JUDGMENT OF 27. 10. 1971 — CASE 6/71 RHEINMÜHLEN v EINFUHR- UND VORRATSSTELLE GETREIDE

In Case 6/71 Reference to the Court under Article 177 of the EEC Treaty by the Bundesfinanzhof for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, J. Mertens de Wilmars and H. Kutscher (Rapporteur), Presidents of Chambers, A. M. Donner, A. Trabucchi, R. Monaco and P. Pescatore, Judges, Advocate-General: A. Dutheillet de Lamothe Registar: A. Van Houtte

gives the following

JUDGMENT

Facts

I — Facts and procedure

1. Examination of the provisions applicable during the relevant period

The provisions applicable during the relevant period were as follows:

A — Community law

Regulation No 19/62 of the Council which has since been repealed was in force at that time. It is with the interpretation of Articles 19 and 20 of that regulation that the first question, referred by the Bundesfinanzhof, is concerned. Also applicable during the period in question were the regulations made pursuant to Regulation No 19.

Regulation No 19 authorized the Member States to grant up to a certain amount refunds upon exports ‘to a Member State’ (Article 19 (2)) or ‘to third countries’ (Article 20 (2)); these concepts were not defined in either Regulation No 19 or in the provisions made pursuant thereto. Regulation No 19 provided in detail for the refund granted upon certain products such as cereal meal of durum wheat, referred to in Article 1 (c) of Regulation No 19.

On the other hand as regards the processed products referred to in Article 1 (d), which are listed as an annex to the regulation and which include inter alia hulled barley grains, Article 19 (2) and Article 20 (2) of Regulation No 19 refer to further implementing provisions. As regards the levies imposed upon importation of goods originating in Member States or third countries and with which Regulation No 19 is mainly concerned, Article 14 provided that in the case of processed goods, they consisted of a variable component and of a fixed component intended to protect the processing industry.

Regulation Nos 90, 91 and 92 of the Commission of 25 June 1962 (OJ of 28.7.1962, p. 1902 et seq.) laid down certain other details concerning refunds, in relation to which a distinction was drawn between ‘export to Member States’ and ‘export to third countries’ (cf. for instance Articles 5 and 6 of Regulation No 91). According to these provisions the Member States were obliged regularly to inform the Commission of the amount of refunds granted and also to furnish it with certain other particulars; this information had to be furnished ‘according to destination of exports’ separately in respect of each Member State and in the aggregate in respect of exports to third countries (cf. for instance Article 6 of Regulation No 91).

Refunds on exports of processed goods were the subject of Regulation No 141/64 of the Council of 21 October 1964 (OJ of 27.10.1964, p. 2666 et seq.) — which also made provision on certain points concerning the levies — as well as of Regulations Nos 162/64 and 164/64 of the Commission of29 October 1964, made in implementation of the former regulation (OJ of 31.10.1964, p. 2739 et seq.) which regulated the refunds (upon exports to Member States in the case of Regulation No 162/64, and upon exports to third countries in the case of Regulation No 164/64).

According to Article 5 (1) of Regulation No 141/64, the variable component of the levy corresponded to the average amount of the levy which had to be imposed upon certain given quantities of the basic product; in respect of 100 kg of hulled barley, the ‘processing rate’ amounted to 160 kg of raw barley (Article 5 (1), heading C (b)).

Article 14 (1) of the regulation provided that within the framework of intra-Community trade, refunds might only be granted when the threshold price in force in the exporting Member State for the basic product was higher than that in force in the importing Member State; the difference between the two threshold prices constituted the maximum amount authorized in respect of the refunds. Within the framework of trade with third countries, Article 15 provided that in the determination by the Commission of the amount of the refund ‘account shall be taken in particular of world market conditions and of the prices of the basic products’.

Regulation No 162/64, the validity of which is questioned by the second question referred by the Bundesfinanzhof, provided by Article 1 (1) thereof that the maximum amounts authorized in respect of the refunds might not exceed a certain percentage of the amount of the refunds resulting from giving effect to Article 14 of Regulation No 141/64; this percentage was 55 % in respect of hulled barley (heading (e) of the paragraph referred to). This regulation was justified inter alia‘having regard to the different processing rates existing in the various Member States’ so that ‘price distortions might result in respect of certain processed products both in trade between Member States and on the market of the importing Member State.’

According to Article 1 (1) of Regulation No 164/64, the interpretation of which is the subject-matter of the third question referred by the Bundesfinanzhof, ‘In trade with third countries, the refund which may be allowed … during a given month must not exceed the average refund which could have been allowed during the 25 first days of the preceding month on export of the quantity of basic product on which the variable component was calculated’.

Commission Decision of 17 July 1962, published in the Official Journal (p. 2140 et seq.) had instituted ‘for the application in the importing Member State of the system of intra-Community agricultural levies … within the framework of methods of administrative cooperation, referred to in the first paragraph of Article 10 (2) of the Treaty, a movement certificate for goods on form DD4’. According to Article 2 of this decision this certificate ‘can only be utilized to the extent that the goods to which it refers are transported directly from the exporting Member State to the importing Member State’.

