' s entitlement to the payment of refunds and monetary compensatory amounts for the exportation from the Community of a basic product, butteroil, processed from a product called "nutrix" which is not covered by Annex II to the EEC Treaty .

3 The nutrix, which was originally thought to be of French origin, proved upon enquiry by the Belgian and French customs authorities to have originated in Austria, from where it had been imported into France under an incorrect tariff heading, resulting in the collection of a lower levy than would have been due had its tariff classification been correct .

4 In the proceedings before the national court, that court held that it had not been established that the processing by Corman of the nutrix into butteroil constituted a fraudulent contravention of the Community rules or that Corman was aware that the product had originated outside the Community . It also held that the butteroil could not be considered to be of Community origin under Article 5 of Regulation ( EEC ) No 802/68 of the Council of 27 June 1968 on the common definition of the concept of the origin of goods ( Official Journal, English Special Edition 1968 ( I ), p . 165 ). Finally, it upheld Corman' s right to the monetary compensatory amounts on trade within the Community and the accession compensatory amounts which it claimed .

5 In order to decide whether Corman is entitled to payment of refunds and monetary compensatory amounts for the exportation of butteroil from the Community, the national court referred the following questions to this Court for a preliminary ruling :

"( 1)In a case where :

( i)goods not listed in Annex II, provided for in Article 38(1 ) of the Treaty, composed of 84% butterfat, 2% fat-free cocoa and 12% wheat flour, were imported into the EEC in Member State A under an incorrect tariff heading ( 19.02 B II ( b ) ), whereas the correct tariff heading was 18.06, and upon that importation duties were charged on those goods pursuant to Regulation No 1059/69,

( ii)those goods were then imported into another Member State ( Member State B ) under the correct tariff heading and were purchased in good faith by an undertaking in Member State B as goods originating in Member State A and in free circulation within the EEC,

( iii)those goods were processed by that undertaking, which in particular extracted butteroil, a basic product covered by Annex II of the Treaty, and that product was subsequently re-exported in part outside the EEC,

( iv)it has been held that the treatment did not constitute a substantial process or operation and did not result in the manufacture of a new product or represent an important stage of manufacture within the meaning of Article 5 of Regulation No 802/68, so that the product could not be considered to originate in Member State B,

do those circumstances confer on the goods not covered by Annex II which were originally imported the character of a basic product, particularly for the purposes of the subsequent application of the rules relating to the grant of export refunds and compensatory amounts, especially compensatory amounts in trade with non-member countries, on the exportation of the basic product extracted from those goods by processing?

( 2)If the reply to the first question is that the goods concerned must be regarded as goods not covered by Annex II and those goods have been put into free circulation in the EEC and then exported after processing, which rules apply to the basic product resulting from that processing; in other words, which of the following two interpretations is correct for the purposes of applying Regulation No 2682/72 of 12 December 1972 :

( i)Article 9 of that regulation precludes the grant of the refund referred to in Article 1(1 ) for both the goods and the basic products resulting from the processing described above, or

( ii)Article 9 precludes the grant of the refund only in respect of goods 'not covered by Annex II' resulting from such processing?

( 3)If the reply to the second question is that Article 9 of Regulation No 2682/72 must be regarded as not precluding the grant of an export refund for the basic product resulting from the processing of goods not covered by Annex II which have previously been imported, on the basis of which principles or rules of Community law should the following be established :

( i)the refunds on exports from the Community which may be due to the exporter of that basic product,

( ii)the compensatory amounts payable, if the products are exported to non-member countries?

( 4 ) If the compensatory payments or refunds which would be due under the rules formulated in reply to the third question are subject to a limitation, in particular in the circumstances laid down in Article 12 of Regulation No 1380/75, then, as far as products in free circulation in the Community within the meaning of Article 10 of the Treaty are concerned, must the levies and duties to be taken into account for the purpose of limiting the amount of the refunds and compensatory amounts in trade with non-member countries be considered to be the fixed and variable duties, as provided for in Regulation No 1059/69, as they should have been levied on entry into the Community in accordance with the correct tariff heading, or must the limitation be calculated in relation to the duties actually levied, albeit on an incorrect basis, upon importation into the Community?"

6 Reference is made to the Report for the Hearing for a fuller account of the legal background, the facts of the main proceedings, the course of the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .

