OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN

DELIVERED ON 3 JULY 1984

My Lords,

This case concerns part of a quantity of butter exported from Australia and temporarily imported into Belgium for inward processing, no duties or agricultural levies being paid on that importation.

Towards the end of 1975, the product was taken out of inward processing and consigned to Roba SA of Basel at the Swiss free port at La Praille, Geneva as oil for industrial use. It was transported by rail under six CIM international consignment notes together with other quantities of the product not now in issue. At La Praille the relevant goods were re-consigned by Roba SA to Magazzini Generali Cariplo at Cremona in Italy, as oil for industrial use, butter oil. The goods were transported there by rail under a second set of consignment notes and arrived in the early part of 1976. Gormec Sri in Milan instructed an Italian customs agent, Mr Claudio Fioravanti, to clear the goods through customs. The goods were cleared through the Italian customs on the basis of three customs entry documents issued by the Italian customs authorities. The Italian customs authorities accepted that the goods were of Belgian origin, and did not require the payment of customs duties or agricultural levies, because the Swiss authorities had marked the consignment notes “T2”.

Subsequently, however, the Italian customs authorities discovered that the goods originated in a third country and they required Gormec to pay LIT 243400755 by way of agricultural levies. Gormec failed to pay. Under Italian law it seems that Mr Fioravanti bore a subsidiary liability and, in May 1977, the customs authorities proceeded against him. Mr Fioravanti challenged the decision of the customs authorities requiring him to pay the levies. The matter came before the Court of Appeal at Brescia which referred four questions for a preliminary ruling under Article 177 of the EEC Treaty. The events in question have given rise to two disputes. The first concerns Mr Fioravanti's liability to pay the agricultural levies to the Italian customs authorities. The second concerns the liability of the Italian Government to remit the levies to the Community. The Italian Government takes the view that the goods were imported into Italy without payment of levies as the result of a mistake made by the Belgian customs authorities. In consequence, the Member State responsible for collecting the levies and remitting them to the Community is Belgium, not Italy. In substance, before this Court, the Italian Government is in agreement with Mr Fioravanti that the levies were not payable on importation of the goods into Italy.

The first question referred is as follows :

“With particular reference to Articles 1 and 5 of the Agreement between the EEC and the Swiss Confederation on the application of the rules on Community transit contained in Council Regulation No 2812/72 of 21 November 1972 (OJ 1972, L 294, p. 1, OJ 1973, L 365, p. 225) and to other specific provisions of those rules, must a transit operation involving goods which, after being dispatched from Belgium (customs office at Montzen) to a specific consignee at the free port of Geneva (La Praille), Switzerland, are reconsigned by that person, through the customs office of that free port, to another consignee in the city of Cremona (Italy) and definitively imported there, be regarded as Community transit?”

At the material time, Council Regulation No 542/69 of 18 March 1969 (OJ 1969, L 77, P. 1, English Special Edition 1969 (1), p. 125) governed the procedure applying to the movement of goods between two points in the Community. It set out two procedures: “external Community transit” for goods which, in brief, are not in free circulation in the Community and “internal Community transit” for goods which are in free circulation (described as “Community goods”): Article 1 of the regulation, as amended by Article 1 of Council Regulation No 2719/72 of 19 December 1972 (OJ 1972, L 291, p. 24, English Special Edition 1972, (28-30. 12.) p. 24). Goods carried under the external Community transit procedure must be covered by a “Tl” declaration; those carried under the internal Community transit procedure must be covered by a “T2” declaration: Articles 12 (1) and 39 (1) of Regulation No 542/69.

By virtue of Article 8 of that regulation, since the goods in question in this case were transported from Belgium to Italy under two sets of consignment notes, the Community transit procedure would not apply in the absence of an agreement between the Community and Switzerland. Such an agreement was made in 1972 and is annexed to Regulation No 2812/72. It was subsequently amended (Council Regulations No 3613/73 of 27 December 1973, (OJ L 365, p. 187) and No 1291/77 of 14 June 1977, (OJ 1977, L 151, p. 1).

