CELEX: 61994CC0300
Language: en
Date: 1995-12-14
Title: Opinion of Mr Advocate General Fennelly delivered on 14 December 1995. # Tirma SA v Administración General del Estado. # Reference for a preliminary ruling: Tribunal Superior de Justicia de Andalucía - Spain. # Protocol No 2 to the Act of Accession of Spain and Portugal - Canary Islands - Customs territory of the Community - Processed agricultural products - Exemption from customs duties - Article 5 of Regulation (EEC) No 3033/80 - Variable component. # Case C-300/94.

OPINION OF ADVOCATE GENERAL
      FENNELLY
      delivered on 14 December 1995 (
            *1
         )
      I — Introduction
      
               1.
            
            
               Should a provision declaring that the Community will apply ‘the general arrangements which it applies in its foreign trade’ in agricultural products be interpreted as meaning that other products escape the application of these arrangements? Alternatively, does an exemption from ‘customs duties’ extend to the variable component of a charge levied on the importation of confectionery products? These are the questions which arise from a reference from a Spanish court in a dispute on the payments which must be made in respect of the importation in 1989 of sweets from the Canary Islands to the Spanish mainland. Though these islands have in effect been part of the Community customs territory since 1 July 1991, the questions posed are of more than historical interest, as the relevant provisions of Protocol No 2 to the Act of Accession of Spain and Portugal still apply as regards Ceuta and Melilla; (
                     1
                  ) it is also conceivable that similar questions of principle could arise from transitional arrangements in subsequent accession agreements.
            
         II — Facts and procedure
      
               2.
            
            
               In July 1989, TIRMA S. A. (hereinafter ‘TIRMA’) imported into Spain a consignment of ‘caramelos’ (toffee or fudge) manufactured in the Canary Islands; while the nature of the consignment was not further identified by the order for reference, it appears to be common ground that it comprised sugar confectionery not containing cocoa, falling within CCT heading ex No 17.04. TIRMA contested the decision of the customs authorities in Cadiz to apply the variable component of the charge levied on the importation into the Community of confectionery products in accordance with Council Regulation (EEC) No 3033/80 of 11 November 1980 laying down the trade arrangements applicable to certain goods resulting from the processing of agricultural products (
                     2
                  ) (hereinafter the ‘Trade Arrangements Regulation’ or ‘Regulation’, depending on the context).
            
         
               3.
            
            
               TIRMA failed both in its administrative complaint and before the Regional Economic Administrative Court, Andalusia. On appeal, the Sala de lo Contencioso-Administrativo (Chamber for Contentious Administrative Proceedings), Seville of the Tribunal Superior de Justicia (High Court of Justice), Andalusia referred the following questions to the Court:
               ‘Do the arrangements laid down in Article 1 (5) of Protocol No 2 to the Act of Accession of Spain and Portugal apply to the variable component of the tariff duties on processed agricultural products governed by Regulations (EEC) Nos 3033/80, 3034/80 and 3035/80 despite the fact that such products are not listed in Annex II to the Treaty, or does the exemption provided for in Article 2 of that Protocol apply? Or, if neither of the above applies, must the general principle of free movement of goods apply to trade in processed agricultural products between the Canary Islands and the customs territory of the Community?’
            
         
               4.
            
            
               Written observations were submitted to the Court by the Spanish Government and the Commission. In the absence of any request to be allowed to present oral argument, the Court decided not to hold an oral hearing.
            
         III — The relevant provisions of Community law
      
               5.
            
            
               The Trade Arrangements Regulation (
                     3
                  ) consolidates and replaces a number of earlier regulations on trade arrangements applicable to certain goods resulting from the processing of agricultural products, as defined in Annex I to the Regulation; this includes ‘sugar confectionery not containing cocoa’, except certain liquorice extracts. Article 5(1) of the Regulation provides, in part, as follows:
               ‘On importation into the Community, all goods [listed in Annex I to the Regulation] shall be subject to the relevant charge in the Common Customs Tariff consisting of:
               
                        (a)
                     
                     
                        an ad valorem duty, which is the fixed component; and
                     
                  
                        (b)
                     
                     
                        a variable component.
                     
