OPINION OF MRS ADVOCATE GENERAL ROZÈS

DELIVERED ON 10 MARCH 1983 ( 1 )

Mr President,

Members of the Court,

The Court is requested by the Finanzgericht [Finance Court] Hamburg to give a preliminary ruling on the validity of certain provisions of Commission Regulations Nos 851/79 of 30 April 1979 and 1309/79 of 29 June 1979, fixing the export refunds on products processed from cereals and rice.

I — The facts are as follows:

Nordgetreide, a company in Lübeck which imports and processes cereals, exported to Poland between 1 August 1979 (the commencement of the marketing year 1979-1980) and 31 August 19791400 tonnes and between 5 and 26 September 19791000 tonnes, of flaked barley classified under Common Customs Tariff subheading 11.02 E I (b) 1 (aa) (flaked barley of an ash content, referred to dry matter, not exceeding 1% by weight and of a crude fibre content, referred to dry matter, not exceeding 0.9% by weight).

Like the barley from which it is derived, that product of first-stage processing is subject to the common organization of the market in cereals. ( 2 ) Nordgetreide had therefore submitted two applications for export licences to the competent German agency, on 31 May and 31 July 1979. The applications were subject to advance fixing of the refunds (and of the monetary compensatory amounts), the grant of which, in the case of an export operation carried out during the currency of the licence, is provided for in the fourth subparagraph of Article 16 (2) of Regulation (EEC) No 2727/75 of the Council.

Refunds in respect of both operations were paid to Nordgetreide at the rate of DM 396.26 (163.55 European Currency Units (ECU)) and DM 293.12 (128.01 ECU) per tonne.

The refund applicable on the dates when the application for a licence was submitted (31 May and 31 July 1979) was adjusted in accordance with the threshold price of barley (the basic product) ruling during the months in which the processed products were exported, namely August and September 1979.

The detailed rules governing the adjustment are laid down in the second sentence of the second paragraph of Article 7 of Regulation (EEC) No 2744/75 of the Council of 29 October 1975 on the impon and export system for products processed from cereals and from rice. It provides that “The adjustment shall be effected by increasing or reducing the refund by the difference between the threshold prices valid for one metric ton of the basic product during, respectively, the month in which the licence was applied for and the month of exportation, multiplied by the coefficients which appear against the processed product in question in Column 4 of Annex 1.”

The coefficient for flaked barley is 2.00.

The refunds applicable on the dates when the licence applications were submitted (31 May and 31 July 1979) had been fixed by Commisison Regulation (EEC) No 851/79 of 30 April 1979 at 163.55 ECU per tonne and by Commission Regulation (EEC) No 1309/79 of 29 June 1979 at 128.01 ECU per tonne for flaked barley.

In calculating the refunds it is necessary to establish the incidence which the levy fixed for the basic product, namely barley, has on the prime cost of the flaked product. That incidence determines the variable component of the levy charged on the processed product. ( 3 )

In the present case, Nordgetreide observed that the incidence was quantified as 1.5 instead of the figure of 2.00 adopted for calculating the variable component of the levy ( 4 ) employed for the purpose of adjusting the amount of the refunds. ( 5 )

Clearly, the consequence is a difference in the amount of the refund which, in Nordgetreide's submission, ought to have been 146.48 ECU or 195.30 ECU (instead of 105.31 ECU) in respect of the exports effected during September 1979.

Nordgetreide would accept the lower of those amounts (146.48 ECU), but takes the view that at all events the coefficient applicable to the basic product for calculation of the refunds to be granted on the processed product when advance fixing is requested must be equal to the coefficient employed for adjusting the threshold price of the same basic product in accordance with the monthly increases of the levy occurring between the date of advance fixing and the day of exportation. The plaintiff therefore protested against the reduction from 2.00 to 1.5 of the coefficient used for calculating the amount of the refund prior to adjustment, in so far as the effect of that reduction is that the volume of the basic product yielding the flakes exported from the Community is considered to be lower than the volume of the basic product employed for the purpose of adjusting the amount of the refund.

The Customs Office took refuge behind the letter of the Community legislation which it had done no more than enforce.

In those circumstances, the Finanzgericht Hamburg asks the Court of Justice whether the refunds fixed by Commission Regulations (EEC) Nos 851/79 and 1309/79 in respect of flaked barley are valid in the light of Regulation No 2744/75 of the Council and, if that is not so, what the legal consequences are of the invalidity.

