OPINION OF MR ADVOCATE-GENERAL ROEMER

DELIVERED ON 1 DECEMBER 1970 ( 1 )

Mr President,

Members of the Court,

The plaintiff in the main action, an import firm which has its registered office in Hamburg, applied in January 1963 for customs clearance for maize which had been imported from the USA. According to its declarations, the goods had been damaged in transit by moisture and had lost 25 % in value. Regardless of this, the customs office responsible, on the basis of Regulation No 19 of the Council on the progressive establishment of a common organization of the market in cereals (OJ 1962 p. 933), which was then in force, imposed a levy according to the rate shown in the import licence, that is, in the full amount.

The import firm considers that this is not justified; it claims rather that the levy should be reduced in proportion to the loss in value. For this reason, having made an unsuccessful appeal, it took the matter right up to the Bundesfinanzhof. In the proceedings, it takes the view that although according to Regulation No 19 differences in the quality of the goods imported are not to be taken into considerado in calculating the levy, this case involves defects in condition which must be assessed differently. In this respect, Regulation No 19 contains no provisions and in particular it does not provide that special features of this kind cannot be considered. It claims that this is a gap in the levy system which needs to be filled by means of an amplifying interpretation to the effect that where there are defects in the condition of imported goods only a reduced levy is payable. If an amplifying interpretation is held to be impossible and on the basis of Regulation No 19 it is considered necessary to impose the full levy on goods damaged in transit, its validity in this respect would have to be questioned. This is because there would be a breach of the principle of the equality of taxation, an infringement of the principle of the equality of taxation, an infringement of the principle of proportionality and a disregard of the prohibition on the imposition of duties which is derived from Article 12 of the EEC Treaty.

In view of these problems, the Bundesfinanzhof stayed proceedings by an order of 4 June 1970 and referred the following questions to the Court of Justice for a preliminary ruling in accordance with Article 177:

‘(1) Must Regulation No 19 of the Council of the European Economic Community of 4 April 1962 concerning the progressive establishment of a common organization of markets in the cereals sector be interpreted as meaning that the same levy must be imposed on maize which has suffered water damage in transit before being imported and thus lost some of its value as on maize which has suffered no damage?

(2) If so, is this regulation valid?

(3) If Question 1 or 2 is answered in the negative, (a) can a levy be imposed on maize which has suffered water damage before being imported? (b) If Question 3(a) is answered in the affirmative, according to what criteria must the levy be fixed?”

On the basis of the written observations submitted by the plaintiff in the main action, the Dutch Government and the Commission of the European Communities and having regard to the oral observations made by the plaintiff and the Commission, I shall now deliver the following opinion on these questions:

1 — The first question

In accordance with the manner in which the questions were phrased by the Bundesfinanzhof, it must first be examined whether Regulation No 19 must be interpreted as meaning that the same levy applies to maize which has been damaged in transit as to undamaged maize. According to the Commission's view, this question must be answered in the affirmative. On the other hand, the plaintiff claims that Regulation No 19 does not provide that the same treatment is to be applied. Finally, the Dutch Government takes the view that the answer to the question on the levy applicable to maize which has been damaged in transit cannot be found solely in Regulation No 19 and the implementing regulations issued thereunder in Community law.

In examining the questions which have been posed, it can be stated with certainty that under Regulation No 19 a system of general levy was applicable in principle. The Commission has strongly emphasized this and described it in detail. The purpose of this system was to guarantee the pricelevel achieved for domestic products by raising the price for goods imported from third countries, that is, the world market price, up to Community level by means of levies. For this operation two reference prices are significant: first, the so-called threshold price as regards the domestic market, which corresponds to the basic target price at the frontier, that is, to the selling price sought for the product concerned at the marketing centre of the region having the greatest deficit, and secondly the cif price in respect of imports. The threshold price was fixed each year by the importing State for each class of product mentioned in Regulation No 19 and for a specified standard quality (sound, merchantable goods). The Commission determined the cif price on each occasion. In so doing, the most favourable opportunities for buying on the world market during a certain reference period had to be taken into account for “fair average quality”, and this was thereafter converted into the standard quality for the Community by using certain coefficients. The amount of levy payable was the difference between the two values, whilst the cost price of the individual consignment was not important.

