CELEX: 61981CC0147
Language: en
Date: 1982-02-11 00:00:00
Title: Opinion of Mr Advocate General Capotorti delivered on 11 February 1982. # Merkur Fleisch-Import GmbH v Hauptzollamt Hamburg-Ericus. # Reference for a preliminary ruling: Finanzgericht Hamburg - Germany. # Customs procedure - Security on imports for processing. # Case 147/81.

OPINION OF MR ADVOCATE GENERAL CAPOTORTI
      DELIVERED ON 11 FEBRUARY 1982 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      
               1. 
            
            
               This reference for a preliminary ruling raises one problem of the validity and another of the interpretation of the Community rules requiring importers of frozen beef intended for processing to lodge a security in order to qualify for the total or partial suspension of the import levy.
               Let me give a brief summary of the facts.
               The undertaking Merkur Fleisch-Import of Hamburg, by a declaration of 16 October 1978, requested the customs authorities of the Federal Republic of Germany to release into free circulation some 13 tonnes of frozen boned or boneless beef and stated that it was intended for the manufacture of products other than preserved beef. The customs office at Hamburg-Ericus cleared the goods for release into free circulation and suspended the charging of the levy since the beef was for industrial processing and for its part Merkur lodged a security in the form of a bank guarantee; all this was in accordance with the relevant Community rules whose salient features I shall summarize below. However, the customs authorities subsequently ascertained that more than 8 tonnes of the beef in question were processed after the expiry of the period of three months from the importation and accordingly, by a decision of 5 November 1979, fixed the levy due for that part of the quantity imported.
               The importer first of all lodged an objection against that decision through administrative channels; the objection was unsuccessful and the importer then instituted proceedings before the Finanzgericht [Finance Court] Hamburg claiming that the decision of the customs authorities should be declared void. The ground of the application was that, in view of the marginal nature of the delay in processing the beef, the imposition of the levy amounted to a breach of the relationship of proportionality which ought to exist between the gravity of the shortcoming and the amount of the penalty therefor. By an order of 7 May 1981 the Finanzgericht stayed the proceedings and referred the following preliminary question to the Court of Justice:
               “Whether Article 1 (3) of Commission Regulation (EEC) No 572/78 of 21 March 1978 is invalid in so far as it provides that the security lodged by the importer shall be forfeit and retained as levy if the period laid down in that provision for the due processing of frozen beef is exceeded, or whether the regulation is rather to be interpreted, in accordance with the Treaty, as allowing for the security not to be forfeit if the period has been exceeded by only 12 days.”
            
         
               2. 
            
            
               At this point it is necessary to set out the content of the Community provisions to which the question of the German court relates, directly or indirectly. The legal position with regard to levies on imports of frozen boned or boneless beef intended for processing is governed chiefly by Regulation (EEC) No 805/68 of the Council on the common organization of the market in beef and veal, and in particular of Article 14 thereof, as amended by the subsequent Council Regulation No 425/77 of 14 February 1977. The article in question lays down, inter alia, in paragraph (1), that “frozen meat intended for processing and listed in Section (b) of the Annex hereto under subheadings 02.01 A II (b) 2 and 02.01 A II (b) 4 (bb) shall qualify, under the conditions laid down in this article: ... (b) for the total or partial suspension of the levy on meat intended for the processing industry for the manufacture of products other than ... preserved food” which does not contain characteristic components other than beef and jelly.
               The detailed rules for the application of the special arrangements in question were laid down by Commission Regulation (EEC) No 572/78 of 21 March 1978. Article 1 (1) of that regulation provided in particular that “no importer shall be entitled to total or partial suspension of the import levy under Article 14 (1) of Regulation (EEC) No 805/68 unless: ... (b) he lodges a security equal to the amount suspended of the levy applicable on the day of importation”. Paragraph (3) of the same article provides furthermore that “except in case of force majeure, the security ... shall not be released in whole or in part unless, within six months following the month of importation, proof is furnished ... that all or part of the imported frozen meat has been processed within three months of importation“; that ”the amount of the security released shall be in proportion to the quantity for which proof of processing is furnished“; and finally that ”the amount of the security not released shall be forfeit and retained as levy”.
               As we have seen it is precisely to paragraph (3) that the question of the court dealing with the main action refers. There are basically two grounds on which the validity of the provision is called in question: the power of the Commission fo fix a time-limit for the processing of the imported beef, to prescribe the lodging of a security as a guarantee that the time-limit will be observed and the forfeiture of the security for nonobservance; and in the second place because, even if it were conceded that the Commission had the power thus to prescribe the lodging of a security and its forfeiture, the arrangements required in this field might prove to be incompatible with two wellestablished general principles of the Community legal order, the principle of proportionality and the principle of equality.
            
         
               3. 
            