B — German law

According to paragraph 1 (1) of the ‘Erstattungsverordnung Getreide und Reis’ (Regulation on export refunds in respect of cereals and rice) of 24 November 1964 (Bundesgesetzblatt I, p. 917 et seq.) refunds are allowed on export of the products referred to; in respect of some of them nevertheless, for instance cereal meal of durum wheat, a refund is made only when the export is to a third country whilst in respect of others, for instance hulled barley grains, a refund is made when the export is to a Member State (paragraph 1 (1), Nos 2 and 4).

Paragraph 1 (2) provides:

‘Export to Member States takes place when the country of consumption (Verbrauchsland) is a Member State of the European Economic Community. Export to third countries takes place when the country of consumption is a third country. The concept of country of consumption is determined by reference to the provisions relating to the statistics of foreign trade.’

The provisions applicable are therefore those which appear in the ‘Verordnung zur Durchführung des Gesetzes iiber die Statistik des grenzüberschreitenden Warenverkehrs’ (Regulation on the implementation of the law relating to the statistics of foreign trade) amended by the text of 13 January 1964 (Bundesgesetzblatt I, p. 9 et seq.). Under the provisions of paragraph 10 (6) and (7) of that regulation:

6) The country of consumption (Verbrauchsland) is the country in which the goods must be utilized or consumed, treated or processed.

7) The country of consumption is defined as follows:

1) …

2) In respect of goods, the country of consumption of which is not known, it shall be the country of destination (Empfangsland). Under the provisions of paragraph 11 (2):

‘The country of destination (Empfangsland) is that country in which the goods must be delivered without having remained in the country of transit except for the purpose of transport and without having been subject in those countries to legal transactions other than those necessary for that purpose. If such country is unknown it shall be deemed to be the last known country to which the goods were sent.’

2. Facts

The facts may be summarized as follows:

A —) As set out by the Bundesfinanzhof and the Hessisches Finanzgericht, the facts giving rise to the main proceedings are as follows: During the period from 30 December 1964 to 16 December 1965, Rheinmuhlen, the appellant on a point of law in the main proceedings delivered barley grains and cereal meal of durum wheat to various undertakings in Belgium, Italy and Switzerland. The conditions of delivery were for instance: ‘cif Antwerp’, ‘free Chiasso’, ‘free Bolzano’, ‘free Basel’, ‘free Trieste’, ‘free Mestre’, ‘free Genoa’, etc. In all cases the parties had chosen not to prepare a certificate on form DD4. At the time of these exports, the undertaking received refunds in the form of authorizations to import free of levy. On 7 December 1966 the Einfuhr- und Vorratsstelle fur Getreide und Futter- mittel revoked the decision granting these refunds on the grounds that contrary to the statements of the undertaking, the products had not been exported to third countries but to Member States.

B —) After having complained unsuccessfully against this decision, Rheinmuhlen brought the matter before the Hessisches Finanzgericht. The latter rejected its appeal by a judgment of 12 August 1968 and in particular declared: Rheinmuhlen brought before the Bundesfinanzhof an appeal on a point of law against the judgment of the Finanzgericht.

Rheinmuhlen is in no way entitled to the refunds in question since in respect of the exports in question the ‘country of consumption’ within the meaning of the German regulation relating to export refunds and of the regulation relating to statistics of foreign trade was in each case a Member State.

The provisions contained in the regulations in question are not in contradiction to Community law. Whilst it is true that the EEC regulations did not use the concept of ‘country of consumption’ but limited themselves to drawing a distinction between exports to third countries and exports to the Member States, nevertheless, by introducing the concept of ‘country of consumption’ the German authority empowered to make regulations did no more than lay down criteria which would allow these two operations to be distinguished. These regulations are in conformity with Regulation No 19 which gives the exporter no right to refunds but limits itself to authorizing Member States to grant refunds. Whilst it is true that in making regulations in this matter the Member States are obliged to act within the framework fixed by the Community, they are unrestricted in other respects. The concept of ‘country of consumption’ corresponds to the concept of ‘country of destination’ used in Regulations Nos 90 and 91 and relating to the destination of the exports.

The question of which State is in any particular case the ‘country of consumption’ depends on the knowledge which the exporter had of the destination of the goods at the moment of export. Subsequent changes in this destination have no effect on the entitlement to refunds for the exporter must be able to foresee the economic consequences of the export.

The fact that the exports took place without a certificate on form DD4 having been prepared is of no importance in law; the Commission's decision of 17 July 1962 limits itself to providing a system of proof for the collection of the intra-Community levy and has no effect on the material character of the operation.

