OPINION OF MR ADVOCATE-GENERAL TRABUCCHI

DELIVERED ON 11 JULY 1973 ( 1 )

Mr President,

Members of the Court,

Article 15 of Regulation 121/67/EEC of the Council of 13 June 1967 on the common organization of the market in pigmeat, provides, in its first paragraph, that ‘to the extent necessary to enable the products listed in Article 1 (1) 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’.

In its first question, the Hamburg Finanzgericht asks us whether this provision must be interpreted as meaning that the refund envisaged by that provision cannot be granted when its amount exceeds the price paid for the product on the home market.

From the Preamble to the Regulation cited it is clear that the provision for a refund on exports to third countries was specifically designed to safeguard Community participation in international trade in the products in question. The subsidy on exports has, therefore, been introduced not simply to enable domestic products to leave the Community, but to enable them to enter the world market. With this end in view, the export refunds on the products in question are fixed on the basis of making up the difference between the current prices of these products within the Community and prices on the world market, as laid down specifically in Article 15 and reiterated in the second recital of Regulation No 177/67/EEC of the Council of 27 June 1967, laying down general rules for granting export refunds in the pigmeat sector. It follows from Articles 2 and 3 of this Regulation that the amount of this refund is determined not on the basis of the individual exporter's costs but at a flat rate based on general considerations. Under that system it is, therefore, theoretically possible that, in an individual case, the refund may amount to more than the price actually paid by the exporter on the home market. The Community legislature established the refund system only in wide and general terms; it is the task of the Commission, subject to the control of the Court, to prescribe its parameters in the light of the objectives the system is designed to achieve. Consequently, there is no doubt that, in cases where goods have been acquired in normal market conditions, the contingency described above will be avoided if the amount of the refund has been correctly calculated. If, then, a situation has arisen which was not covered by the legislature's provisions, this would reveal the existence, in practice, of a departure from the premises on which the legislation was based which, as appears to be the case here, could consist in a substantial change in the market conditions applicable to the product. The agencies responsible for implementing Community legislation would indeed be failing in their duty if they granted refunds greater than the normal value of the goods on the home market. In such a situation, the refund would in fact be exceeding the function prescribed for it in Article 15 of Regulation No 121/67, which, in order to facilitate Community participation in external trade, is to make up the difference between the Community price and prices on the world market, and would have the effect of encouraging profitable speculations by individuals at the expense of the Community.

The task of fixing the amount of the refunds, which is a single amount for each type of product, must be based on given standards of quality appropriate to the product. The average price in the Community of a product fulfilling the given requirements is then calculated and the amount of the refund fixed accordingly. As, therefore, this amount is worked out on the basis of certain required standards of quality, it seems logical to me that the refund should be granted only in respect of goods which reach the minimum required standards of quality. Otherwise the refund mechanism would constitute a basic anomaly which could distort its application in relation to the objects for which it was introduced.

Against this background, consideration must be given to the terms in which Article 6 of Regulation No 1041/67/EEC of the Commission sets out the conditions for a refund; this is the subject of the German court's second question. This Article lays down that the refund shall be granted only in respect of products in free circulation within the Community which are of sound and fair marketable quality and, in the case of products intended for human consumption, which have characteristics or are in a condition such as do not exclude or substantially impair their use for that purpose. There is, therefore, an objective parameter dictated by the requirements of marketability.

The national court asks us whether these requirements are to be assessed on the basis of commercial practice and health protection measures in the Member States of the Community or in the countries of destination, and further, whether in interpreting these requirements, the products must be regarded as being not of good commercial quality if the amount of the refund exceeds the price in fact paid for them on the home market.

The answer to the first part of the question is clear from what has already been said. The objects of the system require that there should be some affinity between the qualitative criteria which determine the amount of the refund for the various types of product and the standards required under the provision cited from Article 6, and the effect of this is to give a Community dimension to these requirements.

Apart from Community participation in world trade, one is driven to the same conclusion when one considers the other point of concern to the Community, with which the mechanism is intended to cope, viz. the sale of domestic surpluses in order to avoid prolonged imbalance between demand and supply (See Article 2b of Regulation No 177/67/EEC). If in fact, the intention is to eliminate surpluses, this must refer to those products which are marketable in the Community and therefore capable of fulfilling the conditions laid down in Article 6, because it is only these which, being in circulation in the common market, could cause disturbances in it in case of surplus.

This conclusion is also confirmed by the general requirement of equal treatment for individual Community traders, a requirement which is reflected in the 6th recital of Regulation No 177/67 of the Council (‘Whereas to avoid distortions of competition between individual Community traders, the administrative conditions under which they operate must be identical throughout the Community’).

In this context, real uniformity can in fact be ensured only if the Community agencies have effective powers of control over the practical application by the national customs authorities of the criteria laid down in Article 6 of Regulation No 1041/67. If it is to proceed on the basis of something more than formalities and appearances, a control of this kind must be based on common parameters. In other words, the power of control can attain its objective only if a precise significance can be given to the requirements it is there to enforce, and if it can be identified as an integral part of the Community system. On the other hand, it would not be possible to attain this objective if these requirements varied according to the different destinations of the product being exported. Indeed, having regard to the difficulty for the Community agencies of knowing the commercial practices and health protection requirements in third countries, the decision whether a condition laid down by Community law for a refund to exporters has been fulfilled would in practice finally depend, at least in many cases, on declarations and assessments by private individuals and by agencies in third States, and would thus in large measure be outside the Community's control.

I believe that, in the context of export refunds, these considerations are decisive arguments in favour of the criterion, whereby the meaning of the requirements must be derived directly from the Community system and not from a general reference to practices and regulations in the recipient countries.

From this it follows that, regardless of the price paid for it, when the real value of a product on the Community market is less than the appropriate refund, it must be assumed that, in the absence of sudden and substantial changes in the market price or of an erroneous assessment on the part of the agencies responsible for fixing refunds, the product does not comply with the standards of quality required under Article 6 of Regulation No 1041/67.

The answer proposed for the first two questions, clarifying the criteria and declaring the parameters to be observed in applying the refunds provided for in Regulation No 121/67/EEC of the Council, makes it unnecessary to go into the third question put as a supplementary by the national court. However, as this question involves purely technical matters which the Regulations we are called upon to interpret here have not defined, and as nothing has emerged in the course of the present proceedings to contradict the criteria suggested by the Commission in the light of the admittedly sparse notes on the ‘Brussels Nomenclature’. I maintain that to find an answer, reference must be made to these criteria.

I therefore advise:

1. Although Article 15 of Regulation No 121/67/EEC of the Council of 13 June 1967 does not, in principle, preclude the grant of the refund provided for by the Article in respect of exports covered by Article 1 whenever the refund amounts to more than the price paid for the product in a particular case on the domestic market, it does not, as a rule, authorize the grant of refunds in excess of the current value of the product in the common market.

2. (a) The requirements referred to in Article 6 of Regulation No 1041/67/EEC of the Commission of 21 December 1967 must be evaluated on the basis of standards establishing the marketability of products in the Community, regardless of the commercial practices and health protection regulations in the States of destination. (b) The fact that the rate fixed for the export refund applicable to a particular category of goods is higher than their actual value in the common market sector concerned, normally justifies the assumption that they are not of good commercial quality.

( 1 ) Translated from the Italian.