1 BY ORDER OF 3 DECEMBER 1975 , WHICH WAS RECEIVED AT THE COURT ON 15 MARCH 1976 , THE FINANZGERICHT BADEN-WURTTEMBERG REFERRED , PURSUANT TO ARTICLE 177 OF THE EEC TREATY , TWO QUESTIONS FOR A PRELIMINARY RULING ON THE INTERPRETATION OF THE COMBINED PROVISIONS OF ARTICLE 1 OF REGULATION ( EEC ) NO 974/71 OF THE COUNCIL OF 12 MAY 1971 ON CERTAIN MEASURES OF CONJUNCTURAL POLICY TO BE TAKEN IN AGRICULTURE FOLLOWING THE TEMPORARY WIDENING OF THE MARGINS OF FLUCTUATION FOR THE CURRENCIES OF CERTAIN MEMBER STATES ( OJ , ENGLISH SPECIAL EDITION , 1971 ( I ), P . 257 ) AND ARTICLE 1 ( WITH ANNEX I , PART 5 ) OF REGULATION ( EEC ) NO 218/74 OF THE COMMISSION OF 25 JANUARY 1974 FIXING THE MONETARY COMPENSATORY AMOUNTS AND CERTAIN RATES FOR THEIR APPLICATION ( OJ L 24 , 1974 , P . 1 ) AS AMENDED BY REGULATION ( EEC ) NO 725/74 OF THE COMMISSION OF 29 MARCH 1974 ( OJ L 89 , 1974 , P . 1 ) AND THE INTERPRETATION OF PROVISIONS OF REGULATION ( EEC ) NO 712/74 OF THE COMMISSION OF 29 MARCH 1974 SETTING OUT THE METHODS OF APPLICATION OF THE CORRECTIVE AMOUNT FOR SKIMMED-MILK POWDER DURING THE 1974/75 DAIRY YEAR ( OJ L 88 , 1974 , P . 14 ).
2 THESE QUESTIONS WERE RAISED IN THE COURSE OF A CASE CONCERNING THE CALCULATION OF COMPENSATORY AMOUNTS AND OF THE CORRECTIVE AMOUNT APPLICABLE TO IMPORTS OF UNSWEETENED WHOLE MILK POWDER HAVING A FAT CONTENT BY WEIGHT BETWEEN 9.6 % AND 24.5 % FROM FRANCE INTO THE FEDERAL REPUBLIC OF GERMANY BETWEEN 26 JUNE AND 14 AUGUST 1974 CARRIED OUT BY THE FIRM WHICH IS THE PLAINTIFF IN THE MAIN ACTION . THE COMPETENT CUSTOMS OFFICE , THE DEFENDANT IN THE MAIN ACTION , CLASSIFIED THE PRODUCT UNDER SUBHEADING 04.02 A II B 2 OF THE COMMON CUSTOMS TARIFF AND , PURSUANT TO REGULATION NO 725/74 , IMPOSED COMPENSATORY AMOUNTS AT THE RATE OF DM 25.74 AS THE BASIC AMOUNT PLUS A SUPPLEMENTARY AMOUNT OF DM 0.91 FOR EACH ADDITIONAL PERCENT OF FAT CONTENT PER 100 KG NET WEIGHT . THE PLAINTIFF IN THE MAIN ACTION ARGUES ON THE ONE HAND THAT THE COMPENSATORY AMOUNTS SHOULD BE REDUCED BY A CORRECTIVE AMOUNT EQUAL TO 2 U.A . PER 100 KG AND ON THE OTHER HAND THAT THEY HAD BEEN FIXED AT TOO HIGH A LEVEL AS THE DEVELOPMENT OF THE MARKET PRICE HAD NEUTRALIZED THE EFFECTS OF THE REVALUATION OF THE DEUTSCHE MARK .
