OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN

DELIVERED ON 4 JUNE 1981

My Lords,

By an Order dated 1 July 1980 made pursuant to Article 177 of the EEC Treaty the French Cour de Cassation, Commercial Chamber, referred to the Court of Justice a question concerning “the application of Community Regulations Nos 804/68, 823/68, 1053/68 and 1054/68 to the classification of French Emmenthal cheese exported to Italy and Belgium during the periods from 12 August 1974 to 24 October 1974, from 20 January 1975 to 28 April 1975 and from 27 March 1976 to 24 September 1976 under either tariff heading 04.04 A I or tariff heading 04.04 A II ”.

The appellants in the proceedings before the Cour de Cassation are the French Customs Authorities. The first respondent is Gondrand Frères SA (which I shall call “Gondrand”) a transport company which has its headquarters in Paris and which acts as customs agents in Bellegarde amongst other places. The second respondent is Garancini SA (which I shall call “Garancini”) a company based in Aix-les-Bains, which produces cheese.

Between 12 August 1974 and 24 September 1976 Gondrand, acting as agents for Garancini, made a total of 64 declarations to the customs authorities at Bellegarde relating to the export of French Emmenthal cheese to destinations in Belgium and Italy. In August 1974 the customs authorities in Bellegarde informed Garancini that exports of this description fell within subheading 04.04 A I or the Common Customs Tariff. It appears that Garancini communicated this information to Gondrand and the latter, accordingly, specified that subheading in its customs declarations.

During the period in question the Common Customs Tariff was set out successively in three sets of Council Regulations: Nos 1/74 of 17 December 1973, (OJ 1974, L 1); 2658/74 of 15 October 1974, (OJ 1974, L 295); and 3000/75 of 17 November 1975, (OJ 1975, L 304). In all these versions the description of tariff subheading 04.04 read, so far as is material, as follows:

“Cheese and curd

A. Emmenthal, Gruyère, Sbrinz, Bergkäse and Appenzell, not grated or powdered : I. Of a minimum fat content of 45% by weight, in the dry matter, matured for at least 3 months... II. Other.”

It is clear that products falling within subheading 04.04 AI were not subject to the imposition of monetary compensatory amounts when traded between Member States of the European Community. Commission Regulation 1014/71 of 17 May 1971 (OJ L 110, p. 10) (made in pursuance of Council Regulation 974/71 of 12 May 1971 (OJ L 106, p. 1) which instituted the system of monetary compensatory amounts in agricultural trade) fixed the rate of monetary compensatory amounts for products falling within tariff subheading 04.04 A II but made no mention of subheading 04.04 A I. Commission Regulation No 652/76 of 24 March 1976 (OJ L 79, p. 4) governing the application of the system of monetary compensatory amounts to France, also specified subheading 04.04 A II but not 04.04 AI. Although both of these Commission Regulations have been subject to numerous amendments, none of the latter has referred to subheading 04.04 A I as being within the scheme for the purposes of monetary compensatory amounts.

On the understanding that the cheese fell within subheading 04.04 A I the customs authorities did not initially demand monetary compensatory amounts at the time of export. On or about 12 April 1977, however, they served on Gondrand a formal demand dated 8 April 1977 for the payment of FF 307551.98 by way of monetary compensatory amounts said to be due in respect of the exports in question. On 18 and 28 April 1977 Gondrand gave notices of objection as to that demand, advancing as its main argument the contention that no monetary compensatory amounts were due, but it joined to each notice of objection a third party notice pleading, in the alternative, that if any such amounts were due the liability for paying them fell upon Garancini.

The matter came before the Tribunal d'Instance at Nantua. Gondrand argued that tariff subheading 04.04 A I applied to Emmenthal cheese only on the occasion of its importation from third countries. In support of this contention it relied upon the wording of the customs tariff and upon customs notices issued by the French Ministery of the Economy and Finance, in pursuance of Commission Regulations Nos 1053/68 and 1054/68 dated 23 July 1968 (OJ L 179, pp. 17 and 25), in particular, a customs notice published on 22 December 1968. Relying upon the same sources, and particularly on customs notices published on 13 February 1974 and 26 March 1976 the customs authorities maintained that when exported from France to other Member States of the European Communities Emmenthal cheese fell within subheading 04.04 A II of the Common Customs Tariff. On 7 February 1978 the Tribunal rejected the latter argument and gave judgment for Gondrand. It was not persuaded that the classification for customs purposes of a product depended upon the direction in which it was being traded; and it considered that some of the customs notices issued by the French authorities, particularly that of 13 February 1974, placed Emmenthal cheese within subheading 04.04 AI whenever it had specified physical properties.

The customs authorities appealed to the Cour d'Appel at Lyon. In its judgment dated 28 June 1978 the First Civil Chamber of that Court accepted that Regulations Nos 1053/68 and 1054/68 applied only to products originating in third countries and not to those from the Communities. The Cour d'Appel observed that the French customs notices published on 13 February 1974 and 26 March 1976 supported Gondrand's contentions; for the former notice indicated that Emmenthal cheesse having specified physical poperties fell within subheading 04.04 AI and both notices indicated that no monetary compensatory amounts were chargeable on cheese falling within that subheading.