First question

7 The national court rightly found that nutrix, which consists of 84% fat, 2% fat-free cocoa and 12% wheat flour, did not appear in the list of products subject to the provisions of Articles 39 to 46 of the EEC Treaty which is contained in Annex II to the Treaty, as is confirmed by the annex to Regulation ( EEC ) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products ( Official Journal, English Special Edition 1968 ( I ), p . 176 ), which contains a list of goods not covered by Annex II to the Treaty, including "chocolate and other food preparations containing cocoa ".

8 The national court nevertheless asked whether by reason of certain circumstances ( namely the fact that on the original importation of the nutrix into the Community it was classified under an incorrect tariff heading, it was acquired without fraud by the processing undertaking as a product of Community origin, the processing of the nutrix gave rise to a basic product covered by Annex II to the Treaty, that product cannot be deemed to be a new product or represent an important stage of manufacture within the meaning of Article 5 of Regulation No 802/68 and cannot therefore be considered to be of Community origin ) the nutrix could be deemed to be a basic product for the purposes of the subsequent application of the rules on the grant of export refunds and compensatory amounts in trade with non-member countries on the exportation from the Community of substances extracted from those goods by processing .

9 The Belgian and Luxembourg Governments observed in that respect that the goods originally introduced into the Community have no value as such . Their only value is to conceal the basic products which they contain and consequently they should be deemed to be a basic product .

10 The circumstances recounted above do not affect the classification of goods with regard to Annex II to the Treaty . Regardless of the purposes which that classification serves, it depends solely on the tariff heading of the goods in question according to the Brussels Nomenclature, to which Annex II to the Treaty refers .

11 The answer to the first question must therefore be that neither the incorrect classification of goods upon their importation into the Community, a bona fide mistake by the purchaser as to the origin of the goods, the nature of the product extracted from those goods by processing, nor the fact that the product cannot be considered to be of Community origin because of the insubstantial character of the processing carried out can cause goods not falling under Annex II to the Treaty to be regarded as a basic product covered by that annex for the purposes of the subsequent application of the rules on the grant of export refunds and compensatory amounts in trade with non-member countries upon the exportation from the Community of substances extracted from those goods by processing .

Second question

12 The second question concerns the interpretation of Article 9 of Regulation No 2682/72 of the Council of 12 December 1972 laying down general rules for granting export refunds on certain agricultural products exported in the form of goods not covered by Annex II to the Treaty, and the criteria for fixing the amount of such refunds ( Official Journal, English Special Edition 1972 ( 9 to 28 December ), p . 42 ).

13 As is clear from Article 1(1 ), Regulation No 2682/72 is concerned only with the grant of refunds on the exportation of basic products listed in Annex A, of products derived from the processing thereof or "of products assimilated to one of those two categories in accordance with paragraph 2, when those various products are exported in the form of goods not covered by Annex II to the Treaty ". The exportation of basic products as such thus does not fall within the scope of the regulation .

14 Article 9 provides that "the refund referred to in Article 1(1 ) shall not be granted on the exportation, whether processed or unprocessed, of goods which have previously been in free circulation within the meaning of Article 10(1 ) of the Treaty ".

15 In view of the regulation' s scope it is clear that that article precludes the grant of the refund only in respect of the exportation of goods not covered by Annex II which have previously been imported as such from non-member countries and put into free circulation in the Community . It thus does not apply to the exportation of a basic product such as butteroil even if that product has been extracted by processing from goods not covered by Annex II which have been imported from a non-member country .

16 The answer to the second question must therefore be that Article 9 of Regulation No 2682/72 of the Council of 12 December 1972 must be interpreted as precluding export refunds only in respect of goods not covered by Annex II, exported unprocessed or after processing, which have previously been imported as such from non-member countries and put into free circulation in the Community . Article 9 does not, however, apply to the exportation of a basic product resulting from the processing of goods not covered by Annex II which have previously been imported .

Third question

17 The third question concerns the rules of Community law on the basis of which refunds on the exportation of a basic product such as butteroil from the Community and the monetary compensatory amounts payable to the exporter must be established .

18 On the first point it must be borne in mind, as the Court held in its judgment of 1 October 1974 in Case 14/74 Norddeutsches Vieh - and Fleischkontor BmbH v Hauptzollamt Hamburg Jonas (( 1974 )) ECR 899, that the fundamental principle in relation to export refunds is that only products originating in the Community are entitled to a refund, and what is granted in respect of products imported from non-member countries and re-exported to non-member countries is only a "repayment" of a levy previously exacted .