                  The variable component ... is intended to reflect, for the quantities of basic products considered to have been used in the manufacture of the goods, the difference between the prices of those products in the Community and the prices of imports of those products from third countries, when the total cost of those quantities of basic products is higher in the Community.’
            
         
               6.
            
            
               Article 5(2) prohibits ‘the levying of any customs duty or charge having equivalent effect other than the charge provided for in paragraph 1’, except in the circumstances governed by Article 14(3) and (4) of the Regulation. The raison d'être of the variable component of the charge is identified in the first recital in the preamble to the Regulation as being ‘to offset any difference between the prices of the relevant agricultural products in the Community and on the world markets’, while that of the fixed component is described as being ‘the protection of the processing industry’.
            
         
               7.
            
            
               The equivalent measure for basic sugar products is Council Regulation (EEC) No 1785/81 of 30 June 1981 on the common organization of the markets in the sugar sector (
                     4
                  ) (hereinafter the ‘Sugar Regulation’). Article 16(1) of the Sugar Regulation provides for the charging of a levy on imports of the sugar products covered, with the exception of beet-pulp, bagasse and other waste of sugar manufacture; the rationale of this levy is explained in the fifth recital in the preamble in the following terms:
               ‘... the charging of a levy on imports from third countries ... as regards sugar, would ... cover ... the difference between prices ruling inside and outside the Community when world market prices are lower than Community prices’.
            
         
               8.
            
            
               Article 25(1) of the Act of Accession of Spain and Portugal provides that ‘The Treaties and the acts of the institutions of the European Communities shall apply to the Canary Islands ... subject to the derogations referred to in paragraphs 2 and 3 and to the other provisions of this Act’. Article 25(2) in turn refers to Protocol No 2 to the Act (hereinafter ‘Protocol No 2’ or ‘the Protocol’, depending on the context) as determining ‘the conditions under which the provisions of the EEC and ECSC Treaties concerning the free movement of goods, and the acts of the institutions of the Community concerning customs legislation and commercial policy shall apply to the Canary Islands ...’.
            
         
               9.
            
            
               Article 1(1) of Protocol No 2 provides, in part, as follows:
               ‘Products originating in the Canary Islands ... and products coming from third countries imported into the Canary Islands ... shall not be deemed, when released for free circulation in the customs territory of the Community, to be goods fulfilling the conditions of Articles 9 and 10 of the EEC Treaty.’
               The Canary Islands are excluded from the customs territory of the Community by virtue of Article 1(2), while Article 1(3) establishes that:
               ‘Except where otherwise provided in this Protocol, the acts of the institutions of the Community regarding customs legislation for foreign trade shall apply under the same conditions to trade between the customs territory of the Community ... and the Canary Islands.’
            
         
               10.
            
            
               Article 1(5) of Protocol No 2 reads, in part, as follows:
               ‘Except where otherwise provided for in the Act of Accession, including this Protocol, the Community shall apply in its trade with the Canary Islands ... for products falling within Annex II to the EEC Treaty, the general arrangements which it applies in its foreign trade.’
            
         
               11.
            
            
               Article 2 of the Protocol provides certain derogations from the provisions of Article 1 for ‘products originating in the Canary Islands’. In particular, such products ‘shall, when released for free circulation in the customs territory of the Community, qualify for exemption from customs duties’; the exemption applied, as from the date of Spanish accession to the Community, in respect of imports to ‘that part of Spain which is included in the customs territory of the Community’.
            
         
               12.
            
            
               For the sake of completeness, it should be added that Council Regulation (EEC) No 1911/91 of 26 June 1991 on the application of the provisions of Community law to the Canary Islands (
                     5
                  ) applies the common agricultural policy to these islands, subject to specific supply arrangements, and includes the Islands in the customs territory of the Community, subject to certain transitional arrangements, in each case with effect from 1 July 1991.
            
         IV — The questions posed by the national court
      
               13.
            