3 THE FIRST OF THE QUESTIONS REFERRED BY THE NATIONAL COURT ASKS WHETHER REGULATION NO 725/74 MUST BE INTERPRETED AS MEANING THAT COMPENSATORY AMOUNTS MUST BE REDUCED BY THE ABOVEMENTIONED CORRECTIVE AMOUNT AND THE SECOND QUESTION ASKS WHETHER THAT REGULATION IS INCOMPATIBLE WITH REGULATION NO 974/71 OF THE COUNCIL UPON WHICH IT IS BASED BECAUSE OF THE LEVEL AT WHICH THE COMPENSATORY AMOUNTS HAVE BEEN FIXED . THE FIRST QUESTION
4 REGULATION NO 804/68 OF THE COUNCIL OF 27 JUNE 1968 ON THE COMMON ORGANIZATION OF THE MARKET IN MILK AND MILK PRODUCTS ( OJ , ENGLISH SPECIAL EDITION 1968 ( I ), P . 176 ) PROVIDES THAT EACH YEAR THERE SHALL BE FIXED A TARGET PRICE FOR MILK AND INTERVENTION PRICES - DESIGNED TO ASSIST IN ACHIEVING THE TARGET PRICE OF MILK - FOR CERTAIN PRODUCTS PROCESSED FROM MILK : BUTTER , SKIMMED-MILK POWDER AND GRANA PADANO AND PARMIGIANO REGGIANO CHEESES . IN THE ANNEX TO REGULATION NO 1108/68 OF 27 JULY 1968 CONCERNING THE METHOD OF APPLICATION OF PUBLIC STORAGE OF SKIMMED-MILK POWDER ( OJ , ENGLISH SPECIAL EDITION , 1968 ( II ), P . 387 ) THE COMMISSION FIXED AT 1.5 % THE MAXIMUM LIMIT FOR THE FAT CONTENT OF SKIMMED-MILK POWDER WHICH COULD BE PURCHASED BY THE INTERVENTION AGENCIES .
5 ARTICLE 1 ( 2 ) OF REGULATION NO 974/71 OF THE COUNCIL PROVIDES THAT THE PRODUCTS FOR WHICH COMPENSATORY AMOUNTS MAY BE CHARGED ON IMPORTS FROM MEMBER STATES AND THIRD COUNTRIES OR GRANTED ON EXPORTS TO MEMBER STATES AND THIRD COUNTRIES SHALL BE : ( A ) ' PRODUCTS COVERED BY INTERVENTION ARRANGEMENTS UNDER THE COMMON ORGANIZATION OF AGRICULTURAL MARKETS ' ; ( B ) ' PRODUCTS WHOSE PRICE DEPENDS ON THE PRICE OF THE PRODUCTS REFERRED TO UNDER ( A ) AND WHICH ARE GOVERNED BY THE COMMON ORGANIZATION OF MARKETS ' . FOR THE PRODUCTS REFERRED TO IN SUBPARAGRAPH ( B ) ARTICLE 2 ( 2 ) OF THAT REGULATION PROVIDES THAT ' THE COMPENSATORY AMOUNTS SHALL BE EQUAL TO THE INCIDENCE , ON THE PRICES OF THE PRODUCT CONCERNED , OF THE APPLICATION OF THE COMPENSATORY AMOUNT TO THE PRICES OF THE PRODUCT . . . ON WHICH THEY DEPEND ' .
6 THE PARTICULAR SITUATION OBTAINING IN CERTAIN MEMBER STATES DID NOT PERMIT THE APPLICATION OF A UNIFORM INTERVENTION PRICE FOR SKIMMED-MILK POWDER AND THEREFORE ARTICLE 2 OF REGULATION NO 1188/73 OF THE COUNCIL OF 8 MAY 1973 FIXING THE TARGET PRICE FOR MILK AND THE INTERVENTION PRICES FOR BUTTER , SKIMMED-MILK POWDER AND GRANA PADANO AND PARMIGIANO REGGIANO CHEESES FOR THE 1973/74 MILK YEAR ( OJ L 122 , 1973 , P . 1 ) LAID DOWN A CORRECTIVE AMOUNT OF 2 U.A . PER 100 KG TO REDUCE THE INTERVENTION PRICE AT WHICH THE INTERVENTION AGENCIES IN BELGIUM , GERMANY , LUXEMBOURG AND THE NETHERLANDS WOULD BUY IN SKIMMED-MILK POWDER AND PROVIDED FOR THE APPLICATION OF THIS CORRECTIVE AMOUNT TO THE PRODUCT IN QUESTION IN TRADE BETWEEN EACH MEMBER STATE REFERRED TO ABOVE AND THE OTHER MEMBER STATES AND THIRD COUNTRIES .