19 The organization of the agricultural markets has established price mechanisms intended to give agricultural producers certain guarantees of income, providing, in the case of export to non-member countries, for refunds granted from Community resources, but the benefit of those measures is limited, as a rule, to Community products .

20 In the specific sector of milk and milk products, which includes butteroil, Community origin is required by Article 6(1 ) of Regulation ( EEC ) No 876/68 of the Council of 28 June 1968 laying down general rules for granting export refunds on milk and milk products and criteria for fixing the amount of such refunds ( Official Journal, English Special Edition 1968 ( I ), p . 234 ).

21 According to Article 6(1 ), "the refund shall be paid upon proof :

( i)that the products have been exported from the Community, and

( ii)that the products are of Community origin, except where the provisions of Article 7 apply ".

22 Since the national court found that the butteroil exported in the present case could not be considered to be of Community origin, refunds could be paid on exportation from the Community only on the basis of Article 7 of Regulation No 876/68, which makes the right to refund subject to proof that the product to be exported and the product previously imported are one and the same and that the levy was collected on importation .

23 It follows from the answer given to the first question that that condition of identity cannot be regarded as satisfied in a situation such as the present, where the product exported is a basic product extracted by processing from goods not covered by Annex II .

24 It should be added that, contrary to what Corman claims, no refund may be granted on the exportation of a product of non-Community origin in application by analogy of the regulations providing for payment of refunds in other cases . Entitlement to refunds can arise only in the circumstances provided for in the Community rules . Moreover, as has already been pointed out, the fundamental principle in that regard is that only products originating in the Community are entitled to a refund .

25 As regards the second point, the question put by the national court must be considered in the light of the provisions of the regulation which provides the basis for and the general framework of the system of monetary compensatory amounts, namely Regulation ( EEC ) No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States ( Official Journal, English Special Edition 1971 ( I ), p . 257 ).

26 Article 1(1 ) of Regulation No 974/71 authorizes Member States to "... ( b ) grant on exports to Member States and third countries compensatory amounts for the products referred to below under the conditions determined hereinafter ".

27 Article 1(2 ) provides that paragraph 1 is to apply both "to products covered by intervention arrangements under the common organization of agricultural markets" and "to products whose price depends on the price of the products referred to ... and which are governed by the common organization of markets ".

28 Those provisions thus make general reference to the rules relating to the common organization of agricultural markets as regards the determination of the "products" covered by the system of monetary compensatory amounts ( judgment of 4 July 1978 in Case 5/78 Milchfutter v Hauptzollamt Gronau (( 1978 )) ECR 1597 ). The exportation of a milk product such as butteroil can therefore give rise to the grant of monetary compensatory amounts under the conditions laid down by Regulation No 974/71 .

29 In the case of a product exported to non-member countries Article 6 of Regulation No 1380/75 of the Commission of 29 May 1975 laying down detailed rules for the application of monetary compensatory amounts ( Official Journal 1975, L 139, p . 37 ) provides that the provisions concerning the granting of export refunds are to apply to monetary compensatory amounts .

30 However, as was held in the judgment of 4 July 1978 in Milchfutter ( paragraph 11 ), the purpose of that reference was merely to link the payment of monetary compensatory amounts to the other operations carried out in trade with non-member countries at the frontier pursuant to the customs tariff and the agricultural rules .

31 That reference is thus concerned with the application of the rules of an administrative and financial nature which govern such transactions and does not make the grant of monetary compensatory amounts subject to the substantive conditions, in particular that of Community origin, on which the payment of refunds depends .

32 Unlike export refunds, monetary compensatory amounts can therefore be paid in respect of both products of Community origin and products originating outside the Community which have been put into free circulation . Since the object of monetary compensatory amounts is to avoid currency obstacles to trade, the decisive condition for their grant is the existence of a fluctuation in the exchange rate of the currency of the exporting Member State wider than the margin permitted by international rules, as is clear from Article 1(1 ) of Regulation No 974/71 .

33 Finally, the last subparagraph of Article 12(1 ) of Regulation No 1380/75 provides that "if a product is exported from one Member State to another Member State and subsequently re-exported to a third country or to another Member State, the monetary compensatory amount shall not be applied on exit from the re-exporting Member State unless it was applied on entry into that Member State, or if the option provided for in Article 2a of Regulation ( EEC ) No 974/71 was exercised on behalf of that State ".