Article 1 (1) of the Agreement provides that the rules on Community transit “shall apply, subject to the provisions of this Agreement, to the movement of goods between two points situated in the Community via the territory of the Swiss Confederation, whether the goods are: consigned direct, with or without transhipment in Switzerland, or — re-consigned from Switzerland, where appropriate after storage in a customs warehouse”. Article 5 of the Agreement is concerned with the issue of “T2” and “T2L” documents in respect of goods which are reconsigned from Switzerland in the course of transport between two points situated in the Community. T2L documents are used for certifying the Community nature of goods not carried under the Community transit system (Regulation No 2313/69 of 19 November 1969, OJ L 295, p. 8, English Special Edition 1969 (11) p. 509, as amended).

The parties submitting observations to the Court (Mr Fioravanti, the Italian Government and the Commission) are in agreement that, in the light of the provisions of the Agreement between the Community and Switzerland, the answer to be given to the first question must be in the affirmative.

It seems clear that once the carriage of goods entails the crossing of an internal frontier of the Community they are to be placed under the Community transit procedure unless (as has not happened as far as I can see) special provisions are made under Article 58 to derogate from the provisions of Article 4 (1) of Regulation No 542/69 in respect of goods under a temporary importation or admission procedure, which by Article 2(1) are excluded from the Community transit procedure. Since the export of the goods in question from Belgium to Switzerland by rail necessarily entailed the crossing of an internal Community frontier (they apparently were transported through France) they should therefore have been placed under the Community transit procedure in Belgium.

However, where goods move between the Community and Switzerland under the procedures of international carriage by rail, the Community transit procedure does not apply to such carriage (Article 7 (1) of Regulation No 542/69 and Article 2 (2) of the Agreement with Switzerland).

On the other hand where goods move between two points situated in the Community via Switzerland, either directly or, after being consigned to Switzerland, on re-consignment from Switzerland, even after storage in a customs warehouse, the rules of Community transit apply (Article 1 of the Agreement).

Reading these two provisions together seems to produce the result that if goods are consigned to Switzerland for the purpose of their being re-consigned from Switzerland to Italy and that is done, then the Community transit rules apply and the various Community transit procedures must be applied.

If on the other hand goods are simply consigned to Switzerland under the procedures of international carriage by rail which are referred to in Article 7 (1) of Regulation No 542/69, the Community transit procedures do not apply to that stage of the journey, even if subsequently a contract is made for the goods to be carried to Italy.

Once the goods leave Switzerland for Italy, they are, however, for the purposes of applying Council Regulation No 304/71 of 11 February 1971 (OJ 1971, L 35, p. 31; English Special Edition 1971, p. 63) which simplifies the Community transit procedure for goods carried by rail, to be “considered as moving under the procedure for external Community transit” (Article 8 (1) of the Agreement with Switzerland).

It must obviously be known when the goods arc first moved whether they are subject to Community transit procedures or not.

Accordingly the answer to the first question in my view is that if goods arc despatched from Belgium to a specific consignee in Switzerland with the intention that they should be re-consigned to another point in the Community and are then re-consigned by that consignee in Switzerland to another consignee in Cremona and are imported there, they arc to be regarded at all times as in Community transit. They are in any event when consigned from Switzerland to Cremona to be considered as in Community transit and under the procedures for external Community transit for the purposes of applying Council Regulation No 304/71.

The second question referred is as follows :

“In the circumstances under consideration, was it lawful for the Swiss customs authorities to issue CIM international consignment notes containing references to the consignment notes relating to the previous phase of the carriage and to mark them with the letters T2 indicating internal Community transit, on the basis of the assertion (for which there is no proof in as much as copy No 3 of those documents is presumed lost) that the earlier consignment notes were not marked with any letters and therefore did not bear the letters Tl, in the absence of which the Community transit operation had to be treated as internal and not external, that is to say relating to goods which did not come from countries outside the Community?”