7 REGULATION NO 663/74 OF THE COUNCIL OF 28 MARCH 1974 FIXING THE PRICES FOR THE 1974/75 MILK YEAR ( OJ L 85 , 1974 , P . 52 ) AGAIN INCREASED THE TARGET PRICE FOR MILK , MAINTAINED THE INTERVENTION PRICE FOR BUTTER IN THE ORIGINAL MEMBER STATES ( WHICH HAD BEEN REDUCED FOR THE 1973/74 MILK YEAR ) AND INCREASED THE INTERVENTION PRICE FOR SKIMMED-MILK POWDER .
8 THE FIFTH RECITAL OF THAT REGULATION STATES : ' WHEREAS THE PARTICULAR SITUATION OBTAINING IN CERTAIN MEMBER STATES AT PRESENT DOES NOT PERMIT THE APPLICATION OF A UNIFORM INTERVENTION PRICE FOR SKIMMED-MILK POWDER ; WHEREAS IT IS THEREFORE NECESSARY TO APPLY A CORRECTIVE FACTOR TO THE AFORESAID PRICE ' . THE SIXTH RECITAL OF THAT REGULATION STATES : ' WHEREAS IN ORDER TO ENSURE THAT THIS CORRECTIVE FACTOR AFFECTS MARKET PRICES IN THE SAID MEMBER STATES WITHOUT LEADING TO DISTORTIONS OF COMPETITION IT IS NECESSARY TO COMPENSATE FOR PRICE DIFFERENCES OCCURRING IN TRADE IN SKIMMED-MILK POWDER . ACCORDINGLY ARTICLE 3 OF THAT REGULATION PROVIDES : ' 1 . BY WAY OF DEROGATION FROM ARTICLE 7 ( 1 ) OF REGULATION ( EEC ) NO 804/68 THE PRICE AT WHICH THE INTERVENTION AGENCIES IN BELGIUM , GERMANY , LUXEMBOURG AND THE NETHERLANDS BUY IN SKIMMED-MILK POWDER SHALL BE THE INTERVENTION PRICE LESS A CORRECTIVE AMOUNT OF 2 U.A . PER 100 KG . 2 . THE CORRECTIVE AMOUNT REFERRED TO IN PARAGRAPH 1 SHALL BE APPLIED TO TRADE IN THE PRODUCT IN QUESTION BETWEEN EACH OF THE MEMBER STATES REFERRED TO IN PARAGRAPH 1 WITH THE OTHER MEMBER STATES AND THIRD COUNTRIES , THE BENELUX COUNTRIES BEING CONSIDERED AS ONE MEMBER STATE . FOR THIS PURPOSE THE AMOUNTS COLLECTED ON IMPORTATION AND GRANTED ON EXPORTATION WITHIN THE FRAMEWORK OF THE COMMON AGRICULTURAL POLICY SHALL BE REDUCED BY THE CORRECTIVE AMOUNT . 3 . DETAILED RULES FOR THE APPLICATION OF THIS ARTICLE SHALL BE ADOPTED IN ACCORDANCE WITH THE PROCEDURE LAID DOWN IN ARTICLE 30 OF REGULATION ( EEC ) NO 804/68 . '
9 IT APPEARS FROM THE THIRD RECITAL OF REGULATION NO 712/74 THAT , IN SETTING OUT THE METHODS OF APPLICATION FOR THE ABOVEMENTIONED ARTICLE , THE COMMISSION DETERMINED THE PRODUCTS TO WHICH THE CORRECTIVE AMOUNT WAS APPLICABLE ' TAKING ACCOUNT OF THE POSSIBILITIES OF DISTORTION OF TRADE WHICH MAY RESULT WITH REGARD TO COMPETITIVE PRODUCTS ' AND DESCRIBED SKIMMED-MILK POWDER AS BEING ' MILK IN POWDER OR GRANULES OF A FAT CONTENT NOT EXCEEDING 3 % ' . ACCORDING TO THE PLAINTIFF IN THE