3. Operative part of the order referring the matter and the grounds therefor

By order of 15 December 1970 the Bundesfinanzhof decided to stay the proceedings and under Article 177 of the Treaty establishing the European Economic Community to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) How is the concept of exports to third countries appearing in the first sentence of Article 20 (2) of Regulation No 19/72 of the Council of 4 April 1962 (OJ 1962, p. 933 et seq.) to be interpreted and how must this concept be defined in relation to the concept of exports to a Member State within the meaning of Article 19 (2) of this regulation? Do exports to third countries presuppose in particular: (a) that it is proved that the goods have reached third countries; (b) that they have reached a third country determined in advance; (c) that they have reached a third country directly, that is to say, that they have been transported there by virtue of a single freight document and have not remained in the countries of transit (Member States and third countries) or been the subject of legal transactions there other than in connexion with the transportation; (d) that the goods are put into free circulation in the third country; (e) that tne goods are nationalized there, that is to say, are used or consumed, treated or processed; or is there export to third countries merely if: (a) goods are exported without a movement certificate on form DD4 even to a Member State; (b) they are not transported direcdy from one Member State to another Member State; or by what other criteria must this concept be determined? (2) Is Regulation No 162/64/EEC of the Commission of 29 October 1964 (OJ 1962, p. 2739) invalid in view of the fact that it restricts in the aggregate the refunds in trade between the Member States to certain percentages of the rates of refund permissible under Regulation No 141/64/EEC of 21 October 1964 (OJ 1964, p. 2666), whereas the refunds granted in trade with third countries could reach the full amount of the variable component of the lew applicable to imports? (3) In the event of a negative reply to Question 2: in view of the limitation introduced by Regulation No 162/64/EEC on the amount of the refund applied in trade between Member States and of the aim pursued by this means (the protection of trade between the Member States and of the markets of importing Member States against price distortions) must the concept of exports to third countries within the meaning of Regulation No 164/64/EEC of 29 October 1964 (OJ 1964, p. 2743) be interpreted otherwise than in the cases mentioned in Question 1, in particular in a narrower sense, and must it be defined more strictly than in those cases in relation to the concept of exports to a Member State?’

In the grounds tor the order, the Bundesfinanzhof finds that none of the Community regulations applicable during the period in question provided a precise definition of the concept “exports to third countries”; that in its view it is open to question whether the provisions of the German regulations relating to this concept are compatible with Community law.

In view of the Bundesfinanzhof Questions 2 and 3 are of importance by reason of the fact that the goods reached the Member States; further, it considers that the reply to be given to these questions will determine whether the German regulation on refunds could, taking into account the principle of Community preference, provide that in respect of cereal meal of durum wheat the refunds would be granted only in the case of exports to third countries.

4. Procedure

The order of the Bundesfinanzhof referring the matter was received at the Court Registry on 3 March 1971.

Rheinmuhlen, the Einfuhr- und Vorratsstelle fur Getreide und Futtermittel and the Commission of the European Communities submitted written observations under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC.

After hearing the report of the Judge-Rapporteur and the views of the Advocate-General, the Court decided to open the oral procedure without any preparatory inquiry.

The parties to the main action and the Commission were heard on 30 June 1971.

The Advocate-General delivered his oral and reasoned opinion at the hearing on 22 September 1971.

Rheinmuhlen is represented by Dr Modest, Advocate at Hamburg, the Einfuhr- und Vorratsstelle by Mr Schaller (Assessor) and by Mr Stock-burger, Advocate at Frankfurt am Main, the Commission by its Legal Adviser, Mr Gilsdorf.

II — Observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

1. The first question

The observations of Rheinmuhlen may be summarized as follows:

a) The concept of “exports to the Member States” and of “exports to third countries” must have the same meaning in all the Member States. It would be incompatible with the idea of a common organization of the agricultural markets and moreover illogical that the same commercial operation might be considered by the exporting Member State as an intra-Community export and, on the contrary, by the importing Member State as an import from a third country. This is the reason why the national legislature was not itself authorized to define these concepts. The concept of exports to the Member States' and of ‘imports from Member States’ must be interpreted stricto sensu, whilst the concepts of ‘exports to third countries’ and of ‘imports from third countries’ must be the subject of a wide interpretation; this is the only way of avoiding the benefits linked to intra-Community trade being improperly granted. The demarcation of the concepts of ‘exports to the Member States’ and of ‘exports to third countries’ must be based on objective points of view; only objective means of proof are suited to proving that one is dealing with one or other category of export.