            
               The legal basis for the legislative power exercised by the Commission in adopting the said Regulation No 572/78 is to be found in the said Article 14 (4) (c) of Regulation No 805/68 of the Council (as amended by Regulation No 425/77). That provision provides that “detailed rules for the application of this article and particularly those concerning control of the end use of imported meat” must be determined “in accordance with the procedure laid down in Article 27”, that is to say by the Commission after consulting the Management Committee for Beef and Veal. The second reference in the preamble to Regulation No 572/78 expressly mentions the said Article 14 (4) (c) of Regulation No 805/68. Furthermore a general power of the Commission to enact provisions in implementation of regulations of the Council must be ruled out; I shall merely recall in this connection that when Article 155 of the EEC Treaty defines the powers of the Commission it provides in the fourth indent that it “shall exercise the powers conferred on it by the Council for the implementation of the rules laid down by the latter”.
               In order to reply to the question submitted be the German court it is thus necessary to establish whether, and to what extent, Regulation No 572/78 comes, with regard to its content, within the scope of the powers conferred by the Council upon the Commission through Article 14 (4) (c) of Regulation No 805/68. That provision primarily confers power to lay down detailed rules for the application of the system for suspending the levies established by the same Article 14 of Regulation No 805/68; it is clearly a power of a legislative nature and of a general scope. It is only after making this wide provision that a specific reference is made to the laying down of detailed rules for the application, in particular, concerning control of the use of imported meat. Accordingly the rules which the Commission was authorized to enact might concern all aspects of the detailed procedure for the application of Article 14 and not only the control, even though the latter was of necessity of particular importance.
               In those circumstances, the point to be established is not whether or not the requirement that importers should lodge a security — and its forfeiture in the case of failure to process the beef within certain periods — is covered by the control of the use of the imported beef: the matter which appears to me necessary and sufficient to ascertain is whether instead the provisions concerning the security contained in Regulation No 572/78 may be classified as provisions in implementation of the abovementioned Article 14 of Regulation No 805/68.
            
         
               4. 
            
            
               According to the submission of the plaintiff undertaking in the main action the specific objectives of that article are not compatible with the rules laid down by the Commission concerning the time for processing the imported beef and the relative security. The plaintiff cites the statement of the Court of Justice in its judgment of 6 March 1979 in Case 92/78, Simmentha v Commission, namely that the system of suspending the levy “created by the original Article 14 of Regulation No 805/68 and kept in being, with new rules, by the amended version of the same provision, is to protect the competitiveness of the processing industry vis à vis competitors who are established outside the Community and as such enjoy the benefit of world market prices” ([1979] ECR 777, in particular paragraph 68 of the decision). Merkur emphasizes that, in order to attain an objective of that nature, it was not necessary to fix a time-limit for processing and above all to prescribe the forfeiture of the security solely on the ground of failure to observe the time-limit when in fact the processing is ultimately effected, albeit tardily.
               In my opinion it is impossible to uphold this line af argument. There are reasons of an economic nature relating to the objectives of Article 14, for which the Commission ought to have power to fix a time-limit for processing. It must be borne in mind that frozen beef can be preserved for a fairly long time and that its market price is liable to vary within relatively short periods: accordingly, if importers enjoyed an exemption from the levy which was unlimited in time they would be free to release the goods on the market at the time most favourable to them which would entail the risk of adversely affecting producers of beef within the Community. It is important in this connection that the quantity of frozen beef to be earmarked for processing, which may accordingly qualify for importation under suspension of the levy, must be determined by the Commission every three months in accordance with Article 14 (4) (a) and (b) of the said Regulation No 805/68. If it is considered necessary to introduce this system, which implies a periodic and frequent examination of the conditions of the market, it is evidently dependent on the fact that such conditions may change at short notice and that all such changes call for a corresponding amendment of the quantities which may be imported on favourable conditions.
               In view of this the fixing of a time-limit for the use of the beef appears to be a justified implementing provision of Article 14 which is not at variance with the particular objectives of that article. In connection with these objectives it must be borne in mind that the suspension of the levy in respect of frozen beef intended for processing is related, in the seventh recital in the preamble to Regulation No 805/68, to the objective of guaranteeing “adequate supplies for the processing industries in the Communitv, while maintaining a preference for Community-produced meat ... ”. This confirms that the interests of Community producers of beef are also involved, as well as those of processing undertakings. In that complex situation the fixing of a limit for processing the imported meat was the only means of conserving the delicate balances of the Community market and of preventing frustration of the quarterly decisions of the Commission by speculative manoeuvres on the part of importers who might be interested in delaying the industrial processing of the meat.
            
         
               5. 
            
