OPINION OF MR ADVOCATE GENERAL REISCHL

DELIVERED ON 2 OCTOBER 1980 ( 1 )

Mr President,

Members of the Court,

The legal proceedings which form the basis of this reference for a preliminary ruling have already been the subject of Case 5/78, which led to the Court's judgment of 4 July 1978 in Milchfiitter GmbH & Co. KG v Hauptzollamt Gronau [1978] ECR 1597.

I should like briefly to recall the facts of the case, for the details of which I refer to the judgment in the above-mentioned case and the opinion of Mr Advocate General Capotorti.

Between January and March 1975 the plaintiff in the main action imported from the Netherlands into the Federal Republic of Germany several consignments of milk-based compound feedingstuffs, which, in addition to skimmed-milk powder, also contained powdered whey. With the application of the method of calculation provided for in Article 11 (1) of Regulation (EEC) No 823/68 of the Council of 28 June 1968 determining the groups of products and the special provisions for calculating levies on milk and milk products (Official Journal, English Special Edition 1968 (I), p. 199), the goods had a “milk product content” of more than 75% by weight. Accordingly, when the goods were cleared through customs, the customs office at Oeding classified them under tariff subheading 23.07 B I a 4 of the Common Customs Tariff, which covers animal feeds containing at least 75% by weight of milk products, and levied the monetary compensatory amounts provided for as respect to goods falling within that tariff subheading by Article 1 of Regulation (EEC) No 2547/74 of the Commission of 4 October 1974 fixing the monetary compensatory amounts and certain rates for their application (Official Journal L 272 of 7 October 1974, p. 1) and Article 1 of the corresponding Regulation (EEC) No 539/75 (Official Journal L 57 of 3 March 1979, p. 2) at the rate of DM 169.90 per 1000 kilograms net weight as regards imports carried out in January 1975 and at the rate of DM 149.40 for those carried out in March 1975.

After having unsuccessfully objected to the assessment, the plaintiff brought proceedings before the Finanzgericht [Finance Court] Münster in which it at first sought to have the milk-based compound feedingstuffs classified in tariff subheading 23.07 B I a 3 of the Common Customs Tariff, which covers animal feeds containing not less than 50% but less than 75% by weight of milk products. By order of 29 September 1977 the Finanzgericht Münster submitted to the Court of Justice for a preliminary ruling inter alia the question whether the method of calculating the “milk product content” provided for in Article 11 (1) of Regulation No 823/68 is decisive with regard to the amount of the monetary compensatory amounts. That question was answered in the affirmative by the Court of Justice in its judgment of 4 July 1978 in Case 5/78.

After the Court of Justice had decided in its judgment of 3 May 1978 in Case 131/77 Firma Milac, Groß- und Außenhandel Arnold Noll v Hauptzollamt Saarbrücken [1978] ECR 1041 that the fixing of monetary compensatory amounts for whey was contrary to 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), the plaintiff in the main action contested the monetary compensatory amounts which had been fixed on the further ground that the levying of those charges is contrary to the last-mentioned regulation in so far as the proportion of powdered whey mixed in with the skimmed-milk powder is taken into account in the monetary compensation.

By order of 20 November 1979 the Fourth Senate of the Finanzgericht Münster thereupon again stayed the proceedings and referred to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty the following question:

“In so far as they include in the basis of assessment for monetary compensation the content by weight of any whey in compound feedingstuffs within tariff subheadings 23.07 B I a 3 and 4 of the Common Customs Tariff, are Article 1 of Regulation (EEC) No 2547/74 of the Commission of 4 October 1974 and Article 1 of Regulation (EEC) No 539/75 of the Commission of 28 February 1975 invalid in that they infringe higher-ranking Community law, in particular Article 2 (2) of Regulation (EEC) No 974/71 of the Council of 12 May 1971?”

My view on this matter is as follows:

The court making the reference for a preliminary ruling wishes to make its judgment of the legality of the decisions addressed to the plaintiff dependent upon whether Article 1 of each of Regulations No 2547/74 and 539/75, which provides for calculation of monetary compensation on the basis of the total weight of the compound feedingstuffs, including the proportion of any powdered whey contained therein, is compatible with Regulation No 974/71 of the Council. The Court of Justice having decided in its judgment of 3 May 1978 in the Milac case that Article 1 of Regulation No 539/75 was invalid in so far as it fixes compensatory amounts in respect of trade in powdered whey, it appears questionable whether the abovementioned, similarly-worded provisions are valid in so far as they do not exclude the whey content from the calculation of monetary compensatory amounts for trade in other goods.