It is common ground that the Swiss customs authorities did mark the consignment notes covering the carriage of the goods from La Praille to Cremona “T2”. The second question proceeds on the basis that the earlier consignment notes were not marked with any letters. Whether this was in fact the case is, of course, for the Court of Appeal at Brescia to decide. It is, however, right to point out that, from the documents made available to the Court, it would appear that copy No 3 of the four consignment notes covering the carriage from Belgium to Switzerland bore no mark, but that the Swiss authorities appear to accept that copies No 3 of the remaining two consignment notes were marked “Tl”. For reasons which are not clear, the third copies of these consignment notes were not in the possession of the Swiss customs authorities when the second set of consignment notes was issued, and the second copy of the consignment note was marked “(3)”. The Belgian consignment notes were, however, marked “T2L” in manuscript, apparently by the Swiss authorities.

The power of the Swiss customs authorities to issue T2 documents is defined in Articles 5, 6 and 8 of the Agreement between the Community and Switzerland. So far as is relevant to the present case, the Swiss authorities may only issue a T2 document subject to presentation of a T2 or T2L document drawn up by a Member State (Article 6 (1)) and to compliance with Article 5, which imposes conditions on the treatment of the goods when they are re-consigned from Switzerland after storage in a customs warehouse.

It has not been suggested that the goods were stored otherwise than in compliance with those conditions.

The only question, therefore, is whether the documentation presented to the Swiss customs authorities entitled them to issue the documents for the carriage of the goods to Italy. The Swiss customs authorities were only entitled, and only required, to mark the third copies of the consignment notes “T2” if the goods were subject to internal Community transit; if they were not, it was not necessary to put any mark on the third copy (see Article 8 (2) and (3) of the Agreement).

Commission Regulation No 304/71 simplified the Community transit procedure for goods carried by rail under cover of a CIM international consignment note and, for this reason, largely replaced the provisions of Titles II and III of Regulation No 542/69 (see Article 17 of Regulation No 304/71), although it did not preclude use of the procedure provided for in Regulation No 542/69 (see Article 19 of Regulation No 304/71). Regulation No 304/71 did not, therefore, affect in principle the basic rules laid down in Title I of Regulation No 542/69 concerning the application of the Community transit procedure to the movement of goods; it was intended to simplify that procedure, where it applied. Article 5 of Regulation No 304/71 provides that the railway authorities are to ensure that consignments carried under the Community transit procedure are identified by labels attached, inter alia, to the consignment note. In the case of goods which are not carried under the Community transit procedure, a Community transit document is issued only if required to prove the Community nature of the goods for the purpose of ensuring the application of the Treaty provisions relating to the free movement of goods (see Article 7 (3) of Regulation No 542/69). At the material time, this would have been the T2L document.

Article 2 of Regulation No 304/71 provides that the international consignment note is to be treated as a Tl or T2 declaration depending on whether the goods are those to which the external or internal transit procedure applies. In the case of a carriage operation which starts within the Community and ends outside it, the same procedure applies as to carriage operations which start and end within the Community (Article 10 (1)) save that the customs office for the frontier station through which the goods in transit leave the territory of the Community acts as the office of destination (Article 10 (2)). The third copy of the consignment note is to be marked Tl by the customs office of departure if the goods are carried under the external Community transit procedure (Article 7 (2)). On the other hand, there is no requirement that the consignment note be marked T2 if the goods are carried under the internal Community transit procedure and the Member States are even authorized to provide that such goods may be placed under the internal Community transit procedure without it being necessary to submit the consignment note to the office of departure (Article 7 (4)).

Having regard to Articles 2 and 5 of Regulation No 304/71, it seems to follow that, if the consignment note bears a label indicating that the goods are carried under the Community transit procedure and if the third copy of the consignment note is not marked T1, it is to be treated as a T2 declaration. However, while this applies in the Member States, Articles 7 (2) and 7 (4) are expressly excluded so far as the Agreement between the Community and Switzerland is concerned (see Article 13 (1) of the Agreement). In my opinion, this was intended to avoid any conflict with Articles 5, 6 and 8 of the Agreement concerning, in the case of Article 7 (2), the marking of consignment notes by the Swiss customs authorities. It does not signify that, where the third copy of a consignment note relating to Community goods under internal Community transit is not marked Tl by the customs authorities in a Member State, the consignment note cannot be regarded as a T2 declaration when it comes into the hands of the Swiss customs authorities. In such an event, the consignment note would, in my view, constitute a T2 document for the purpose of Article 6 (1) of the Agreement between the Community and Switzerland and the Swiss customs authorities would be authorized to mark the consignment notes for the carriage of goods to Italy T2. If the third copy of the consignment note were clearly marked Tl, the Swiss customs authorities would naturally have no authorization to do so. The same would apply if the third copy were missing because the Swiss customs authorities would not then be in a position to ascertain the status of the goods from the consignment note alone. In this situation, the Swiss customs authorities could not, in my view, properly issue T2 documents unless, pursuant to Article 4 (1) of the agreement, they had contacted the customs authorities in the Member State from which the goods had come and been informed by them that the goods were Community goods.