            
               Merkur, continuing its endeavour to show that the Commission did not have the power to fix a time-limit for the use of the imported meat or to require a security to be lodged, points out that Article 14 of Regulation No 805/68 does not make reference either to the time-limit or to the security although it would have been reasonable to expect from it some indications on these points since the same regulation provides in Article 15 with regard to import licences both a time-limit as to their validity and the obligation to provide a deposit as a guarantee that the operations authorized will be carried out in due time.
               In my opinion Article 15 is not of real assistance io the plaintiff. In reality the two cases — provided for in the said Articles 14 and 15 respectively — are clearly distinct and accordingly not comparable. As I have already stated, Article 14 provides for the suspension of the levy — which is equivalent in practice to an exemption — rendering it conditional on a specified use of the imported goods. The provision of a deposit which the Commission has prescribed in order to ensure that the meat is used in due time in the manner prescribed is explained by the consideration that the obligation to pay the levy is not extinguished until the meat has been processed and subject to proofs being provided within a certain time-limit: consequently the entitlement to the suspension ceases if the goods are not used in due time and in that case the deposit is retained by the customs authorities as levy. The conversion of the deposit into levy accordingly is not in the nature of a penalty but is merely the logical consequence of failure to comply with the special conditions on which the favourable treatment was granted to the importer. On the other hand Article 15 provides that a deposit must be lodged in order to ensure that an obligation is fulfilled: its forfeiture when the importation does not take place within the prescribed period is thus in the nature of a penalty. In view of this difference between the system governing the suspension of the levy and that governing import licences I consider it impossible to rely in matters of interpretation on the fact that Article 14 fails to mention either the time-limit for using the imported beef or the security.
            
         
               6. 
            
            
               I now come to consider whether or not the legal rules applicable to the security, and in particular the rule on the basis of which the entire amount of the security is forfeit if the imported beef is not processed in due time, is contrary to the principle of proportionality and the principle of equality.
               In the submission of the importing undertaking the provision that the security must be forfeit in its entirety, both when the beef is processed late and when it is not processed at all, constitutes a breach of the principle that the offence and the penalty must be proportionate. In its view the delay in processing is punished with excessive severity whilst it would have been more proper and in accordance with the criterion of proportionality to draw a clear distinction between late compliance and complete failure to comply and to graduate the penalty in accordance with the significance of the delay in using the beef. The same criticism is also advanced as a breach of the principle of equality: the fact that the regulation makes provision for the forfeiture of the security in all cases without distinguishing the various cases of failure to observe the time-limit amounts to according identical treatment to situations of varying seriousness.
               In support of that argument Merkur relies upon the case-law of the Court of Justice, in particular the judgment of 21 June 1979 in Case 240/78, Atalanta v Produktschap voor Vee en Vlees. The point at issue in that case was whether Article 5 (2) of Commission Regulation No 1889/76 which provided for the complete forfeiture of securities furnished in order to obtain the Community aids for producers of pigmeat if such producers failed to fulfil the obligations undertaken by them in the contracts concluded with the national intervention agencies was in accordance with the principle of proportionality. The Court held that “the absolute nature” of those provisions was contrary “to the principle of proportionality in that it does not permit the penalty for which it provides to be made commensurate with the degree of failure to implement the contractual obligations or with the seriousness of the breach of those obligations” (paragraph 15 of the decision, [1979] ECR 2137 in particular at p. 2151). The plaintiff in this case claims that Article 1 of Regulation No 572/78, like Ariele 5 of the said Regulation No 1889/76, does not permit the penalty to be made commensurate with the gravity of the shortcoming and deduces from that that the article is contrary to the principle of proportionality.
               It must first of all be emphasized that the forfeiture of the security provided for by Regulation No 572/78 is not in the nature of a penalty but constitutes at the most a form of withdrawal of the benefit granted to importers by Regulation No 805/68 and the implementation of the general obligation to pay the levy fixed by the Common Customs Tariff. In that state of affairs there would be no justification for graduating the amount of the levy in accordance with the greater or lesser delay in processing the imported meat. The decisive element which terminates the period of suspension of the obligation to pay the levy is in fact constituted by noncompliance with one of the conditions to which the suspension itself is subject (that the imported beef should be used in the manner laid down and within the prescribed period). It is reasonable that whatever the conditions upon which a special benefit depends are not fulfilled the benefit itself should be definitively withdrawn and the obligation to make payment be revived in its entirety. If, furthermore, the reasons of an economic nature which form the basis of the special arrangements concerning the security introduced by Regulation No 572/78 are examined further confirmation is provided of the fact that it would not be reasonable to graduate the amount of the levy in accordance with the (variable) delay in processing or of the failure to process. We have in fact seen that the benefit of suspension of the levy can perform its function of ensuring that the processing industry is competitive with rival industries outside the Community only if the suspension is restricted to a short period of time. It must accordingly be found that if that benefit were extended beyond three or four months the consequences for the market in beef and veal might be the very opposite of the objectives pursued by the Commission. This finding goes to show the unreliability of the argument that the amount of the levy should be reduced when the imported meat is used late and imposed in its entirety only if the intended processing is not carried out at all.
               The interpretation of Article 1 of Regulation No 572/78 which appears to me to be correct and which takes account of the objectives of economic policy pursued by the Commission in controlling the market in beef and veal is confirmed by the case-law of the Court of Justice. It seems to me relevant in this connection that the judgment of 26 June 1980 in Case 808/79, Pardini, ([1980] ECR 2103) recognized that it is necessary for the authorities entrusted with the management of the common organization of the markets to have available precise forecasts on future imports and exports, and stated that traders who take advantage of the benefits of the system must also bear the disadvantages which arise from the necessity, on the part of the Community, of preventing any abuse (paragraphs 17 and 21 of the decision). That case was concerned to establish whether or not the rule contained in Regulation No 193/75 of the Commission, to the effect that an exporter from whom an export licence or advance fixing certificate has been stolen may not obtain a new licence or certificate, was justified with regard to the requirements of supervision; the Court ruled that the risk borne bytraders was proportionate to the requirements which the rule was intended to meet. In two important respects it is above all possible to discern a certain analogy between that case and the present case: first in so far as it was recognized that the Commission, in order to perform its duties relating to economic policy, must have available precise forecasts on the development of the market and, secondly, inasmuch as it was stated that the exclusion of the right of the trader to obtain a copy of the missing licence was not in breach of the principle of proportionality even though a rule of that nature is intended to operate strictly and automatically.
               Finally, it appears to me appropriate to emphasize that the determination of the length of the period within which the imported beef must be processed follows from a technical appraisal which the Commission is entitled to make. In the course of the procedure, and in particular during the oral procedure, the Commission has provided ample explanation of the reasons for its choice; it seems to me that when detailed explanations are provided and on the other hand there are no clear and persuasive indications to the contrary it is reasonable to have regard exclusively to the choices of economic policy adopted by the Commission. I cannot see in a situation of this kind how it is possible to deny that the suspension of the levy is appropriate for attaining the objective of economic policy for which it was provided only if it is restricted to a certain period which must not be excessively long.
            