It is thus crucial to the answer to the question submitted for a preliminary ruling whether the proportion of powdered whey contained in the compound feedingstuffs in question is to be exempted from monetary compensation or not. If Regulation No 974/71 of the Council, on the construction given to it by the Court in the Milac case, enjoins such exemption, then Article 1 of each of the Commission regulations in question is invalid in so far as it includes in the basis of assessment for monetary compensation any whey in compound feedingstuffs.

In the view of the Finanzgericht, the inclusion of the whey constituent could, in particular, be a breach of Article 2 (2) of Regulation No 974/71 under which the compensatory amounts for so-called derived products are to be equal to the incidence, on the prices of the products concerned, of the application of the compensatory amount to the prices of the product referred to in Article 2 (1), on which they depend. In this context, regard must be had to the sixth recital of the preamble to that regulation, in which it is stated that the compensatory amounts should be limited to the amounts strictly necessary to compensate the incidence of the monetary measures on the prices of basic products covered by intervention arrangements. Since, as the Court held in the Milac case, prices of powdered whey do not depend on the prices of skimmed-milk powder, an intervention product, it should not be permissible, in the view of the Finanzgericht, to include the powdered whey constituent of compound feedingstuffs in the basis of assessment for monetary compensation.

To the same effect are the submissions of the plaintiff in the main action, which points out that the milk constituents in the present case are made up of 65.2% skimmed-milk powder and 9.5% of powdered whey. The plaintiff claims that a completely independent product, the price of which is not determined by the price of an intervention product, such as is the case with powdered whey, may not be burdened with monetary compensation. If, however, monetary compensation is charged, that constitutes a prohibited charge equivalent to a customs duty on intra-Community trade, irrespective of whether the product concerned is a single product or a constituent of a compound product. After the judgment was delivered in the Milac case, the Commission drew that conclusion, which, according to the plaintiff, is the only correct one, in adopting Regulation No 1824/77 (Official Journal L 203, p. 7) Regulation No 3005/77 (Official Journal L 354, p. 1) and Regulation No 1733/78 (Official Journal L 201, p. 36). Finally, as Regulation No 3005/77 shows, the risk of falsification may be met by exporters and importers providing prescribed particulars.

However, in agreement with the Commission, I do not consider that this argument may be sustained.

It must first of all be pointed out that the judgment of the Court in the Milac case cannot be decisive in the present case. The underlying legal dispute in the former case concerned the fixing of monetary compensatory amounts for imported powdered whey falling within tariff heading 04.02 of the Common Customs Tariff. Article 1 of Regulation No 974/71 provides inter alia that, in the case of imports into a Member State the currency of which rises above the permitted margin, it is possible to introduce monetary compensatory amounts for products covered by intervention arrangements under the common organization of agricultural markets (Article 1 (2) (a)) or whose price depends on the price of the above-mentioned products which are governed by the common organization of markets (Article 1 (2) (b)). Since powdered whey is not covered by intervention arrangements under the common organization of the markets, what was crucial. in the Milac case was whether the price of that product was dependent on the price of skimmed-milk powder, an intervention product. The Court of Justice did not consider that such price dependency had been established and therefore decided, that, in so far as it fixed compensatory amounts for trade in powdered whey and to that extent did not satisfy the conditions contained in Regulation No 974/71, Article 1 of Regulation No 539/74 was invalid.

In the present case, however, and in contrast to the Milac case, the Court has to decide upon the fixing of monetary compensatory amounts for milk-based compound feedingstuffs falling within tariff heading 23.07 of the Common Customs Tariff. Contrary to the assumption made by the court making the reference and by the plaintiff in the main action, the ruling made by the Court in the Milac case says nothing on the question whether powdered whey which is present along with skimmed-milk powder as a constituent of milk-based compound feedingstuffs is to be excluded from the calculation of the monetary compensatory amount for compound feedingstuffs falling within the said customs tariff heading. As the Commission properly stresses, there is indeed a difference between a situation in which homogeneous powdered whey is in itself the subject-matter of an import transaction and one in which that product is mixed with intervention products of a related kind and it is almost impossible in practice reliably to determine the individual proportions.

It is generally known that in the course of time manufacturers of compound feedingstuffs went over to admixing powdered whey, which is less expensive, to skimmed-milk powder in order to substitute it for skimmed-milk powder up to a certain level. As has been learned in the oral procedure in particular, the proportion may vary in individual feedingstuffs and, as did not appear to me to be disputed by the plaintiff in the main action, at least in 1974 and 1975 it was not possible to introduce efficient methods of checking the description of the various constituents which were simple and easy to use in practice.