            
               The first question arising from the order for reference concerns the legal foundation for the application to the importation in question of the variable component of the charge imposed by Article 5(1) of the Trade Arrangements Regulation. Two different provisions of the Protocol have been invoked during the course of the proceedings in this regard, namely Article 1(3) and (5). Before the referring court, the representative of the Spanish State had argued, (
                     6
                  ) in line with the position taken by the customs administration and the lower court, that, as the purpose of the variable component was identical to that of the charge imposed within the framework of the common agricultural policy, the importation was subject to the general arrangements which the Communityapplied in its foreign trade, in accordance with Article 1(5) of the Protocol, notwithstanding the fact that the products themselves fell outside the scope of Annex II to the Treaty. The referring court however took the view that the variable component of the charge was not an instrument of the common agricultural policy, in that it did not protect agricultural production or supply, but an instrument of commercial policy intended to protect certain manufacturers placed at a disadvantage. In these circumstances, the national court requested a ruling from the Court as to whether the Article 2 exemption should apply.
            
         
               14.
            
            
               In my view, however, and regardless of the objectives Article 5 of the Trade Arrangements Regulation sought to achieve, Article 1(5) of Protocol No 2 applies solely to products listed in Annex II to the Treaty, and cannot be relied upon to found the imposition of the variable component of the charge on other products. Reliance upon this provision would be in any case unnecessary, in so far as Article 1(3) of the Protocol expressly provides for the application to trade between the customs territory of the Community and the Canary Islands of ‘the acts of the institutions regarding customs legislation for foreign trade’. The Trade Arrangements Regulation, which was based primarily on the Treaty articles governing customs legislation for foreign trade (Articles 28 and 113 EEC), is in my view clearly such an act.
            
         
               15.
            
            
               That does not, however, conclude the question of the interpretation of Article 1(3) and (5) of the Protocol. While the Court has not had the benefit of observations from the appellant in the main proceedings, it appears from the observations of the Spanish Government and the order for reference that TIRMA had argued before the referring court that Article 1(5) distinguishes between products listed in Annex II to the Treaty, which are subject to the Community's general foreign trade arrangements, and other products, which are not so subject. According to TIRMA, at the material time Community law applied in general to the Canary Islands by virtue of Article 25(1) of the Act of Accession, even though they were not part of the Community customs territory; while the Community's tariff provisions did not apply to trade between the Islands and third countries, their trade with the rest of the Community was subject to the rules on the free movement of goods. As processed agricultural goods were not included in any of the exceptions to free movement set out in Articles 1 and 2 of Protocol No 2, they must benefit from such free movement; the distinction made by Article 1(5) would otherwise make no sense. This hypothesis is tantamount to saying that, as Article 1(3) had already established the general principle of exclusion from free movement of goods, Article 1(5) would be redundant if it were not to be read as excluding products other than Annex II products from the general arrangements the Community applies to its foreign trade.
            
         
               16.
            
            
               The interpretation suggested, which views Article 1(5) as a qualification of the principle established by Article 1(3) as regards all products not listed in Annex II to the Treaty, is not, in my view, convincing. Article 25(2) of the Act of Accession provides that ‘the acts of the institutions ... concerning customs legislation and commercial policy, shall apply to the Canary Islands [in accordance with] Protocol No 2’; the Protocol is specifically described in Article 25(1) as laying down ‘derogations’. That these derogations have the effect of excluding the application of the Community principles on the free movement of goods, except where the contrary is provided, is clear from Articles 1 and 2 of Protocol No 2, examined further below.
            
         
               17.
            
            
               The interpretation proposed by the appellant company in the main proceedings also implies that the Community legislator established a general principle in Article 1(3), but deprived it of almost all effect just two paragraphs later, thus rendering Article 1(3) redundant. In the first place, for goods originating in the Canary Islands to benefit from the free movement of goods within the customs territory of the Community as is claimed, they would have to come within the scope of Articles 9 and 10 of the Treaty. In accordance with Article 9(2) of the Treaty, the provisions concerning the customs union and the elimination of quantitative restrictions (Articles 12 to 17 and 30 to 37, respectively) apply only to ‘products originating in Member States and to products coming from third countries which are in free circulation in Member States’; Article 1(1) of Protocol No 2, which, unlike paragraphs 3 and 5 of the same article, does not admit of any derogations, expressly specifies that products originating in the Canary Islands ‘shall not be deemed ... to be goods fulfilling the conditions of Articles 9 and 10 of the EEC Treaty’
            
         
               18.
            