This presupposes that the goods in question were carried under the Community transit procedure for the journey from Belgium to La Praille. If this journey was merely the first stage of an intended movement of the goods from Belgium to another point in the Community, then it was proper for the consignment notes from Belgium to Switzerland to be treated as T2 documents and the Swiss authorities were entitled to mark the new consignment notes “T2” If it was simply a consignment from Belgium to Switzerland, since Switzerland is not treated as part of the Community for the purposes of Article 7 of Regulation No 542/69, it follows, in my view, that the Community transit procedure was not applicable and that the consignment note should not have been labelled in accordance with Article 5 of Regulation No 304/71. In this situation, the Community nature of the goods could only have been established if they were covered by T2L documents. In the absence of such documents, the Swiss customs authorities would not have been authorized under Articles 6 (1) and 8 (2) of the Agreement to forward the goods under consignment, notes marked Ţ2. Instead, they should have been carried under the external Community transit procedure, it not being necessary to mark the consignment notes “Tl” (see Article 8 (1) and (3) of the Agreement).

The third and fourth questions referred are as follows :

“In the case of goods which in fact came from outside the Community (in this case from Australia) and were imported into Belgium temporarily and therefore without the payment of any customs duty in Belgium, the Member State of the Community in which the transit in question began, does that transit operation, which was carried out on the basis of documents permitting internal Community transit, give rise to liability on the part of the country (and of the traders) from which the goods were consigned (Belgium) or on the part of the country from which they were subsequently re-consigned (Switzerland) and not on the part of the country (Italy) where the goods were definitively imported on the basis of documents which were formally valid?.”

The fourth question is whether in the light of Article 36 (1) of Regulation No 542/69, the recovery of agricultural levies must be effected “by the State in which the transit described as being an internal Community transit operation commenced or by the State from which the goods were re-consigned, by means of proceedings against the traders concerned, even though in this case the offence was discovered in Italy?”

As to the third question, it does not seem to me that the transit operation in itself can be said to give rise to liability for the duties or levies. Where goods are imported into a Member State under inward processing arrangements, duties and agricultural levies are not chargeable by virtue of Directive 69/73 of 4 March 1969 (OJ 1969, L 58, p. 1, English Special Edition 1969, p. 75). Where the goods are put under the external Community transit procedure for export, or are exported outside the customs territory of the Community, duties and levies do not have to be paid (Article 13 of the directive). On the other hand the competent authorities of the Member States where the processing is carried out may allow the goods to be placed on the market under the conditions referred to in Articles 14 and 15 of the directive, one of which is that customs duties and agricultural levies must be paid, assessed as provided in the directive. This seems to me clearly to envisage that the duties and levies are collected by the competent authorities in the Member States where the processing was carried out, unless the goods are released on specific terms that the duties be paid elsewhere in the Community. Accordingly, if in the present case the goods were put on the market in Belgium, so that they could be transhipped to Italy, or authorized to be sent to Italy under the Community transit procedure, duties and levies should have been charged in Belgium, unless specific provisions were made for them to be charged in Italy. If they were simply sent to Switzerland on completion of the inward processing arrangements, then no duties would have been payable in Belgium or of course in Switzerland. They would have been payable on first importation into Italy.