There thus existed in fact the risk of abusive practices through the giving of incorrect details of the proportion of powdered whey, which could not in practice be discovered by checks. In view of the practical impossibility of reliably determining the proportion of powdered whey, the Commission had the choice either of dispensing in general with monetary compensation on compound feedingstuffs or of including the proportion of powdered whey in the calculation of the monetary compensation for compound feedingstuffs. In this regard it must be borne in mind that, as the Court held in its judgment of 14 May 1975 in Case 74/74 CNTA v Commission [1975] ECR 533, in considering the question whether the monetary measures may lead to disturbances in trade in agricultural products, the Commission enjoys a wide area of discretion. As is stated in that judgment, the Commission may take into account market conditions as well as monetary factors in order to judge the risk of such disturbances. In view of the large proportion in terms of quantity and value which the intervention product, skimmed-milk powder, constituted in milk-based compound feedingstuffs, no objection could be taken to the Commission's not wishing generally to dispense with monetary compensation for compound feedingstuffs.

Likewise, the Commission must have an area of discretion in deciding how those disturbances are to be dealt with.

It remains therefore to consider further whether the flat-rate calculation of monetary compensation falls within the framework created by the monetary compensatory system. In that regard it is to be remembered that on several occasions, including its judgment of 11 October 1977 in Case 125/76 Firma Peter Cremer v Bundesanstalt für landwirtschaftliche Marktordnung [1977] ECR 1593, the Court of Justice has pointed out that, basically, in fixing export refunds for compound feedingstuffs the application of flat-rate methods of calculation cannot be avoided. The Court expressed itself to similar effect in its judgment of 30 November 1978 in Case 87/78 Welding & Co. v Hauptzollamt Hamburg-Waltershof [1978] ECR 2457 when it pointed out that where it is impossible for technical or practical reasons precisely to determine the composition of certain products, a flat-rate method is unavoidable. As appears from that case, the use of such methods must merely ensure the practical effectiveness of Community rules and must not give rise to instances of demonstrable unfairness.

If the system of monetary compensatory amounts is then considered in particular, it must be stated that in principle that system may only be applied in order to obviate those difficulties which may arise in trade flows and in the functioning of the intervention mechanism as a result of the effect of the monetary measures on the price of the basic products. According to the sixth recital to the relevant regulation, Regulation No 974/71, monetary compensatory amounts should therefore be limited to the amounts strictly necessary to compensate the incidence of the monetary measures on the prices of basic products covered by intervention arrangements. Further, they should only be applied in cases where that incidence would lead to difficulties. Accordingly, under Article 1 (2) (b) of that regulation, the power to charge or grant compensatory amounts applies only to products the price of which depends on the price of products covered by intervention arrangements and which fall within the common organization of the markets. Under Article 2 (2) of the regulation, the compensatory amounts to be applied in the case of so-called derived products shall be equal to the incidence on the prices of the relevant basic products on which the prices of the relevant product depend. From that it follows that, as the Court emphasized in its judgment of 5 April 1979 in Case 151/77 Peiser & Co. KG v Hauptzollamt Hamburg-Ericus [1979] ECR 1469, in order to justify the application of compensatory amounts to products covered by that provision, it is sufficient for the compensatory amounts applicable to the basic products to have a considerable incidence on the price of the so-called derived product. The price of that product depends, within the meaning of Article 1 (2) (b) of Regulation No 974/71, on the price of the so-called intervention product where, as the Court stated in the Milac case, “the former price fluctuates appreciably owing to the incidence of variations in the latter price”. As I have already mentioned, in the Milac case it was not possible to demonstrate such a dependence between powdered whey falling within tariff heading 04.02 of the Common Customs Tariff and skimmed-milk powder.

On the other hand, as the Court has heard, it was not possible to establish in relation to milk-based compound feedingstuffs falling within tariff subheading 23.07 Bla that, during the period for which Commission Regulations Nos 2547/74 and 539/75 were in force, the price of compound feedingstuffs moved appreciably away from, and became independent of, developments in the price of skimmed-milk powder according to the amount of powdered whey in the compound feedingstuffs. Rather was it clear from that investigation that the price of milk-based compound feedingstuffs, which are generally acknowledged to fall under the common organization of the market, was essentially dependent, irrespective of the proportion of powdered whey contained in them, on the price of skimmed-milk powder, which was covered by intervention arrangements under the common organization of the agricultural markets. If I have correctly understood the position, that circumstance was brought about by the fact that during the period in question skimmed-milk powder represented in terms of value and quantity the most significant proportion of milk products in the compound feedingstuffs. For that reason, the Commission did not exceed the discretion conferred on it by Regulation No 974/71 by including in the calculation of the monetary compensatory amounts the powdered whey contained in milk-based compound feedingstuffs.