         
               7. 
            
            
               The second part of the question from the German court concerns the interpretation of the provision on the forfeiture of the security which is contained in the third subparagraph of the said Article 1 (3) of Regulation No 572/78. The Court asks whether this provision may be interpreted as meaning that the forfeiture will not be effected if the imported beef is processed only slightly later than the time-limit fixed.
               In this connection I observe first of all that there is no factor, either in the wording or in the scheme of the arrangements, which provides support for an interpretation of this nature. The wording of the provision is clear and precise: the security is released in its entirety only if all the beef has been processed within three months following the month of the importation (likewise there is partial release if part of the beef has been processed). It is impossible to see the basis for the argument that the said provision permits release even after the three months fixed, provided that the delay is slight. It is scarcely necessary to add that there is no general principle to the effect that failure to observe a time-limit may be considered to produce no effects if the limit is only slightly exceeded.
               I may add that the same reasons why the forfeiture of the security and its retention as levy cannot be considered contrary to the principle of proportionality or to the principle of equality also operate to rule out the interpretation advanced by the court making the reference. In particular both the fact that the forfeiture is not a penalty and the fact that the provision in question is based on specified economic requirements which are worthy of protection tends to preclude importers from qualifying for exemption from the levy when they have carried out the processing after the expiry of the period prescribed, regardless of the extent of the delay. It should not be forgotten that the time-limit was determined by the Commission in relation to the generality of those whom it might benefit, on the basis of an appraisal of the typical structural conditions of the market in beef and veal; if any extension of the period prescribed were to be justified it would thus have to take the form of an amendment to Regulation No 572/78 on the basis of a reexamination of the characteristics of the abovementioned market. Any deferment of the time-limit in paricular cases, in reliance on the judgment of the person interpreting the regulation, would be arbitrary and would risk giving rise to discriminatory treatment.
            
         
               8. 
            
            
               In view of all the foregoing considerations I suggest that the Court of justice should reply as follows to the question referred to it by the Finanzgericht Hamburg by order of that court of 17 May 1981 in the case between Merkur Fleisch-Import and Hauptzollamt Hamburg-Ericus:
               
                        1.
                     
                     
                        There are no grounds for considering that Article 1 (3) of Commission Regulation (EEC) No 572/78 of 21 March 1978 is invalid in so far as it provides that the security lodged by the importer must be forfeit and retained as levy if the period laid down for use of the frozen beef in the prescribed manner is exceeded.
                     
                  
                        2.
                     
                     
                        The abovementioned provision must be interpreted as meaning that the security may properly be forfeited even if the delay in processing the imponed beef is only slight.
                     
                  
         (
            1
         )	Translated from tne ltalian.