            
               In the second place, the principle laid down by Article 1(3) of the Protocol, that Community customs legislation governing foreign trade shall apply to trade between the customs territory of the Community and the Canary Islands, is of general application; it signifies, in particular, that the Trade Arrangements Regulation applies to such trade. As the Spanish Government has argued, Article 1(5) is a more specific provision governing only Annex II products; the use of the term ‘general arrangements’ would appear to cover both customs legislation and other measures applying to such products. It therefore follows, in my view, that Article 1(5) cannot overturn the generality of Article 1(3), in the absence of any indication in the text of Protocol No 2 to this effect. The imported goods at issue in the present proceedings were clearly not Annex II products, and hence must be deemed to come within the scope of application of Article 1(1) to (3) of the Protocol.
            
         
               19.
            
            
               Furthermore, the suggestion imputed to TIRMA that the words ‘Except where otherwise provided for in the Act of Accession, including this Protocol’ which qualify Article 1(5) should be taken as referring to Article 1(3) of the Protocol is not in my view tenable. It seems much more likely that Article 1(5) refers to those provisions of the Act of Accession and the Protocol which expressly apply to trade in Annex II products between the customs territory of the Community and the Canary Islands, arrangements other than the general arrangements the Community applies in its foreign trade. The second indent of Article 25(3) of the Act of Accession, for example, obliges the Council to apply ‘provisions of a sociostructural nature ... in the sphere of agriculture ... to the Canary Islands’. Article 155 of the same Act goes further, in requiring not only structural measures in the area of fisheries, but that the Council ‘take into consideration all or part of the interests of’ the Canary Islands in deciding on bilateral or multilateral fisheries agreements with third countries. These provisions could hardly be deemed ‘general arrangements’ the Community applies in foreign trade; the same is true of the special arrangements for trade between the rest of the Community and the Islands in fisheries products and listed agricultural products originating in the Islands established by Articles 3 and 4 of the Protocol.
            
         
               20.
            
            
               The other question which arises is whether the variable component of the charge on sugar confectionery products originating in the Canary Islands and imported into Spain may be considered a ‘customs duty’ within the meaning of Article 2(1) of Protocol No 2. I have no difficulty in agreeing with the Spanish Government and the Commission that the variable component of the import charge is not a customs, duty from which products originating in the Canary Islands, such as the ‘caramelos’ whose importation gave rise to the main proceedings, are exempted by virtue of Article 2 of Protocol No 2.
            
         
               21.
            
            
               In the first place, Community law has long drawn a distinction between ‘customs duties’ properly so called, and other charges payable on the import and export of goods, which is reflected, for example, in Article 9(1) of the Treaty. While the distinction has rarely been at issue in the Court's caselaw (
                     7
                  ) as the imposition of both is prohibited in the framework of trade between Member States, the former has been defined in Article 2(b) of the Council Decision of 21 April 1970 on the replacement of financial contributions from Member States by the Communities' own resources (
                     8
                  ) as covering ‘Common Customs Tariff duties and other duties established ... in respect of trade with nonmember countries’. Paragraph (a) of the same provision defined ‘agricultural levies’ as ‘levies, premium, additional or compensatory amounts, additional amounts or factors ind other duties established ... in respect of trade with nonmember countries within the framework of the common agricultural policy’. It is clear from the purpose of the variabl : component of the import charge at issue in the present proceedings, as described above, (
                     9
                  ) that it corresponds more closely to that of an agricultural levy than of a customs duty, as defined by the Decision of 21 April 1970, to which Ankle 371 of the Act of Accession expressly refers.
            
         
               22.
            