The customs authorities appealed to the Cour de Cassation, Commercial Division. In a.written case the authorities advanced two arguments, the first based on Community law, and the second on French law. The substance of its first argument -is that by virtue of Commission Regulations Nos 1053/68 and 1054/68, subheading 04.04 AI of the Common Customs Tariff applies only in the case of importation. Gondrand and Garancini, in their written conclusions, dispute that argument.

In these circumstances the Cour de Cassation decided to make a reference to this Court, designed to determine whether, at the material dates, Emmenthal cheese fell within subheading 04.04 AI or subheading 04.04 All on the occasion of its export from France to Italy and Belgium.

In the proceedings before this Court, only Gondrand and the Commission entered appearances. It appears from the file, however, that the position adopted by Gondrand, on the issues before this Court, is shared by Garancini, in the litigation before the national courts, whereas the Commission's conclusions in this Court substantially coincide -with those of the customs authorities below.

It was contended on behalf of Gondrand that the four Regulations mentioned in the Cour de Cassation's questions have no direct bearing upon the exportation of cheese from France to other Member States, but only upon the importation of cheese from third countries. According to this argument, Council Regulations Nos 804/68 and 823/68 (OJ 1968, L 148/13 and L 151/3) serve an important function in establishing the common organization of the market in milk and milk products and in determining the levies to be charged on the import of milk and its products from third countries, but this has nothing to do with the Community's internal trade. In similar vein, it was argued on Gondrand's behalf that exports of cheese from France do not fall within Commission Regulation No 1053/68, which deals only with importation from third countries, nor within Commission Regulation No 1054/68, which determines the list of agencies authorized to certify the admissibility to certain tariff subheadings of specified milk products from third countries.

In addition to contending that Emmenthal cheese exported from France falls under subheading All “Other” by reference to the four Regulations of 1968, to which I have referred, the Commission maintains that such a result is consistent with the scheme for monetary compensatory amounts. There is, in the view of the Commission, no need for the application of monetary compensatory amounts on the importation from third countries of cheeses falling within tariff heading 04.04 AI because in such an event fluctuations in the exchange rates are already corrected by the use of the Communities' “green” or agricultural rates of exchange. In effect the price of the import at the French frontier, and the rate of import levy, are expressed in European currency units and are converted into the vendor's currency by the use of “green” rates. This being the case, the use of monetary compensatory amounts, on such transactions, would be otiose. It is otherwise in the case of trade between Member States and in the absence of monetary compensatory amounts such trade would be liable to be distorted by fluctuations in the relative rates of exchange of the Member States' currencies.

Although I appreciate this latter argument, it seems to me to leave open the question whether, as a matter of construction, the cheese in question falls within heading “04.04 All Other” in respect of which monetary compensatory amounts were at the relevant time to be charged in France.

The annexes specifying the various monetary compensatory amounts take the headings from the Common Customs Tariff. There is no express indication in any of the Regulations dealing with monetary compensatory amounts as to what is not “Other” cheese, and in respect of which no monetary compensatory amount is chargeable.

As already indicated, the Common Customs Tariff in heading 04.04 distinguishes between Emmenthal cheese of certain physical characteristics (A I) from “Other” (All). A note states “entry under this heading is subject to conditions to be determined by the competent authorities”., which I understand, for customs purposes usually to be the national customs authorities. It can be argued that this means that Emmenthal cheese of the characteristics specified is not within the heading at all unless it satisfies the conditions and that if no conditions are laid down it is excluded from the heading. I do not accept this. In my opinion, the heading and the note are to be read as meaning that Emmenthal cheese of the specified characteristics is within the heading so long as conditions laid down are satisfied. If no conditions are laid down, such cheese is within tariff subheading A I.

Accordingly, to my mind, thè essential questions are therefore (ä) whether conditions have been laid down by the competent authorities, and (b) whether they have been satisfied. If they have been laid down and are satisfied, the cheese is in A I. If no conditions have been laid down, then the cheese is still in A I.

Monetary compensatory amounts are by Article 1 paragraph 2 of Regulation No 974/71 authorized in respect of products covered by intervention arrangements under the common organization of agricultural markets, and of products whose price depends on the price of such first-mentioned products and which are governed by the common organization of the market, or are the subject of a specific arrangement under Article 235 of the Treaty.

Cheese is a product whose price depends on the products covered by intervention arrangements (namely milk and milk products) and it is governed by the common organization of the market. Article 1 of Regulation No 804/68 specifically includes Common, Customs Tariff heading No “04.04 Cheese and curd” as being products covered by the common organization of the market in milk and milk products. That Regulation recites the need to adopt a system comprising a single target price for milk, and for intervention agencies to take intervention measures on the market. Detailed provisions are contained in the Regulation to that end. It recites as a requirement of a single Community market in milk, in addition to a single price system, “the introduction of a single trading system at the external frontiers of the Community”. It continues “therefore provision should be made for the charging of a levy on imports from third countries and the payment of a refund on exports to such countries both being designed to cover the difference between the prices ruling outside and inside the Community”.