II —

1. The combined provisions of Article 2 (1) and Column 4 of Annex I to Regulation (EEC) No 2744/75 of the Council state that the variable component of the import levy for flaked barley (the processed product) from a nonmember country is the same as the component applicable to barley (the basic product), multiplied by a coefficient of 2.00. Those provisions give effect to Article 14 of Regulation (EEC) No 2727/75 of the Council, pursuant to which the variable component of the levy on processed products manufactured from basic products corresponds “to the incidence on their prime cost of the levies on those basic products”. The coefficient is based on technical grounds: in order to obtain one tonne of flaked barley it is necessary to use two tonnes of barley. Nordgetreide does not seriously challenge the compatibility with Community law of the coefficient chosen and, in any case, the national court is not questioning this Court any further as to the validity thereof.

2. The refund which may be granted on processed products is determined with particular reference to the quantities of basic products used in calculating the variable component of the levy (Article 6 (1) of Regulation No 2744/75). That provision must be compared to Article 2 (1) of the same regulation, which includes a reference to the coefficient of 2.00 adopted for flaked barley (Column 4 of Annex 1). It should be noted, however, that whilst two tonnes of barley are generally required to make one tonne of the flaked product, that quantity can also produce — leaving aside pearled grains and waste material — an average of: (i) 30 to 35% of barley groats and meal (subheading 11.02 A III (a)); (ii) 12 to 15% of a derived product made up of the husks and parts of the floury kernel of the barley grain; the product is processed into pellets and exported as animal feed (bran, sharps and other residues under subheading 23.02 A II (a)). The exportation of those products, too, confers entitlement to a refund. ( 6 ) The Commission takes the view that, since as a result of the application of a coefficient of 1.5 the entire refund applicable to the basic product (barley) is passed on to the processed product (flaked barley), the application of a coefficient of 2.00 would allow a multiplicity of refunds on the various products yielded by the same processing operation from a single basic product. In those circumstances, the choice of the coefficient to be adopted in calculating the refund must not entail the result that the flaked barley made from a given quantity of the basic barley product attracts a refund equal to the sum of the amounts granted in respect of the various processed products, even if a different, higher coefficient is adopted for calculating the levy charged on the same quantity of the basic product as that used for manufacturing only one processed product, namely flaked barley. In the preamble to the contested regulations reference is made first to Article 2 of Regulation (EEC) No 2746/75 of the Council of 29 October 1975 laying down general rules for granting export refunds on cereals for the products covered by Article 1 of Regulation No 2727/75 (including, therefore, flaked barley) and then to the general criteria for fixing the amount of such refunds. The regulations then refer to Article 6 of Regulation (EEC) No 2744/75 of the Council of 29 October 1975, which defines the specific criteria to be taken into account for calculation of the refund on processed products. Although, amongst those specific criteria, account is admittedly taken of the quantities of basic products used in calculating the variable component of the levy (subparagraph (b)), consideration must also be given to the possible duplication of refunds applicable to various products obtained from one and the same process and one and the same product (subparagraph (c)). The choice of a coefficient of 1.5 in the regulations in question is due in particular to the fact that “cumulation of the refunds on the various products manufactured by a single process from the same basic product may make it possible, in certain cases, to export to third countries at prices which are lower than world market prices”.

3. That statement seems to be in keeping with Community rules as interpreted by the case-law of this Court. In its judgments of 15 October 1980, ( 7 ) this Court held that in calculating monetary compensatory amounts it was unlawful to apply a processing coefficient in its entirety, without taking account of derived products, when such an application would involve overcompensation. Thus the Commission seems to have correctly applied by analogy a rule derived from the Court's case-law when calculatting the refunds ţo be granted in respect of flaked barley.

4. The equivalence of 1.5 on which the amounts fixed by the contested regulations are based does not imply that the quantity of barley actually processed by the manufacturers of the flaked product does not correspond to the quantity deemed to have been utilized. For Nordgetreide's argument to be correct, the calculation of the refund would have to be the exact counterpart of the calculation of the levy. That is not the case, because the two operations have different aims. As Mr Gilsdorf has written : ( 8 )“Whilst levies play an essentially protective role, refunds, besides reflecting a concern to decongest the market, often introduce elements of commercial policy: the methods of calculation therefore differ appreciably, levies being generally larger than refunds.” The refund on processed products is granted independently of the levy on the basic product, regardless of whether the latter was imported from a nonmember country (subject to levy) or originated within the Community (free of levy). Whereas the levy is calculated daily, by reference to the difference between the threshold price and worldwide cif. (cost, insurance and freight) prices, the refund is not automatic; it is required to be fixed only once a month, subject to amendments in the meantime (generally each. week). When the refund is applicable, it is quantified in the light both of the Community's commercial policy and of the difference between fob (free on board) prices within the Community and the prices prevailing on the world market. As regards products processed from certain types of cereal harvested in the Community, the refund is not exactly the same as the difference between the threshold price and world prices because the trader processing those cereals does not buy them at the threshold price but at a lower price on the domestic market. Thus, for certain pasta products in Annex B to Regulation No 2727/75 (which do not appear in Annex II to the EEC Treaty, to which Article 38 thereof refers), the refund is not precisely equal to the incidence on the basic product of the levy charged. Recourse to the expedient of refunds — which are charged to the European Agricultural Guidance and Guarantee Fund (EAGGF) — is not in principle justified except in the case of cereals which are harvested in Member States and of which there is a surplus within the Community. As regards products processed from barley in particular— a cereal which is overproduced in the Community — the level of the export refunds by no means matches that of the import levies. Furthermore, the system of monthly increases which must be added to the threshold price for barley during the marketing year in order to take account of storage costs and also of the need to dispose of stocks in accordance with market needs ( 9 ) naturally favours the exportation of products processed within the Community from cereals imported from nonmember countries. Because of those increases it may happen that the refund granted on the exportation of such products exceeds the levy actually charged on the imported basic product. Such an advantage is not warranted when it is possible to fix refunds in advance.