            
               This view is supported by the wording of the Trade Arrangements Regulation, which carefully distinguishes throughout between ‘customs duties’ and other charges on imports. Thus Article 5(1) of the Regulation provides that all the imported goods covered shall be subject to a ‘charge’, comprising a ‘duty’ (the fixed component) and a ‘variable component’ (of the charge), while Article 5(2) prohibits the levying of ‘any customs duty or charge having equivalent effect’ (emphasis added) other than the charge imposed by virtue of Article 5(1). This distinction between customs duties and other charges is equally reflected in other measures regarding customs legislation for foreign trade, both at the material time (
                     10
                  ) and following the entry into force of the Community Customs Code of 12 October 1992. (
                     11
                  )
               The distinction is equally explicit in other provisions of the Protocol. Article 6(1) exempts products originating in the customs territory of the Community imported into the Canary Islands from ‘customs duties and charges having equivalent effect’, while Article 7 specifies that it applies to ‘customs duties and charges having an effect equivalent to such duties’ due on the import into the Islands of goods from third countries. In these circumstances, it appears inappropriate to suggest that the term ‘customs duties’ employed in Article 2(1) should be interpreted as if it extended to ‘charges having an equivalent effect’. (
                     12
                  )
            
         
               23.
            
            
               In the second place, the distinction might, arguably, be considered a substantial one, rather than one of mere terminology. In general, customs duties, other than those of a fiscal nature, may be said to protect the producer based in the territory of the entity which imposes the duty; indeed, the fixed component of the import charge at issue, an ad valorem duty, is expressly stated to be ‘for the protection of the [Community] processing industry’ (first recital in the preamble), and applies regardless of world sugar prices. On the contrary, the variable component is no more than a compensatory mechanism to offset the higher Community prices of the basic products; it seeks to put the Community processing industry on an equal footing, as regards the purchase of sugar, but does not protect the industry from third-country competition in any other respect. At the same time, the variable component also protects the Community sugar producers, by equalizing Community and world sugar prices for industrial users.
            
         
               24.
            
            
               Finally, the net result of the interpretation of Article 2 of Protocol No 2 proposed by both the appellant in the main proceedings and the referring court would be that the manufacturers of confectionery in the Canary Islands would have been able to avail themselves of sugar at the lower prices obtaining on the world market, and subsequently to import the finished product into the Community free not only of the variable component but also of any duty. I do not think that Article 2 was intended to provide Canary Islands confectionery producers with such an uncovenanted competitive advantage over Community producers, nor to allow sugar produced in third countries such easy access to the Community market, albeit in a processed form.
            
         
               25.
            
            
               Furthermore, this would mean, in effect, that the Canary Islands producers enjoyed a more favourable regime under Protocol No 2 in relation to the import of sugar and its re-export as ‘caramelos’ in 1989 than, for example, in 1992, when the Islands had been incorporated into the customs territory of the Community. In accordance with Article 2(2) of Regulation No 1911/91, (
                     13
                  ) the application of the common agricultural policy is to be accompanied by ‘specific supply arrangements’ for certain products. The arrangements in respect of sugar were laid down by Council Regulation (EEC) No 1601/92 of 15 June 1992 concerning specific measures for the Canary Islands with regard to certain agricultural products. (
                     14
                  ) In order to take account of the ‘exceptional geographical situation of the Canary Islands in relation to the sources of supply of products used as inputs for’ manufacturing, and ‘to prevent disruption of traditional trade flows’, Article 3(1) of this regulation provides that ‘Levies and/or customs duties shall not apply to direct imports into the Canary Islands from third countries of products covered by the specific supply arrangements’, including sugar. However, the specific supply arrangement is subject to two limitations: in the first place, only a given quantity of a particular product can benefit from the Article 3 exemption each year, (
                     15
                  ) and, perhaps more significantly for the present case, the re-export in processed form of the products imported under these arrangements is prohibited, except for ‘traditional exports or shipments to the rest of the Community’. Neither of these restrictions would apply under the interpretation of Article 2 of Protocol No 2 proposed by the appellants in the main proceedings. Such a difference in treatment as a result of the incorporation of the Canary Islands into the Community's customs territory would, in my view, be completely anomalous.
            
         
               26.
            