In addition, a further aspect, which was emphasized by the Court in its judgment of 8 June 1977 in Case 97/76 Merkur Außenhandel GmbH & Co. KG v Commission [1977] /ECR 1063, points to the compatibility of Regulations Nos 2547/74 and 539/75 of the Commission with Regulation No 974/71 of the. Council. In that judgment it was stated that the aim of the system of monetary compensatory amounts is in particular to obviate the difficulties which monetary instability may create for the proper functioning of the common organizations of the market, rather than to protect the individual interests of traders. To this end Article 6 of Regulation No 974/71, upon which the Commission regulations in question are founded, empowers the Commission to act in accordance with a specific procedure to fix not only the compensatory amounts but also the detailed rules for the application of the regulation, including those “which may include other derogations from the regulations on the common agricultural policy”. Thus the said Commission regulations are legislative measures which, as the Court of Justice held in regard to another regulation implementing Regulation No 974/71, were adopted by the Community “in the higher interest of the proper functioning of such market organizations”. In that respect also, in view of the difficulty which has been demonstrated of arranging objective controls, objection could not be taken to the inclusion of the proportion of powdered whey in the calculation of the monetary compensatory amounts, without, contrary to the plaintiff's view, anything turning on whether a trader may derive an advantage from the flat-rate method of calculation in any given case, for example, on exporting milk-based compound feedingstuffs.

Nor does it follow from the method of calculation being a flat-rate one that, as the plaintiff maintains, the opportunity for offering contrary evidence displacing that method must be open. According to the plaintiff, there should be a general legal principle that where the proof of particular circumstances gives rise to difficulties, it should be open to the importer to adduce that proof by the means at his disposal and, in return, rely upon a more favourable rule. In the judgment of 17 June 1971 in Case 3/71 Gebrüder Bagusat v Hauptzollamt Berlin-Packhof [1971] ECR 577 and the judgments which were delivered dealing with the presumption of the overalcoholization of wine (see the judgments of 30 September 1975 in Joined Cases 89/74, 18 and 19/75 Procureur Général at the Cour d'Appel, Bordeaux v Robert Jean Arnaud and Others [1975] ECR 1023; Joined Cases 10 to 14/75 Procureur de la République at the Cour d'Appel, Aix-en-Provence and Fédération Nationale des Producteurs de Vins de Table et Vins de pays v Paul Louis Lahaille and Others [1975] ECR 1053; and the judgment of 9 December 1975 in Case 64/75 Procureur Genéral at the Cour d'Appel, Lyon v Henri Mommessin and Others [1975] ECR 1599) what was at issue, as the Court clearly pointed out, was either a rebuttable presumption in connexion with a particular tariff classification or a presumption under national law of overalcoholization of wine, whereas in the present case the Court is concerned with a flat-rate method of calculation which creates no rebuttable presumption but was laid down in the interests of legal certainty and orderly administration. Were contrary evidence admissible, the administration would be confronted with the same difficulties of objective control which the rules were intended to avoid.

Finally, the fact that at the end of 1977, that is, before the issue of the judgment in the Milac case, the Commission decided in Regulation No 3005/77 to exclude the proportion of powdered whey from the calculation of the monetary compensation for compound feedingstuffs does not stand in the way of the rules in force until then being valid. As the Court has heard, methods of analysis — here Immunoelectrophoresis has been mentioned — had, in the Commission's view, improved in the interim and with their assistance it had become possible to determine the proportion of powdered whey in compound feedingstuffs. In addition, according to the Commission's observations, after 1976 the number of firms operating as exporters, importers or producers of milk-based compound feedingstuffs decreased and could thus be more readily kept under review. In view of these circumstances it appeared to the Commission to be possible, in contrast to the previous rules, to differentiate between the constituent milk products on the basis of which monetary compensation for compound feedingstuffs was determined and to calculate the monetary compensatory amounts having regard only to the percentage of milk powder contained in the end product. That lay within the Commission's discretion, without the previous method, which rested in different premises, thereby being necessarily unlawful.

Since, for the reasons stated, there is no cause to question the validity of the regulations of the Commission in question, I suggest that the question from the Finanzgericht Münster be answered as follows :

Consideration of Article 1 of Regulation (EEC) No 2547/74 of the Commission of 4 October 1974 (Official Journal L 272, p. 1) and Article 1 of Regulation (EEC) No 539/74 of the Commission of 28 February 1975 (Official Journal L 57, p. 2) has disclosed no factor of such a kind as to affect their validity in so far as they include the weight of any whey content in compound feedingstuffs falling within tariff subheading 23.07 B I a 3 and 4 of the Common Customs Tariff in the basis of assessment for monetary compensation.

( 1 ) Translated from the German.