MAIN ACTION THE FAILURE TO FIX A CORRECTIVE AMOUNT FOR MILK-POWDER HAVING A FAT CONTENT BY WEIGHT IN EXCESS OF 3 % PLACES THIS PRODUCT IN A LESS FAVOURABLE POSITION BY REMOVING IT FROM THE GERMAN MARKET . THE COMMISSION IS SAID TO HAVE ABUSED ITS POWERS BY NOT APPLYING TO THAT PRODUCT A CORRECTIVE AMOUNT CORRESPONDING TO THE 2 U.A . APPLICABLE TO SKIMMED-MILK POWDER HAVING A FAT CONTENT BY WEIGHT OF UP TO 3 % . IN SO DOING IT HAS , IN THE VIEW OF THE PLAINTIFF , INFRINGED ARTICLE 3 OF REGULATION NO 663/74 WHICH AUTHORIZED IT TO PRESCRIBE CORRECTIVE AMOUNTS FOR PRODUCTS OTHER THAN SKIMMED-MILK POWDER .
10 ARTICLE 3 ( 1 ) OF THAT REGULATION DEROGATES FROM THE PROVISIONS OF ARTICLE 7 ( 1 ) OF REGULATION NO 804/68 OF THE COUNCIL ONLY IN RESPECT OF SKIMMED-MILK POWDER . NEITHER REGULATION NO 663/74 OF THE COUNCIL , NOR REGULATION NO 1188/73 , ADOPTED FOR THE PRECEDING DAIRY YEAR , CONTAINS A DEFINITION OF ' SKIMMED-MILK POWDER ' . IT IS EVIDENT FROM THE FIFTH AND SIXTH RECITALS OF THAT REGULATION THAT THE COUNCIL LAID DOWN A CORRECTIVE AMOUNT ONLY FOR SKIMMED-MILK POWDER AND THAT CONSEQUENTLY THE COMMISSION DID NOT HAVE THE POWER TO APPLY IT TO OTHER PRODUCTS DERIVED FROM MILK . THE COMMISSION MAINTAINS THAT ALTHOUGH IT DID NOT ADOPT , IN IMPLEMENTING REGULATION NO 712/74 , FOR THE PURPOSE OF FIXING THE CORRECTIVE AMOUNT FOR SKIMMED-MILK POWDER , THE FAT CONTENT OF 1.5 % ADOPTED FOR THE DEFINITION OF THIS PRODUCT , THE REASON FOR THIS WAS TO AVOID ANY POSSIBILITY OF FRUSTRATING THE APPLICATION OF ARTICLE 3 OF REGULATION NO 663/74 . THE DEFINITION OF SKIMMED-MILK POWDER CONTAINED IN THE ANNEX TO REGULATION NO 1108/68 WAS FORMULATED FOR A PURPOSE OTHER THAN THE IMPOSITION AND THE GRANT OF MONETARY COMPENSATORY AMOUNTS , WITH THE RESULT THAT THE COMMISSION DID NOT EXCEED THE LIMITS OF ITS DISCRETION BY FIXING THE UPPER LIMIT FOR THE FAT CONTENT IN SKIMMED-MILK POWDER AT 3 % . THE SECOND QUESTION
11 THE PLAINTIFF IN THE MAIN ACTION FURTHER MAINTAINS THAT ARTICLE 40 ( 3 ) OF THE TREATY PROHIBITS ANY DISCRIMINATION AND THAT CONSEQUENTLY IN THEIR REGULATIONS NEITHER THE COUNCIL NOR THE COMMISSION WERE ENTITLED TO DISTINGUISH BETWEEN PRODUCTS AND PLACE ONE OF THEM IN A LESS FAVOURABLE POSITION WITH REGARD TO COMPETING PRODUCTS AND THAT IN SO FAR AS IT DOES NOT TAKE ACCOUNT OF THE CORRECTIVE AMOUNT APPLICABLE TO SKIMMED-MILK POWDER THE SYSTEM OF MONETARY COMPENSATORY AMOUNTS IS INVALID .