            
               Though it is no longer directly relevant in view of my findings on the main questions, it appears from the order for reference that the national court was not persuaded that the purpose of the variable component was similar to that of the equivalent levy on the import of sugar products under the Sugar Regulation, and, as noted above, for this reason doubted that Article 1(5) of Protocol No 2 should be applied. It is clear, however, from the preamble to the Regulation in each case, cited at paragraphs 6 and 7 above, that the charges do in fact share the objective of offsetting the difference between the higher Community price for sugar and that prevailing on world markets.
            
         
               27.
            
            
               It follows, in my view, that Article 1(5) of Protocol No 2 is not relevant to the present proceedings; it neither excludes products other than Annex II products from the application of the general provisions on foreign trade, nor justifies the application of the Trade Arrangements Regulation to such products. On the other hand, I am of the opinion that Article 1(3) of the Protocol should be interpreted as applying the Trade Arrangements Regulation to imports of the type at issue in this case. Article 2 of Protocol No 2 must be interpreted as conferring an exemption only from the payment of customs duties properly so called. I do not think that the variable component of the impon charge under the Trade Arrangements Regulation is a customs duty.
            
         V — Conclusion
      
               28.
            
            
               In the light of the foregoing, I propose that the questions put by the Sala de lo Contencioso-Administrativo, Seville, be answered as follows:
               Article 1(5) of Protocol No 2 to the Act concerning the conditions of accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties of 12 June 1985 must be interpreted as not applying to the variable component of the charge on imported goods resulting from the processing of agricultural products imposed by virtue of Council Regulation (EEC) No 3033/80 of 11 November 1980 laying down the trade arrangements applicable to certain goods resulting from the processing of agricultural products. This variable component may not be considered a customs duty within the meaning of Article 2(1) of Protocol No 2. At the time the facts giving rise to the main proceedings occurred, the principles of Community law regarding the free movement of goods did not apply to trade between the Canary Islands and the customs territory of the Community in processed agricultural products covered by Council Regulation (EEC) No 3033/80 of 11 November 1980.
            
         (
            *1
         )	Original language: English.
      (
            1
         )	See, for example, judgment of 7 December 1995 in Case C-45/94 Cámara de Comercio, Industria y Navegación, Ceuta v Municipality of Ceuta [1995] ECR I-4385.
      (
            2
         )	OJ 1980 L 323, p. 1.
      (
            3
         )	Cited in footnote above; the other two regulations cited in the order for reference are not directly in point in the proceedings before this Court.
      (
            4
         )	OJ 1981 L 177, p. 4.
      (
            5
         )	OJ 1991 L 171, p. 1.
      (
            6
         )	This fact was explained, with commendable candour, in the very helpful observations of the Spanish Government in the present proceedings.
      (
            7
         )	See, for example, paragraphs 18 to 21 of the Opinion of Advocate General Jacobs of 21 November 1991 in Case C-163/90 Administration des Douanes et Droits Indirects v Legros and Others [1992] ECR I-4625, pp. I-4646 and I-4647.
      (
            8
         )	OJ 1970 L 94, p. 19, the first ‘Own Resources’ decision.
      (
            9
         )	See paragraph 6 of the present Opinion.
      (
            10
         )	See, for example, Article l(2)(d) of Council Regulation (EEC) No 2144/87 of 13 July 1987 on customs debt; OJ1987 L 201, p. 15.
      (
            11
         )	Council Regulation (EEC) No 2913/92, OJ 1992 L 302, p. 1; see, for example, Article 20(3)(c).
      (
            12
         )	This is not to say that the term ‘customs duties’ may never be interpreted as including charges of equivalent effect, particularly where the provision in question contains sufficient indications to justify the broader interpretation; see Case C-45/94 Cámara de Comercio, Industria y Navegarían, Ceuta v Municipality of Ceuta, cited at footnote above, paragraphs 16 to 18 of the judgment.
      (
            13
         )	Cited in footnote above.
      (
            14
         )	OJ 1992 L 173, p. 13.
      (
            15
         )	For the marketing year 1992/93, this was fixed at 3000 tonnes by Article 1 of Commission Regulation (EEC) 1962/92; OJ 1992 L 197, p. 45.