b) Such means ot proot is the production or non-production of the DD4 certificate prescribed by the decision of 17 July 1962. Consequently, as is shown by an ‘export certificate’ which Rheinmuhlen put on the Court file, the German administration always required undertakings wishing to benefit from a refund to indicate whether a certificate on form DD4 had been delivered. If this was not the case it granted, without more ado, the refund provided for exports to third countries whilst in the converse case this refund was precluded as a matter of course. Manipulations were therefore absolutely impossible. Whilst it is true mat tne decision ot 17 July 1962 did not have the purpose of defining the concepts of ‘import’ or of ‘export’ either in the case of intra-Community trade or of trade with third countries, nevertheless Article 2 of the decision shows that in the present case the Commission proceeded on the basis of a precise interpretation of these concepts, an interpretation supported by Rheinmuhlen. For all these reasons the undertakings were at that time convinced that there was ‘export to a Member State’ only when the exporter had requested and obtained a certificate on form DD4. This conviction was based on the idea that no purchaser was bound to request the benefit of the preference which attached to intra-Community imports, so that the parties were free to give their operations the legal character of exports to third countries by not using the certificate DD4. This interpretation was in conformity with the meaning and objectives of Regulation No 19 and could not result in anyone's obtaining an improper advantage. It took no account of all the subjective aspects and in particular attached no importance to what the exporter knew or proposed to do in relation to the subsequent fate of the goods.

c) Rheinmuhlen protests against the inferences which the Hessisches Finanzgericht drew from the insertion in a certain number of the sale contracts of precise clauses relating to costs and expenses. Thus for instance, a clause such as ‘cif Antwerp’, whilst clearly referring to a Member State, nevertheless does not permit of definite conclusions as regards the country of destination, since the port of Antwerp is an outlet.

d) The reply to be given to the first question of the Bundesfinanzhof ought therefore to be as follows: Even if one does not entirely adopt this opinion it is in any event necessary, in order to distinguish the intra-Community exports from those effected to third countries, to bear in mind the following factors: In the cereal trade it is not usual—and it would moreover be pointless—to ask the purchaser what use he intends to make of the goods. It frequently happens that the purchaser wishes to retain a free hand. That is the reason why there can only be a question of export to a Member State where it is really established that the goods have not only reached the national territory of the Member State in question but also that they have been put into free circulation. This can only be established by means of an official document and only the customs document delivered by the importing Member State can in this respect come up for consideration. The question whether the exporter knew that the goods finally would finish up in a Member State is immaterial, all the more so since this knowledge cannot be proved by objective means. Besides, the seller of goods, for which the buyer chose not to use a certificate on form DD4 and so did not obtain the advantage of Community preference, must logically deduce therefrom that the goods will not be put into free circulation in a Member State. In any event there cannot be any export to a Member State except where the goods have been ‘directly transported’ from one Member State to the other within the meaning of Article 2 of the decision of 17 July 1962; this was also the opinion of exporters. Further, it does not matter which third party residing outside Community territory might export goods from one Member State to another by purchasing goods in the exporting Member State at the world market price and reselling them in the importing Member State, also at the world market price. To prevent their so doing would have amounted to establishing a discrimination to the detriment of exporters who are nationals of the Member States. Where the exporter deals with such a third party there is therefore ‘export to the third country’ even if the exporter knows that the third party has resold the goods or will resell them in a Member State. Were this not the case then the legal nature of the operation might depend on the question—difficult to prove—whether the operation is due to the initiative of the original exporter or to that of the third party.

‘There is export to a Member State where the goods are transported directly from one Member State to another, without using the territory of a non-Member State, or under cover of a single transport document, made out in the exporting Member State without the goods' having remained in a third country, and when the exporter has applied for and obtained the issue of a movement certificate on form DD4 with a view to making this available to the importer so that the latter may apply for Community preference in the importing Member State. If these conditions are not fulfilled as from the time when the goods leave the Member State, then the operation must be treated as export to third countries.’

e) The system of refunds provided for under Regulation No 19 was intended to allow exports of cereals coming from Member States which maintain high prices to Member States maintaining low prices and to third countries. The Member States maintaining high prices were not therefore free to refuse refunds or to fix them at an excessively low level. This applies all the more sinco these States could have collected the highest levies and that it was therefore possible to ask of them that they should provide the necessary financial resources. A national system of refunds which subjects exports from one Member State to another to a discrimination in favour of exports coming from third countries is incompatible with Regulation No 19. The observations of the Einfuhr- und Vorratsstelle may be summarized as follows: Regulation No 19 was limited to bringing about the first stage of a common organization of the market in cereals and that is the reason why only certain important fields, such as levies and intervention, were the subject-matter of a uniform system of regulations; on the other hand it attached a lesser importance to export and consequently to the refunds relating thereto. That is why in fixing the maximum amount in respect of refunds it was limited to outlining a framework within which the Member States could act quite freely. If it was for them to decide on the grant of refunds, it was equally for them to lay down the conditions thereof. In the Community legislature s conception the primary purpose of the refunds was to compensate for the disadvantages in the field of prices and of competition, disadvantages which might have impeded exports to the Member States on the one hand and to third countries on the other. That is why it was necessary to draw a clear distinction based on objective criteria between these two categories of exports. The desire to make national products competitive on the respective markets implies that these products have in fact to reach those markets. It is not enough therefore to send the goods beyond the frontier ‘with a Member State or a third country as objective destination’; such a condition would just give rise to malpractices. For the same reasons it is not enough for the goods to be sent directly or under cover of a single transport document from one Member State to another. Fixing the maximum refunds had the purpose of preventing disturbances to the Community levy system. There would have been a disturbance if the goods which resulted in the grant of a more substantial refund applicable to exports to third countries had nevertheless been exported to a Member State. For these reasons the wide interpretation of the concept of ‘exports to third countries’ which is put forward by Rheinmuhlen, is inaccurate. Finally, it also matters little that the parties have chosen not to deliver a certificate on form DD4. The decision of 17 July 1962 concerns solely levies and not refunds; besides, the material fact constituting an import within the meaning of the law on levies does not necessarily correspond to the material fact constituting export within the meaning of law on refunds; in fact, whilst it is true that the Member States were bound at the relevant time to collect the levies they nevertheless were not obliged to grant refunds. The Commission's observations may be summarized as follows:

a) Whilst it is true that the concept of ‘exports to third countries’ belongs essentially to Community law, nevertheless the Community has only defined the framework thereof leaving it to the Member States to fill in the details as they wish.

b) As regards the scope of the provisions in question under Community law: The fact that goods have been exported without a certificate on form DD4 is not a sufficient criterion to constitute ‘export to third countries’. In fact: On the one hand it does not follow from Community law that there is ‘export to third countries’ solely where it is proved that ‘the goods did indeed reach a third country’ (Question 1 of the Bundesfinanzhof, first alternative, (a)). Such a condition, the application of which would have resulted in great practical difficulties, cannot be deduced from the fact that nothing is said on the subject in the relevant instruments. Moreover the interpretation by reasoning from the converse, of the third paragraph of Article 5 of Regulation No 90, under which in the case provided for therein the Member States must take all necessary steps to ensure that the ‘cereals are in fact exported to third countries’, makes it appear that for the purposes of Community law this should not be the normal case. Finally, the wording of the German version of Regulation No 19 (Ausfuhr ‘nach’ dritten Ländern, ‘nach’ einem anderen Mitgliedstaat) and still more the wording of the other three versions (‘a destination de’; ‘vers’; ‘verso’; ‘naar’) suggests that it is sufficient for the exports to be directed to the country in question; this is also the sense which seems to attach to the expression ‘country of destination’ (pays de destination) used in Regulations Nos 90 and 91. Consequendy, it is absolutely impossible to accept that Community law has imposed such strict conditions as those enumerated by the Bundesfinanzhof in its first question under the first alternative, (b) to (e). On the other hand, the fact that ‘the goods have not been transported directly from one Member State to another Member State’ (first question of the Bundesfinanzhof, in fine, (b)) is not sufficient for there to have been ‘export to third countries’; such a theory would encourage fraud. The concept in question must therefore be understood in this sense: ‘The export must actually be directed to a third country which is the country of destination’. This destination may be deduced not only from the contract of sale, from the transport documents, but also from all the other documents which may be supplied by the exporter or be officially known to the authorities. Since the Member States were left free not to grant refunds and since at the time in question they had themselves substantially to bear the financial burden which resulted therefrom, they had good grounds for imposing basic conditions in connexion with the grant of refunds as well as stricter proofs than those imposed by Community law. Whilst it is true that a wide interpretation of the concept ‘export to third countries’ which would have permitted the interested parties to attach this characteristic to any export, would hardly have favoured speculation on a refund as high as possible, coupled with a levy as low as possible, at least, it would have done away with the distinction which Community law draws between a refund applicable in intra-Community trade and a refund applicable to exports to third countries.

The decision of 17 July 1962 was taken on the basis of Articles 10 and 38 of the EEC Treaty in order to allow the application of a system of intra-Community levies in the importing Member State; as against this the Community provisions relating to refunds on exports are based upon Article 43 of the Treaty;

The refund is not simply the quid pro quo of the lew;

The refund is an instrument for the purpose of regulating trade and it follows that it is not for the exporter at his pleasure to influence the legal nature of export by not asking for a certificate on form DD4:

As against the theory put forward by Rheinmuhlen, it can be said that the economic consequences are not the same for the parties whether the delivery is effected to a Member State with a certificate on form DD4 or has been declared as an export to a third country without that certificate's having been used.

c) In general it must be emphasized that from a Community point of view the refunds were of no great importance at the time. As the countries where prices were high at that time were in general importing countries, refunds on exports coming from countries where prices were high would really hardly have been sensible commercial policy. If the Community nevertheless allowed them it was solely in order to create a certain equality of opportunity and in order not to impede traditional trade.