Article 36 of Regulation No 542/69 provides as follows:

“1. When it is found that, in the course of a Community transit operation, an offence or irregularity has been committed in a particular Member State, the recovery of duties or other charges which may be chargeable shall be effected by that Member State in accordance with its provisions laid down by law, regulation or administrative action, without prejudice to the insititution of criminal proceedings.

2. If the place of the offence or irregularity cannot be determined, it shall be deemed to have been committed: (a) where, in the course of a Community transit operation, the offence or irregularity is detected at an office of transit situated at an internal frontier: in the Member State which the means of transport or the goods have just left; (b) where, in the course of a Community transit operation, the offence or irregularity is detected at an office of transit within the meaning of the second indent of Article 11 (d): in the Member State to which that office belongs; (c) where, in the course of a Community transit operation, the offence or irregularity is detected in the territory of a Member State elsewhere than at an office of transit; in the Member State in which it is detected; (d) where the consignment has not been produced at the office of destination: in the last Member State which the means of transport or the goods are shown by the transit advice notes to have entered; (e) where the offence or irregularityis detected after the Community transit operation has been concluded: in the Member State in which it is detected.”

Article 2 (2) of the Agreement with Switzerland provides that, in the application of the rules on Community transit, Switzerland shall have the same rights and obligations as the Member States, and any reference to the Community or to the Member States shall apply equally to Switzerland, save as excluded, for example, in Articles 1 and 7 of Regulation No 542/69. Article 36 is not excluded by Article 13 of the Agreement from the Community provisions applicable to Switzerland. For this. purpose the “Community” is to be read as including Switzerland. Consistently, the guarantee to be given under Article 27 of Regulation No 542/69 in order to ensure the collection of duties and other charges must, by Article 11 of the Agreement, also be valid for Switzerland.

Article 36, which thus applies to Switzerland, does not deal with liability to pay the charges. It is concerned with responsibility for their recovery.

Mr Fioravanti, by his counsel, submits that responsibility for recovering charges is assigned to a Member State simply because the offence or irregularity in the course of a Community transit operation can be shown to have occurred there. Here the irregularities were committed outside Italy and they do not fall to be recovered by Italy. The Commission says this is a total misconception. The only offence or irregularity referred to in Article 36 is one which gives rise to a customs obligation; it must be an offence or irregularity “which concerns the necessity of collecting duties or levies”. The only relevant question is, therefore, according to the Commission, where the customs or levy debt was due; if it was not paid that is an irregularity. Here the goods were admitted for home use in Italy. The levy was not paid there. That is the sole relevant irregularity. Therefore, the debt is recoverable by Italy. Irregularities as to transit or as to transit documents do not create liability for the duties; there is no nexus between liability for the duty and commission of the transit irregularity. Therefore, the latter is irrelevant for the purposes of Article 36. Only if it is not possible to identifiy the Member State where the levies fall to be paid do the provisions of Article 36 (2) fall to be applied.

I do not accept the Commission's contention. Article 36 provides for the collection of duties which may be chargeable. It does not state simply — “shall be recovered in the Member State where they are payable”, and is not concerned only with events which give rise to a customs debt. The most obvious event to give rise to a customs debt is importation and that is not an offence of itself. What the Article says is that chargeable duties are to be collected by the Member State in which, in the course of a Community transit operation, an offence or irregularity has been committed. The offence or irregularity must thus occur “in the course of” a transit operation and, as I see it, be connected with the transit operation. The Member State where that offence occurs may or may not be the Membe State into which the person liable for the duty imports the goods.

This interpretation seems to me to be borne out by paragraph 2 of the Article, which defines the Member State in which recovery of duties is to be effective, if the place of the offence or irregularity cannot be determined. It may thus be the Member State which the goods or transport have just left, or the Member State of an office of transit where the irregularity is detected. Moreover in paragraph 14 of its judgment in Case 105/83 Pakvries BVv Netherlands (16 May 1984) the Court stressed the link between the responsibilities of Member States for the recovery of duties and customs control exercised at the frontier of Member States.

That this was intended to apply also to Switzerland is clear from Annex IV of the Agreement whereby it is accepted that the arrangements made for the customs and railway authorities of the same Member States to deal exclusively with irregularities discovered during or in respect of a Community transit operation “in order to reach a quicker settlement of any dispute” should also apply to Switzerland.