The plaintiff also admits all this, and in particular the fact that differences in quality were of no importance. However, it considers that the system does not prevent differences in the condition of a product (which cannot be equated with differences in quality) from being taken into consideration. In this respect it relies on the fact that the relevant values are calculated having regard to sound, merchantable goods. Only these products therefore are covered, and this is shown clearly in the context of the refund system. Moreover, the plaintiff refers to various increasingly subtle differences contained in the market organization and finally it invokes German case-law on the former national market organization whereby the condition of goods was also important.

However, it is not difficult to show that all these arguments cannot support the contentions of the plaintiff described at the beginning. This certainly applies to the reference to the refund system. It can be ruled out immediately because the interests involved are obviously different from those which are applicable to imports. The conclusion cannot be drawn, therefore, that everything which is applicable to refunds also applies identically to levies.

Then, as regards the fact that the market organization is based solely on sound, merchantable cereals, it must not be overlooked that this is only the case with regard to the calculation of the relevant reference values. It cannot however be concluded from this that corresponding requirements as to quality must be transferred to the goods which are actually imported, especially because Article 10 of Regulation No 19 simply refers to products without qualifying them. In view of its very detailed rules it is especially difficult to imagine that its authors intended it only to apply to sound goods whilst leaving a gap for goods in inferior condition.

Although the plaintiff further refers to the wide differences which exist in the common organization of the market in cereals, against this it can be said that this is essentially a differentiation by products or by the composition of products or by such general criteria as the date of import, if the case of delay in importing owing to force majeure is left aside. The adjustment measures mentioned by the plaintiff (concerning the amount of levy, the coefficients of equivalence applicable for calculating the world market prices and certain denaturing premiums) are of a general nature, that is they relate to products. On the other hand, the condition of the goods imported obviously plays no part in the differentiation as a rule. However, although this can be deduced from the regulation, precisely in view of its detailed nature it is difficult to accept that an appropriate interpretation compels a differentiation to be made when the author of the regulation has said nothing about it expressly.

Moreover in this respect reference can be made, in support of the interpretation proposed by the Commission, not only to the preparatory work on Regulation No 19 (during which the problem of cereal damaged in transit was apparently looked at but any special rules were dispensed with; reference must also be made to Regulation No 61 of the Commission on the fixing of standard qualifies for cereals and coefficients of equivalence between these standard qualities and the standard qualities which are decisive in determining the target price (OJ 1962 p. 1671).

Whilst this Regulation — as regards maize, in Article 5 — this permits the conclusion to be drawn that the question of condition was not overlooked but was intended to apply to a very specific and limited extent. Finally, the reference to national case-law on the national market organization which was formerly applicable and the fact that the condition of goods was in that connexion important in the differentiation is of no value in this case. As the Commission points out, such a reference could only be of use if the structures of the market organizations were the same. However, this is obviously not the case with regard to the function of controlling prices and quotas which was formerly attributed to the Einfuhr- und Vorratsstelle (Import and Supply Agency).

Accordingly, in company with the Commission, I reach the conclusion that Article 10 of Regulation No 19 provided for the imposition of the same rate of levy on imported maize regardless of quality and condition, although it did not mention condition, and that therefore in this respect it cannot be said that there is a gap in the regulation and that modified application of it can be arrived at by means of interpretation.

Incidentally, it is also quite certain that the viewpoint expressed by the Dutch Government is untenable, that is, the viewpoint that the Member States prossess power to make regulations, jurisdiction to issue supplementary implementing provisions, in respect of the problem with which we are concerned at present, or more precisely, that they can reduce or waive levies according to the condition of the goods imported. As I have already stated, under the system laid down in Regulation No 19 the only power conferred on the Member States is to fix the threshold price once a year (moreover this price cannot then be altered arbitrarily). In addition, Regulation No 67 of the Commission laying down the criteria for altering the rate of the levies on cereals, flour, groats and meal (OJ 1962, p. 1860) leaves Member States some margin of discretion within which they can decide that fluctuations in cif prices shall not affect the amount of the levies. On the other hand, it is impossible to detect the existence of more extensive freedom on the part of Member States and in my opinion there is no question of any such powers because they could not be reconciled with the important principle of the uniformity of the levy system. In this respect, the Commission rightly referred to the principle which was stressed in the judgment in Case 74/69 [1970] E.C.R. with regard to the sovereignty of the Community in tariff matters, according to which national implementing measures do not cause any alteration to the scope of the Community organization of markets and therefore certainly cannot prejudice the uniform application of the levy system. In particular it was held in the case concerned that Article 23 (1) of Regulation No 19 does not provide any such opportunities of making regulations, and its purpose is on the contrary merely to require the Member States to eliminate all obstacles under national legislation which might stand in the way of the uniform application of the regulations on the organization of markets, which application guarantees them the same scope.