34 In the present case the national court found that the butteroil exported from the Community by Corman was derived from nutrix which had previously been imported from another Member State and that a monetary compensatory amount had been applied on that importation . In such circumstances the condition laid down in the last subparagraph of Article 12(1 ) of Regulation No 1380/75 appears to be satisfied .

35 The answer to the third question must therefore be that Regulation No 876/68 of the Council of 28 June 1968 laying down general rules for granting export refunds on milk and milk products and criteria for fixing the amount of such refunds precludes entitlement to refunds in respect of exports from the Community of a basic product extracted by processing from goods not covered by Annex II which cannot be considered to be of Community origin . The exportation from the Community of that product may, however, give rise to the grant of monetary compensatory amounts under the conditions laid down in Regulation No 974/71 of the Council and the last subparagraph of Article 12(1 ) of Regulation No 1380/75 of the Commission .

Fourth question

36 The fourth question concerns the limits applicable to any export refunds and monetary compensatory amounts which may be due on the exportation of a basic product such as butteroil .

37 In view of the answer given to the third question the first part of the fourth question, concerning export refunds, is otiose .

38 As regards the second part, concerning monetary compensatory amounts, it need merely be observed that the applicable Community legislation contains no restriction of the kind provided for example in relation to the grant of export refunds in the milk and milk products sector in Article 7(2 ) of Regulation No 876/68, according to which where the product to be exported and the product previously imported are one and the same the refund is limited to the amount of the levy collected on importation .

39In a situation such as that in the present case, where a product is re-exported to a non-member country after having been exported from one Member State to another, Article 12 of Regulation No 1380/75 simply makes the payment of a compensatory amount subject to the condition that a compensatory amount was applied on entry into the Member State from which the product is re-exported or that the option provided for in Article 2a of Regulation No 974/71 was exercised on behalf of that State . Where that condition is satisfied, however, the abovementioned provision contains no limitation on the amount due by way of monetary compensatory amounts .

40 The answer to the fourth question must therefore be that the monetary compensatory amounts which may be due upon the exportation of a basic product such as butteroil are not to be limited on the basis of the duties actually levied on importation into the Community or on the basis of the duties which should have been levied in accordance with the correct tariff position .

Decision on costs

Costs

41 The costs incurred by the Commission of the European Communities, which submitted observations to the Court, are not recoverable . As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court .

Operative part

On those grounds,

THE COURT ( First Chamber ),

in reply to the questions submitted to it by the cour d' appel, Brussels, by interlocutory judgment of 29 September 1988, hereby rules :

( 1)Neither the incorrect classification of goods upon their importation into the Community, a bona fide mistake by the purchaser as to the origin of the goods, the nature of the product extracted from those goods by processing, nor the fact that the product cannot be considered to be of Community origin because of the insubstantial character of the processing carried out can cause goods not falling under Annex II of the Treaty to be regarded as a basic product covered by that annex for the purposes of the subsequent application of the rules on the grant of export refunds and compensatory amounts in trade with non-member countries upon the exportation from the Community of substances extracted from those goods by processing .

( 2)Article 9 of Regulation ( EEC ) No 2682/72 of the Council of 12 December 1972 must be interpreted as precluding export refunds only in respect of goods not covered by Annex II, exported unprocessed or after processing, which have previously been imported as such from non-member countries and put into free circulation in the Community . Article 9 does not, however, apply to the exportation of a basic product resulting from the processing of goods not covered by Annex II which have previously been imported .

( 3)Regulation ( EEC ) No 876/68 of the Council of 28 June 1968 laying down general rules for granting export refunds on milk and milk products and criteria for fixing the amount of such refunds precludes entitlement to refunds in respect of exports from the Community of a basic product extracted by processing from goods not covered by Annex II which cannot be considered to be of Community origin . The exportation from the Community of that product may, however, give rise to the grant of monetary compensatory amounts under the conditions laid down in Regulation ( EEC ) No 974/71 of the Council and the last subparagraph of Article 12(1 ) of Regulation ( EEC ) No 1380/75 of the Commission .

( 4)The monetary compensatory amounts which may be due upon the exportation of a basic product such as butteroil are not to be limited on the basis of the duties actually levied on importation into the Community or on the basis of the duties which should have been levied in accordance with the correct tariff position .