2. The second question

The observations of the interested parties may fee summarized as follows:

Rheinmuhlen points out that Regulation No 162/64, which limits the maximum amount of refunds fixed by Regulation No 141/64 is invalid. This regulation could only apply to exports coming from Member States with high prices in respect of cereals and going to States with lower prices; only these exports could give rise to refunds. This regulation would put exporters especially from the Federal Republic of Germany, where the prices of cereals were the highest, at a disadvantage. In its recitals. Regulation No 162/64 states that there exist in various Member States different processing rates, capable of resulting in price distortions. By the term ‘processing rates’ must be understood the quantities of raw materials required by manufacturers in order to produce a certain quantity of processed products. The Commission proceeded on the basis that the processing industries of the different Member States showed a smaller return the lower the cereal prices in those States were. This opinion is contrary to logic. The levels of cereal prices and of the rates of processing are independent of each other. The differences which exist at the level of prices are attributable to the fact that agricultural production costs differ from one country to another whilst the level of the processing rate depends on the quality of technical equipment and other analogous factors. If against all expectation this opinion had turned out to be in accordance with facts, the Commission ought to have set out the facts and accordingly to have stated its reasons for the provision of the regulation; since it did not do so Regulation No 162/64 infringes Article 190 of the EEC Treaty.

This regulation moreover establishes a discrimination in regard to exports coming from Member States with high prices to Member States with low prices and it does so to the advantage of imports corning from third countries. If, as is thought by the Commission, the uniform rate of processing prescribed by Regulation No 141/64 had actually not been high enough for the Member States with low prices, it would then have been logical also to protect these countries vis-a-vis imports coming from third countries and consequently to raise the amount of the levy. Since this was not the case, the importers from the Member States in question were able to purchase at relatively attractive prices from the third countries products processed from cereals whilst, consequent upon Regulation No 162/64, the price of imports of these products coming from the Member States of the EEC with high prices had appreciably increased and had made it almost impossible to purchase them.

Finally, if the undertakings of countries with lower prices obtained a smaller benefit this ought logically to have led to a diminution in the intra-Community levy in favour of these undertakings in order to allow them to export to countries with higher prices. This however did not occur, hence a further discrimination, this time to the detriment of the undertakings in question.

The Einfuhr- und Vorratsstelle considers that Regulation No 162/64 is valid. To restrict the maximum amount of the refunds is justified. This reduction on a flat rate basis cannot be the target of any criticism for it has facilitated the application of the system of refunds. The principle of Community preference cited by the Bundesfinanzhof, was drawn up only in respect of imports and does not apply to refunds. For the rest, the Einfuhr- und Vorratsstelle refers back to the Commission's arguments.

The Commission likewise takes the view that Regulation No 162/64 is valid. It considers that its purpose is that which is indicated in Regulation No 141/64, that is to say to avoid distortions of prices which may result from the existence of different processing rates from one Member State to another, whilst Regulation No 141/64 laid down uniform rates. It is therefore the legality of Regulation No 141/64 which might be called in question. Nevertheless, this regulation also is in conformity with the Treaty which does not prohibit refunds granted in intra-Community trade from being subjected to stricter conditions than those to which refunds in connexion with exports to third countries are subject. Moreover, the reduction in the maximum amounts of the refunds fits logically into the evolution of the common market, the objective of which is to eliminate any refund within the framework of intra-Community trade.

At the time of adopting Regulation No 162/64, the Commission did not proceed from the notion, which is certainly erroneous, that only in countries with lower prices does one find undertakings which operate without showing a return. Quite to the contrary, it was the purpose of the regulation during the transitional period to protect all undertakings not operating at a profit against the pressure on prices exercised by the more competitive undertakings of the other Member States. The means chosen for this purpose were suitable. Other measures which would have allowed the attainment of the same objective would have been less advantageous to the parties concerned. Thus an increase in the fixed component of the levy would have had a more marked effect on intra-Community trade; the lowering of the processing coefficients and, following from this, of the maximum amount of the refunds for the whole of the Community would have affected the competitiveness of exporters from the Community as compared with those from third countries; as for the graduation of these coefficients Member State by Member State, this cannot be defended, for the very reason relied on by Rheinmuhlen.

The regulations in question did not create any discrimination in favour of imports coming from third countries, since such imports were burdened with the levy applicable to third countries, calculated on the basis of the standard processing rates which had not been reduced. Besides, the fixed component applicable to imports originating in third countries was retained in full whilst in intra-Community trade it was reduced consequent upon the progressive realization of the common organization of the market.

The complaint against Regulation No 162/64 that it had been insufficiently reasoned is not relevant if one adopts the beforementioned thesis.

3. The third question

The parties are in agreement that the concept of ‘exports to third countries’ has the same meaning in Regulation No 164/64 and in Regulation No 19 nevertheless, Rheinmuhlen points out that the third question does not call for a reply since the second question ought to be answered in the affirmative; the Einfuhr- und Vorratsstelle and the Commission emphasize that the Member States were also authorized to adopt this concept, within the framework of Regulation No 164/64.