However, if, contrary to the view of the Dutch Government, national implementing measures cannot provide for variations in the Community rates of levy according to the condition of the goods imported, the only remaining alternative is to answer the first question submitted by the Bundesfinanzhof in the affirmative.

2 — The second question

If the first question is answered in the way I have suggested, then the second question which arises, in the view of the Court referring the questions for a preliminary ruling, must be dealt with, namely whether the fact that Regulation No 19 did not prescribe any special treatment for goods damaged in transit, but provided that the same rate of levy be imposed as on perfect goods, justifies doubts as to its validity. The Commission denies this firmly; on the other hand, the plaintiff in the main action would answer the question in the affirmative by referring to the principles already expounded before the Bundesfinanzhof.

The way in which the question is framed already makes it clear that it is not simply concerned with the validity of the general levy system. In fact, as the Commission rightly stated, no objections can be made to it, that is, in particular to the failure to differentiate the rate of levy according to the quality of the goods bought and their cost price. The arguments which the Commission put forward on this point may be approved without any further discussion. The advantages provided by a uniform, direct determination of the relevant values by the Commission itself should be remembered, whereas differentiation according to the facts of each particular case, which requires the exercise of discretionary power on the part of national administrative authorities, might lead to errors and fraud and in particular to divergent administrative practices. What the Commission stated on the question of the impartiality of the general system as regards competition, on the effects of this system on the price situation on the domestic market and especially on the fact that even importing cheap products might disturb the Community price structure, is also important. Moreover, it may certainly be said that in general no harmful effects on the import trade can be seen since it can adapt itself accordingly when buying goods with the knowledge of the characteristics of the transparent system, and in particular as regards quality, which may very well have significant secondary effects on the market organization and its price structure, since good quality imports will predominate. All this, as I have said, is doubtless correct. However, it does not of course provide an answer to the question whether the absence of special rules seems justified where sound cereals are bought and they only become damaged in transit, that is, unexpectedly, thus sometimes considerably reducing their value.

The Dutch Government has described in its written observations the effects of the system of the normal levy in such situations, and it is also easy to imagine. The price of the imported goods is increased to a level above that applicable to corresponding home-manufactured (damaged) goods, since the amount of the levy is of course based on sound, merchantable goods. As a result of this charge their sale can in some circumstances produce a loss, or it may even be impossible to import them if the levy is greater than the residuary value of the damaged goods. Thus the amount of the levy would have a prohibitive effect. Such consequences cannot be prevented, although there is usually a transport insurance policy. Apparently, it is commercial practice only to take out a policy against the risk of damage in transit, that is, against the risk of loss in the value of the goods measured against the world market price. However, this Only provides compensation which, as the plaintiff's example shows, often does not guarantee that the goods can be sold without a loss when normal rates of levy are applied. Only a special insurance policy would guarantee more extensive compensation, that is, a policy against the risk of having to pay levies which, compared with the value of the damaged goods, must be considered excessive. Insurance policies of this type are, however, evidently not commercial practice, and the premiums, which are correspondingly higher, are on that account not taken into consideration when determining the cif price. Apart from this, it can also scarcely be said that the other provisions mentioned by the Commission are always sufficient, that is, the recognition of considerable damage as a case of force majeure and the possibility of revoking or extending the licence. In fact this releases the importer of damaged goods from the obligation to import or to import immediately, but it only helps him if the amounts of the levies fall and importing the goods seems feasible at a later date or if the goods can be sold elsewhere without considerable expense and this can be regarded as economically sensible. It should of course be obvious that this is not always the case.

It can therefore certainly not be denied (the Commission does not deny it either) that in some situations there may be a genuine need not to subject damaged goods to the full levy. If no corresponding provision exists (they are apparently now being prepared), it seems further to be obvious that this is a serious defect in the basic regulation and one which might cast doubts on its validity, that is, could prevent the general rate of levy from being applied in situations of this kind.