12 SINCE THE SYSTEM OF MONETARY COMPENSATORY AMOUNTS ESTABLISHED BY REGULATION NO 974/71 OF THE COUNCIL WAS INTENDED TO AVOID A DISRUPTION OF THE INTERVENTION SYSTEM FOLLOWING THE WIDENING OF THE MARGINS OF FLUCTUATION FOR CERTAIN CURRENCIES COMPARED WITH THEIR ACTUAL PARITIES , THE COMMISSION , IN ADOPTING THE AMENDMENTS TO THE MONETARY COMPENSATORY AMOUNTS CONTAINED IN REGULATION NO 725/74 IN ORDER TO TAKE ACCOUNT OF THE CHANGES IN THE CURRENCY RATES , DID NOT HAVE THE POWER TO FIX - WITH THE OBJECT OF AVOIDING ANY POSSIBILITY OF PLACING THESE PRODUCTS IN A LESS FAVOURABLE POSITION AS COMPARED WITH THOSE PRODUCTS FOR WHICH THE CORRECTIVE AMOUNT WAS LAID DOWN BY THE COUNCIL - THE RATES OF THE MONETARY COMPENSATORY AMOUNTS FOR THE PRODUCTS IN QUESTION AT A LEVEL LOWER THAN THAT WHICH WOULD HAVE BEEN APPLICABLE OTHERWISE . FURTHERMORE THE FACT THAT THE COUNCIL DEEMED IT NECESSARY IN EXCEPTIONAL CIRCUMSTANCES TO FIX A REDUCED INTERVENTION PRICE FOR SKIMMED-MILK POWDER FOR CERTAIN COUNTRIES DID NOT NECESSARILY IMPLY THAT THE SYSTEM OF MONETARY COMPENSATORY AMOUNTS APPLICABLE TO OTHER PRODUCTS DERIVED FROM MILK ALSO HAD TO BE AMENDED IN ORDER TO AVOID ANY POSSIBILITY OF PLACING OTHER PRODUCTS DERIVED FROM MILK IN A LESS FAVOURABLE POSITION .
13 THE REPLY TO BE GIVEN TO THE FIRST QUESTION , THEREFORE , IS THAT THE COMBINED PROVISIONS OF ARTICLE 1 OF REGULATION ( EEC ) NO 974/71 , ARTICLE 1 OF REGULATION ( EEC ) NO 218/74 AND PART 5 OF ANNEX I TO THAT REGULATION IN THE VERSION CONTAINED IN REGULATION ( EEC ) NO 725/74 AND APPLICABLE TO POWDERED MILK UNDER TARIFF SUBHEADING 04.02 A II B 2 OF THE COMMON CUSTOMS TARIFF MUST BE INTERPRETED AS MEANING THAT THEY DO NOT ALLOW THE REDUCTION OF THE MONETARY COMPENSATORY AMOUNT BY 2 U.A . OR LESS WHERE THE FAT CONTENT BY WEIGHT IS IN EXCESS OF 3 % .
14 CONSIDERATION OF THE SECOND QUESTION HAS DISCLOSED NO FACTOR OF SUCH A KIND AS TO AFFECT THE VALIDITY OF REGULATION NO 725/74 .