5. Consequently, the Commission, guided by consultations with the Management Committee for Cereals, ( 10 )enjoys a certain discretionary power to decide whether to grant a refund in the first place, and to fix the amount of that refund, both for the basic product and for one, or all, of the products processed therefrom. Article 16 (1) of Regulation (EEC) No 2727/75 of the Council expressly provides: “To the extent necessary to enable the products listed in Article 1 [in particular the products of the milling and cereal-starch industries] to be exported in the state referred to therein or in the form of goods listed in Annex B on the basis of quotations or prices for those products on the world market, the difference between those quotations or prices and prices in the Community may be covered by an export refund.” The detailed rules for fixing the refund and even the corrective amount are laid down as well; they may be applied in whole or in part to the products at issue here (third paragraph of Article 16 (4)). It is important to strike a balance between the use of basic products originating within the Community for the purpose of exporting the processed goods to certain nonmember countries and the use of basic products coming from those countries and “improved” in the Community. In order to avoid distortions of competition and to ensure that the common organization of the market continues to work properly, the Commission may legitimately have regard to the fact that, by taking advantage — also quite legitimately — from one marketing year to the next of prefixed refunds and of currency movements, processors would be able to use Community cereals or those imported from nonmember countries in especially favourable circumstances, while benefiting from especially high refunds.

III —

Since the export refunds for flaked barley, as fixed by the annexes to Commission Regulations No 851/79 and No 1309/79, do not infringe the provisions of Regulation No 2744/75 of the Council, the second question referred to this Court by the national court is irrelevant.

Nevertheless, as the national court has expressly enquired as to the legal consequences if the fixing is found to be invalid, the following further observations are called for.

In the context of Article 177, as indeed in cases where annulment is obtained in a direct action, it is incumbent upon the institution which originally adopted the measure which has been declared void to take any steps required to ensure compliance with the Court's final judgment, without prejudice to its enforcement by the national court before which the proceedings in question are pending.

It is a matter for the Commission alone, within the framework of the Management Committee, to fix the refunds and hence, if they are held to be invalid, to choose between the two methods mentioned by Nordgetreide (application of a coefficient either of 1.5 or of 2.00, both for calculating the amount of the refund and for adjusting it)

However, since the Commission has employed the contested processing coefficient for some time, I would suggest that the Court of Justice should adopt the solution which it adopted in the cases in which judgment was given on 15 October 1980, namely to rule that the invalidity of the system for calculating refunds on flaked barley contained in Regulations Nos 851/79 and 1309/79 does not enable the amounts granted by the Principal Customs Office on the basis of those regulations to be challenged as regards the period prior to the date on which the Court gives judgment.

The Court will not need to answer that question if, as I propose, it rules as follows :

— The amounts of the export refunds on flaked barley fixed by Commission Regulations (EEC) No 851/79 and (EEC) No 1309/79 are in conformity with the provisions of Regulation (EEC) No 2744/75 of the Council.

( 1 ) Translated from the French.

( 2 ) Article 1 (d) and Annex A to Regulation No 2727/75 of the Council of 29 October 1975.

( 3 ) Article 14 (1) (A) (a) of Regulation No 2727/75.

( 4 ) Article 2 of Regulation No 2744/75.

( 5 ) Second paragraph of Article 7 of Regulation No 2744/75.

( 6 ) Fixed by the contested regulations respectively at 169.00 ECU and 132.27 ECU per tonne for the first category and at 25.08 ECU and 24.01 ECU per tonne for the second.

( 7 ) Providence Agricole de la Champagne v ONIC, [1980] ECR 2823 ff; Maileries de Beaucev ONIC [1980] ECR 2883 ff.

( 8 ) Der Währungsausgleich aus rechtlicher Sicht, Cologne 1978, p. 13.

( 9 ) Article 6 of Regulation No 2727/75 of the Council.

( 10 ) Article 26 of Regulation No 2727/75 of the Council.