Whether this judgment is correct in the case with which we are now concerned must be examined chiefly in the light of the arguments submitted by the plaintiff. In so doing, I shall begin with its reference to Article 12 of the EEC Treaty and the principle of the illegality of specific customs duties which it is claimed can be derived from this, since it obviously presents the least difficulty. In fact, with the Commission it can be said immediately that the reference to Article 12 of the EEC Treaty (which moreover the plaintiff did not reiterate in its oral observations) is of no value in the present case. The reason is that the purpose of Article 12 is to impose an obligation on Member States to maintain the status quo with regard to intra-Community trade, and it thus contains no orders addressed to the institutions of the Community and moreover does not simply prohibit the imposition of specific customs duties as such, but merely quite generally the introduction of new customs duties and charges having equivalent effect.

On the other hand, the plaintiffs' reference to the principle of equality of taxation and the assertion that in view of the aim pursued by the levy system, the principle of proportionality is infringed where the general levy is imposed on goods which have been damaged in transit might be more important. As regards the first principle mentioned, the Commission also admits that an importer of damaged goods has to pay a higher charge in proportion to their value than an importer of undamaged goods. This must in fact appear to be discriminatory if the comparison is not restricted to the situation of importers of damaged goods but, which alone is correct, the charge imposed on normal imports is also taken into consideration. Nor in this context can the reference to the fact that differences in quality are likewise disregarded when the levy is calculated be decisive, for in this respect it is highly important that the trader when buying the goods was prepared for this circumstance, whereas the importer of goods which have been damaged in transit is the victim of an unforeseen event.

With regard to the principle of proportionality, the plaintiff relies on Article 40 of the EEC Treaty, the legal basis of the Community market organization and in particular the words ‘all measures required to attain the objectives set out in Article 39’. The plaintiff claims that only a regulation covered by this phrase can be justified as the subject of a common organization of markets. Although in my opinion in Case 73/69 [1970] E.C.R., I left open the question whether the principle of proportionality can be derived from Article 40 of the EEC Treaty or whether the words mentioned are not on the contrary intended to postulate the power of the Council to make provisions concerning the market organizations, of course there can be no doubt that the Council's wide margin of discretionary power which exists in fact under the Community law on the organization of markets is not unlimited, but is bound to the purpose inherent in the law on the organization of markets, and that consequently it must be permissible to examine whether the use of this discretionary power is based on proper considerations. If this examination is undertaken in relation to Articles 39 and 40 of the EEC Treaty, it seems that the decision as regards this case can once more be quickly ascertained. The purpose of the common organization of the market in cereals is to guarantee the agricultural population a proper standard of living and to stabilize the markets by means of regulation of prices. To protect prices within the Community a price adjustment is made and the prices of imported goods are raised to the level prevailing in the Community. However, as the plaintiff rightly stresses, there is no doubt that this purpose does not cover the imposition of levies on goods which have been damaged in transit which are only necessary in order to attain the price level prevailing for sound cereals. To this extent therefore it could be said that this is a misuse of discretionary power.