Thus, if in the present case the facts are that the goods were consigned from Belgium to Switzerland with the intention that they should be re-consigned to Italy, then it seems to me that the failure to mark the original consignment notes (or four of them) “T2” was an irregularity committed in Belgium. That error was committed in the course of a Community transit operation. Belgium is liable to collect. If on the other hand the goods were first carried to Switzerland under the procedure of the TIF Convention and the carriage was to end there, they were not carried under Community transit procedures and Article 36 does not apply to that transit. In this case an irregularity was committed in the course of the carriage from Switzerland to Italy because the goods were incorrectly described as Community goods and placed under the internal Community transit procedure. The irregularity was committed in Switzerland, because that was where the goods were placed under the wrong procedure, whether or not the cause of the irregularity was an event which took place before the goods arrived in Switzerland or an irregularity in an earlier transit operation. As a result, the fact that the Swiss customs authorities may have been led to commit the irregularity by a mistake made by the Belgian customs authorities does not alter the position. It follows, in my view, from the provisions referred to earlier that, if an offence or irregularity is committed in Switzerland, in the course of a Community transit operation, Switzerland has the same obligations as the Member States to collect duties and levies which may be chargeable on behalf of the Community, conversely by the Member State on behalf of Switzerland if the irregularity is committed in the Community.

For these reasons, it is my opinion that the questions referred should be answered on the following lines:

1. A transit operation involving goods which are dispatched from Belgium to a specific consignee at the free port of Geneva and then re-consigned through the customs office of that port to another consignee in Cremona, where they are definitively imported, is to be regarded as Community transit if, when the goods leave Belgium, it is intended that they shall after leaving Switzerland be carried to Italy; if the goods are transported to Switzerland without any intention that they shall proceed to another point in the Community, but in fact are subsequently consigned from Switzerland to Italy, only the transit from Switzerland to Italy is to be regarded as Community transit.

2. (a) If the consignment notes sent from Belgium to Switzerland (“the Belgian consignment notes”) bore labels in accordance with Article,5 of Regulation No 304/71 to indicate that the goods were carried under the Community transit procedure, and if the third copy of such consignment notes was not marked “Tl”, so as to indicate external Community transit, the Swiss customs authorities were entitled to mark the consignment notes for the carriage of the goods from Switzerland to Italy (“the Swiss consignment notes”) “T2”. (b) If the Belgian consignment notes were not so labelled (so as to indicate that the goods were carried under the Community transit procedures) the. Swiss customs authorities were not entitled to mark the Swiss consignment notes “T2” unless they received from the Belgian authorities a “T2L” document. (c) If the goods were not carried under the Community transit procedure and were sent from Belgium to Switzerland under the procedures of international transit by rail (TIF Convention) and therefore were not so labelled, but the Belgian consignment notes were marked “T2” by the Belgian customs authorities, the Swiss customs authorities were entitled to mark the Swiss consignment notes “T2”. (d) If the third copy of the consignment notes was missing, the Swiss customs authorities did not have authorization to mark the consignment notes for the carriage of the goods to Italy T2 in the absence of a clear statement from the customs authorities in the Member State from which the goods had come to the effect that they were Community goods.

3. & 4. The transit operation in itself does not give rise to liability for duties or agricultural levies. By virtue of Article 36 of Regulation No 542/69 recovery of such duties and levies is to be effected by the Member State in which an offence or irregularity in the course of a Community transit operation was committed. If the goods are carried under Community transit procedures from Belgium to Italy through Switzerland, and an irregularity is committed in Belgium, then recovery of the duties is to be effected by Belgium. If the goods, though sent from Belgium to Switzerland, are only carried under Community transit procedures between Switzerland and Italy, and an irregularity in the course of such transit is found to have been committed in Switzerland, recovery of such duties and levies is to be effected by Switzerland by virtue of the Agreement made between the Community and Switzerland, which is annexed to Regulation No 2812/72, as amended.

The costs of the parties to the proceedings before the referring court fall to be dealt with by that court. No order should be made as to the costs of the Commission or the Italian Government.