Title III of the Regulation is headed “Trade with third countries”. It provides in Article 13 that imports into the Community of any of the products in Article 1 (of which “cheese” is one) shall be made conditional on the submission of an import licence. By Article 14 (2) a levy is to be charged on imports of certain of the products listed in Article 1, including “cheese”, and by paragraph 6 of the Article, the Council, on a proposal from the Commission, is to determine groups of products and their respective pilot products.

The products falling within Article 1 of Regulation No 804/68 were put in groups by Regulation No 823/68. Annex II set out the tariff descriptions covered by the Regulation, adopting the Common Customs Tariff heading numbers and description. It included 04.04 A I and II and contained a footnote of similar effect to that in the Common Customs Tariff, namely, “inclusion under this tariff subheading is subject to conditions to be laid down by the competent authorities”.

Regulation No 1053/68, having regard to Regulation No 804/68 “on the common organization of the market in milk and milk products, and in particular Article 14 (7) thereof”, recited that it was necessary to define the conditions under which “products from third countries may be admitted to”inter alia, tariff subheading 04.04 A I. The admission of such products was to be the subject of a certificate satisfying the requirements of the Regulation. To be valid a certificate had to be duly authenticated by an agency appearing on a list to be determined.

Regulation No 1054/68 determined the agencies from five third countries, of which one, Denmark, was removed from the list on accession.

It is plain that the levies covered by these Regulation were to be made only on goods imported from third countries so that only Emmenthal cheese coming from one of the countries, and covered by a certificate authenticated by one of the agencies, specified fell within tariff subheading AI. Emmenthal cheese being transferred between Member States is in no way covered by these provisions. It does not follow that Emmenthal cheese with the required characteristics is not within subheading AI for other purposes, indeed for the purposes of customs entry under the Common Customs Tariff itself.

The mere fact that conditions are laid down which must be satisfied before goods fall under a tariff heading for the purpose of import levies does not mean that the same conditions automatically apply in relation to monetary compensatory amounts. There are obviously fundamental differences between the two systems.

On the other hand if the 1968 Regulations had provided generally that, for the purposes of the common organization in milk and milk products, Emmenthal cheese imported from third countries only is to be included in tariff subheading 04.04 A I, there would be little difficulty an applying the same provisions to the tariff headings relevant for monetary compensatory amounts, even without an express reference in Regulation No 974/71 and those Regulations which determine the monetary compensatory amounts. Taking the provisions of the subheading and the note, it could fairly be said that conditions had been determined before goods could be included in the subheading (namely that they should come from third countries). This would have been in keeping with what was said by the Court in Case 5/78, Milchfiitter ν Hauptzollamt Gronau [1978] ECR 1597 at p. 1608, paragraph 9, namely “the particular object of the reference in Article 1 of Regulation No 974/71 is to render applicable to the system of monetary compensatory amounts all the determining factors relating to the products in question, including those which were laid down in relation to the external trade of the Community, since those provisions form an integral part of the ‘common organizations of the market’ referred to by the aforesaid Regulation”.

The difficulty I find is that the 1968 Regulations do not go so far. For the purpose of the levy system they merely provide the “conditions under which products from third countries may be admitted to tariff subheading... 04.04 A I” They require a certificate before goods from third countries can be so admitted. They do not go the further step of saying expressly that only Emmenthal cheese from tnird countries is in the tariff heading. It does not seem to me that such a provision can be implied into Regulations imposing conditions limited to trade with third countries. Accordingly I cannot find any condition which has been determined by the competent authorities which limits cheese falling under subheading 04.04 A I to cheese imported from third countries.

I am conscious of the disadvantages which arise if this cheese, exported from France to another Member State, is not in subheading A II. It clearly means that, unless amended, the objectives of the monetary compensatory amount system are not achieved in respect of this product. On the other hand traders are entitled to have the position spelled out with reasonable precision. The problem seems to me to have arisen because a nomenclature prepared for one purpose has been used for another and assumed to be applicable to a third. Whilst conscious of the desire to achieve those objectives, and giving the Regulations as wide a construction as seems to me reasonable in the light of the Commission's arguments, I do not find it possible to say that the objectives have been achieved. In my view, the company here was entitled to contend that the cheese in question fell within heading 04.04 A I.

Accordingly in my opinion, the question should be answered on the basis that:

for the purpose of the charge of monetary compensatory amounts on Emmenthal cheese exported from France to Italy and Belgium during the periods from 12 August 1974 to 24 October 1974, from 20 January 1975 to 28 April 1975 and from 27 March 1976 to 24 September 1976, such cheese falls within tariff heading 04.04 A I.