However, the considerations which have been advanced so far still do not prove definitely that the levy, system is illegal, since many different aspects have to be taken into account and balanced against one another in drawing up a regulation on the basis of a discretionary power and only if it cannot be justified on any really tenable criterion are doubts admissible as to its validity. In this respect for example the idea might be considered that the price structure laid down under Community law is disturbed even by the importation of cheap cereals (this as we have seen is what makes it permissible to generalize the levy regardless of differences in quality). In this present case, this consideration must frankly be rejected immediately, simply because goods which have been damaged in transit, in proportion to the total size of the market are not really of such great importance that it can be said that the market is jeopardized if the levy is calculated according to value. The levy system to which objections have been made could moreover be justified by the fact that any divergencies would necessitate a complicated system, that many questions of detail varying according to the circumstances of each particular case would have to be dealt with (for example, the actual cost price, the nature of the damage, the possibility of obtaining damages from third parties, and so on) that in this respect questions of expediency play a part, and therefore not only the need for expensive checks but also the danger of divergent administrative practices would become apparent. If I understand it correctly, the Commission is mainly concerned with these criteria, and certainly nobody will try to deny that they have been impressively presented. However, I have doubts whether the system criticized can be justified in this way. First of all, the question must be asked whether all these factors to which the Commission has referred really must be taken into consideration or whether as regards damage incurred in transit a generalizing decision would be sufficient, which, as the plaintiff rightly says, could claim the presumption of appropriateness for itself in the same way as the generalizing imposition of the levy. As regards the administrative difficulties which undoubtedly exist, reference can be made to the corresponding problems in the law relating to ad valorem customs duty (which, as the Dutch Government observed, plays a part in many agricultural market systems alongside the levies). Although levies differ in their function from ad valorem customs duties, this reference is certainly justified, again with regard to the assumption that goods damaged in transit should not genuinely jeopardize the market because of the relatively small volume involved. Moreover it must also be said that certain disadvantages for the common organization of markets which might be the result of divergent administrative practices are less important than an excessive and therefore unjust charge on imports. On the other hand, to refer importers to the fact that they can take out a correspondingly extensive insurance policy would mean not only urging a completely unusual method of reducing the risk but also in particular trying to justify a levy system which is per se illegal by referring to the possibility of shifting its disadvantageous consequences onto civil law, which, as the plaintiff stresses, must be regarded not as a proper but as an improper exercise of discretionary power. Finally, in this connexion the consideration must be rejected too that cases of damage in transit are so rare and so unimportant as regards volume and value that in the overall scope of a commercial transaction they could certainly be controlled and that in particular it should not be regarded as misuse of discretionary power if the legislature has not included this eventuality from the start in a completely novel and complicated subject-matter. The plaintiff has opposed this emphatically and claimed that these are in no way rare, trifling and unimportant cases and the fact that such cases have become less common is solely because of the practice of Dutch authorities, by way of departure from Community law, of reducing or even waiving levies where there has been damage in transit. The Commission could not credibly invalidate this assertion, as it was obliged to do as far as possible.

Accordingly, in spite of the fundamental validity of the general levy system, I reach the conclusion that Regulation No 19 reveals a considerable defect which is not made good by its purpose and other considerations, in so far as it did not provide a special system for the particular cases of serious and unforeseen damage in transit but prescribed that the general levy was to be imposed regardless of the value of the goods. The second question must be answered accordingly and it must be held that Article 10 of Regulation 19 is partially inapplicable.

3 — The third question

In view of this result the question must finally be posed whether a levy was payable at all on maize damaged in transit and, if the question is answered in the affirmative, how it ought to have been calculated.

The first part of the question certainly presents no difficulties. All the parties to the proceedings agree that there is no question of complete freedom from levy. Moreover, in view of the need to protect the market also against damaged goods, it seems obvious that this cannot in fact be considered. I shall therefore examine what then the procedure must be.

In this respect the view put forward by the Dutch Government that national provisions are suitable for filling the existing gap, must certainly be rejected. I have already said all that is necessary on this point above, in particular in relation to the need to apply regulations which are uniform throughout the Community. Likewise, it cannot be thought that the solution should be reserved to the Community legislature (perhaps in view of the necessary considerations of discretionary power), for apparently this solution, which would have to be of a general character and take other considerations into account, cannot be reckoned with in the short term.

Thus the only remaining possibility is, as was also suggested by the Dutch Government, that rules such as those applicable under the legislation relating to ad valorem customs duties should be followed, that is, in the case of serious damage to goods in transit to reduce the levy in proportion to the loss in value. In fact there are no compelling reasons to oppose the application of this method whilst there is no special provision in the regulation: In my opinion there is no need to fear considerable differences in administrative practices. However, if they should emerge, this would certainly give the Commission cause to draw up a specific Community regulation speedily if it hears of them. This settles the answer to the third question, which requires no further consideration.

4 — summary

In view of the above, the questions submitted by the Bundesfinanzhof must be answered as follows :

(1) It follows from Regulation No 19 that only one rate of levy is applicable to imports of maize from third countries, so that there is no provision for a reduction for cases where the goods have suffered a loss in value in transit through the action of water.

(2) The fact that Regulation No 19 has made no provision for a reduced levy in the cases mentioned in (1) must be regarded as a substantial defect which impairs its validity in view of the aims pursued by the regulation and in view of the principle of the equality of treatment of those subject to levies. The general levy system is not therefore applicable to the special cases mentioned.

(3) Imports from third countries of maize damaged by water in transit are not exempt from the levy. On the other hand, if it is serious, the levy must be reduced in proportion to the loss in value, taking into account the principles applicable under the legislation on ad valorem customs duties.

( 1 ) Translated from the German.