Law

1. By order dated 15 December 1970, received at the Court Registry on 3 March 1971, the Bundesfinanzhof referred to the Court for a preliminary ruling several questions on the interpretation of Regulation No 19 of the Council and of Regulation No 164/64/EEC of the Commission as well as on the validity of Regulation No 162/64/EEC of the Commission.

The first question

2. The first question asks the Court to interpret the concept of ‘exports to third countries’ in Article 20 (2) of Regulation No 19 and to define it in particular in relation to the concept of ‘exports to another Member State’ within the meaning of Article 19 (2) (a) of that regulation. More particularly, the Court is asked to rule whether the interpretation of the first concept must be based on certain criteria set out in the question or whether the interpretation should be governed by other criteria to be determined by the Court.

3. (1) At the time of the transactions at issue the provisions mentioned constituted in the cereals sector the basic rules for the refunds which could be granted for ‘exports to another Member State’ or for ‘exports to third countries’. The proceedings in the national court are concerned with the question whether certain exports made by the appellant in the main action went to third countries — and censequently could qualify for the appropriate refunds — or whether they went to another Member State, as is argued by the defendant in the main action.

4. (2) Regulation No 19 and the measures adopted for its implementation made the intra-Community refund and the third country refund subject to different conditions as regards both the grant thereof and the ceiling applicable. This follows, in particular, from a comparison between Articles 19 (2) and 20 (2) of Regulation No 19 and between Regulations Nos 162/64 and 164/64. The distinction thus made between the two systems of refund adequately shows that the distinction between exports to third countries and exports to Member States has a significance in Community law, with the result that the Member States did not have an unlimited discretion in its application.

5. Nevertheless, Articles 19 and 20 of Regulation No 19 provide that a refund ‘may’ be granted for ‘exports to third countries’ or exports ‘to another Member State’. Thus the Member States were free completely to refrain from granting refunds, which a fortiori included the right to add conditions for the grant of the refund to those prescribed by the Community regulations.

6. Therefore the presence of the factors defining exports to a third country within the meaning of Regulation No 19, regardless of what these factors were, was merely a necessary prerequisite to, but not of itself a sufficient ground for, the grant of a refund. Thus export to third countries within the meaning of Regulation No 19 could not be used as a ground for compelling a Member State to exercise the power granted to it by that regulation.

7. Both the provisions of Regulation No 19 and the recitals in the preamble thereto show that the refunds prescribed by the regulation were intended to offset the price differences between the markets in question. It follows that ‘exports to third countries’ within the meaning of that regulation presupposed that the goods were offered for sale on the market of a third country, that is to say, that they must at least have been put into free circulation there. Nevertheless, without infringing Regulation No 19 a Member State could require, in addition to this minimum Community obligation, proof that the goods were ‘used or consumed, treated or processed’ in the country of destination.

8. It was for the Member States to detennine independently the evidence required to establish that export to a third country had taken place, provided that they did not accept insufficient proof.

9. The nature of the proof which can be regarded as sufficient cannot be exhaustively set out, for it depends to a large extent on the circumstances of each individual case, and in particular on the available evidence as a whole, whether the evidence offered was relevant or not. Nevertheless, it must be said that, if they did not wish openly to invite abuses, the national authorities could not be satisfied, for proof of the ‘export to a third country’, either with the mere fact that the goods were exported without a certificate DD4 or with the fact that they were not transported directly from one Member State to another (second alternative in the question, under (a) and (b)).

10. As regards the certificate DD4, which, moreover, according to the Commission's decision of 17 July 1962 was merely intended to prove the origin of imported goods and not the destination of exported goods, it has been submitted that importers in the Member States had an interest in the application of the Community levy, which was lower than the third country levy, and therefore would only have foregone the issue of the certificate DD4 if they had wished to appear solely as forwarding agents, because the goods had been intended for a third country. This argument is erroneous, for it is possible that in certain cases the loss to the importer by reason of the application of the third country levy could largely be offset by the fact that, because of their third-country refund, the exporter was able to offer prices more favourable than those he would have had to offer without the refund.

11. With regard to the criterion of non-direct transport, reference need only be made to the example of the export of goods from Germany to Italy or vice versa, which often go through Austria or Switzerland but this fact, arising out of the geographical situation of the States in question, does not turn the transaction into an export to a third country.

The second question

12. The second question of the Bundesfinanzhof is whether Regulation No 162/64 of the Commission is rendered invalid by the fact that it restricted the refunds in trade between the Member States on a flat rate basis to certain percentages of the rates of refund permissible under Regulation No 141/64, whereas Regulation No 164/64 did not provide a similar restriction for the refunds granted in trade with third countries.

13. From its wording and from the grounds given in the order referring it, the question assumes that the illegality of Regulation No 162/64 may arise from the fact that the regulation discriminates against trade between Member States or conflicts with the principle of Community preference.

14. (1) The non-discrimination rule would only be infringed if it were shown that the Community legislature had treated comparable situations differently. The comparability or otherwise of the Community refunds on the one hand, and the third-country refunds on the other hand, must be considered in the light of the aims of the Community agricultural system.

15. According to Article 3 (d) of the Treaty the activities of the Community are to include ‘the adoption of a common policy in the sphere of agriculture’; the Member States were to develop this policy by degrees during the transitional period and bring it into force by the end of that period at the latest, as stated in Article 40 of the Treaty, which also provides for ‘a common organization of markets’ for this purpose. In accordance with these aims Regulation No 19 provided, according to its tide, for ‘the progressive establishment of a common organization of the market in cereals’.

16. The gradual reduction of the intra-Community refunds came fully within the scope of the ‘progressive establishment’ of such an organization; but this does not apply in the case of exports to third countries. Since the two kinds of refund are accordingly not comparable with one another, the reduction of the ceiling of the intra-Community refund effected by Regulation No 162/64 is not discriminatory.

17. (2) As regards the principle of Community preference, it is true that the ninth recital in the preamble to Regulation No 19 states that ‘the system to be introduced must enable the preference resulting from the implementation of the Treaty to be maintained in favour of Member States’. Nevertheless it follows from the context that with the state of development of the market at that time this aim mainly related to import transactions. The recital referred to did not in such circumstances prevent exports to other Member States from being subject to the same or even less advantageous conditions than those which governed exports to third countries.

18. Accordingly, examination of the question submitted by the Bundesfinanzhof does not reveal any factor capable of affecting the validity of Regulation No 162/64.

The third question

19. In its third question the Bundesfinanzhof asks the Court to rule whether ‘in view of the limitation introduced by Regulation No 162/64 on the amount of the refund applied in trade between Member States and of the aim pursued by this means (the protection of trade between the Member States and of the markets of importing Member States against price distortions) the concept of exports to third countries within the meaning of Regulation No 164/64 must be interpreted otherwise than in the cases mentioned in Question 1 — that is to say otherwise than in Regulation No 19 — in particular in a narrower sense, and be defined more stricdy than in those cases in relation to the concept of exports to a Member State’.

20. Article 1 (1) of Regulation No 164/64 mentions ‘trade with third countries’ and prescribes rules for the refund which ‘may be allowed on exports of the processed products referred to in Regulation No 141/64/EEC’ in trade with these countries; thus the expression ‘trade with countries’ is used here as synonymous with the expression ‘exports to third countries’, which also appears in the title of Regulation No 164/64.

21. This regulation, which only applies to third-country refunds, must be interpreted in the light of Article 20 (2) of Regulation No 19, a provision which is its essential basis and to which it is subordinate.

22. Although this regulation provides for the adoption of implementing provisions regarding the conditions for the granting of the refund and the determination of its amount, it does not contain anything that would permit of the conclusion that the draftsmen of these provisions were empowered to give the expression ‘exports to third countries’, even if only for one sector, a meaning other than that which it has in Article 20. Moreover, even if the existence of such a power were to be assumed, it has none the less never been exercised.

23. This conclusion is confirmed by the fact that the expression ‘exports to a Member State’ has not been defined in any way whatsoever in any of the provisions adopted under Regulation No 19.

24. It must therefore be assumed that in Regulation No 164/64 the expression has the same meaning as in Regulation No 19.

Costs

25. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable, and as the proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the submissions of Rheinmuhlen Diisseldorf, the Einfuhr- und Vorratsstelle fur Getreide und Futtermittel, and the Commission of the European Communities; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 3 (d), 40 and 177; Having regard to Regulation No 19 of the Council of 4 April 1962 on the progressive establishment of a common organization of the market in cereals, especially Articles 19 and 20; Having regard to Regulation No 162/64/EEC of the Commission of 29 October 1964 restricting the maximum amount of refund on exports to Member States of certain products derived from rice and other cereals; Having regard to Regulation No 164/64 of the Commission of 29 October 1964 determining the conditions for the grant of refunds on exports to third countries of processed products derived from rice and other cereals; Having regard to the Commission Decision of 17 July 1962 instituting special methods of administrative cooperation for the application of intra-Community levies; Having regard to the Protocol on the State of the Court of Justice of the EEC, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT in answer to the questions referred to it by the Bundesfinanzhof of the Federal Republic of Germany by order of that court dated 15 December 1970, hereby rules:

1 The expression ‘exports to third countries’ within the meaning of Article 20 of Regulation No 19 of the Council of 4 April 1962 presupposed at least that the goods had been or would be put into free circulation in a third country.

2 The Member States were free to require in addition that the goods had been or would be used or consumed, treated or processed in that country.

3 It was for the Member States to determine independently the evidence required to establish that export to a third country had taken place, provided that they did not accept insufficient proof, in particular the mere fact that the goods were exported without a certificate DD4 or were not transported direcdy from one Member State to another.