JUDGMENT OF 12. 7. 1973 — CASE 11/73 GETREIDE-IMPORT v EINFUHR- UND VORRATSSTELLE GETREIDE

In Case 11/73 Reference to the Court under Article 177 of the EEC Treaty by the Hessisches Finanzgericht (VIIth Senate) for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, R. Monaco (Rapporteur) and P. Pescatore, Presidents of the Chambers, A. M. Donner, J. Mertens de Wilmars, H. Kutscher, C. O'Dalaigh, M. Sørensen and A. J. Mackenzie Stuart, Judges Advocate-General: J. P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure

The facts and procedure may be summarised as follows:

1) On 30 October 1963 the ‘Einfuhr- und Vorratsstelle für Getreide und Futtermittel’, of Frankfurt-am-Main (hereinafter referred to as ‘EVStG’), issued to ‘Getreide-Import GmbH’ two licences for the import of common wheat and barley from France, fixing the rate of levy in advance in accordance with Article 2 (1) of Regulation No 130/62 of the Council. Getreide-Import lodged a protest, by letter dated 12 November 1963, claiming, inter alia, that the rate of levy was too high, as the German authorities had not taken into account certain costs involved in the imports in question. Following EVStG's rejection of this protest by a decision of 12 January 1967, Getreide-Import brought an action before the Finanzgericht of Frankfurt-am-Main. As this court considered that the case raised a problem of interpretation of Community law, it decided, by order of 5 February 1973, received at the Court on 21 February 1973, to suspend proceedings and to refer to the Court, under Article 177 of the EEC Treaty, two questions, later reduced by order of 18 June 1973, received on 22 June 1973, to a single question, phrased as follows:

‘Are Articles 2 and 4 of Regulation No 19/1962 of the Council of the European Economic Community (OJ EEC 1962, p. 933) to be interpreted in such a way that, in calculating the levy, the costs of examining plants, control costs, customs clearance costs, bank charges, cost in connection with the taking up of documents and the costs of the bank guarantee for the mandatory security are to be deducted from the threshold price, or is such a deduction not required?’

2) ‘Getreide-Import GmbH’, respresented by Karl Hinrichs, notary at Duisburg, the Federal Republic of Germany, represented by Martin Seidel, acting as agent, and the Commission of the European Communities, represented by its legal adviser, Peter Kalbe, submitted written observations in accordance with Article 20 of the Protocol on the Statute of the Court. After hearing the report of the Judge-Rapporteur and the opinion of the Advocate-General, the Court decided to open the oral procedure without any preparatory inquiry. The Commission of the European Communities made its oral observations at the hearing on 26 June 1973. The Advocate-General presented his opinion at the hearing on 5 July 1973.

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

The observations submitted by ‘Getreide-Import GmbH’, by the Federal Republic of Germany and by the Commission of the European Communities may be summarised as follows:

A — Observations submitted by ‘Getreide-Import GmbH’

Getreide-Import submits that in fixing in advance the rate of levy for the import licences in question the Federal Republic of Germany wrongly calculated the threshold price for common wheat and barley, having omitted, when making that calculation, to take into account, inter alia, certain import costs.

Getreide-Import supports this allegation by a number of arguments principally based upon:

the ratio decidendi of Judgment 76/70 of the Court of Justice,

the prohibition on the creation of obstacles to trade contained in Articles 18 and 21 of Regulation No 19/62,

the principle of ‘proportionality of means’, which in this case requires that fiscal considerations should not be treated as decisive,

finally the fact that, in the circumstances under consideration, an importer's ability to make a profit on the resale of imported goods is diminished to the extent that not all the import costs are taken into account in calculating the threshold price.

The company further states that in determining which import costs should be taken into account, the Court has sanctioned the concept of ‘necessary costs’, that is, costs which prove to be inevitable due to a set of circumstances such as import procedures, legislative provisions, and customs or practices operative in the sphere in question. Getreide-Import concludes from these criteria that the costs of the following items should have been taken into account in this case by the German authorities:

‘Mandatory security’ (Article 16 (2) of Regulation No 19/62). The granting of import licences being subject to the provision of a mandatory security, bank charges relating thereto must form part of the import costs.

‘Costs of examining plants’, as required by a German regulation of 23 August 1957. These costs are said by the company to be ‘necessary’ expenses, including charges payable by the importer upon examination of the goods and costs incumbent upon the importer as a direct consequence of that examination (eg, cost of aeration). Such charges, in view of the decision of the Court in Case 29/72 of 14 December 1972, amount to ‘taxes having equivalent effect to customs duties’, thereby being incompatible with the Treaty; the authorities' order to comply with certain formalities, and the cost of so doing are ‘measures having equivalent effect to quantitative restrictions’.

‘Customs formalities’, which necessarily involve expenses for the importer, being carried out by ‘haulage firms’.

‘Methods of payment.’ It is the international commercial practice for an importer to pay for imported goods before their arrival at the frontier, upon presentation of the relevant documents (he ‘net cash payment on first presentation of documents’ clause). Payment is made through a bank, the importer having to refund the expenses and to pay for the bank's services.

‘Financing of the purchase of the goods’. The price of the imported goods being payable upon presentation of the relevant documents and not being recoverable from the buyer until after the arrival of the goods, since throughout this period of time he must pay interest upon the amount loaned to him by the bank for the purpose of making the purchase.

‘Control’, as to weight, quality and other characteristics of imported cereals and upon which the final calculation of their price is based. This examination, without which the buyer would lose his rights in relation to the supplier, is conducted by specialised firms.

‘Transport from Emmerich to Duisburg’. According to the arrangements under Regulation No 19/62, whereby the basic target price for the Duisburg marketing area was reflected in the threshold price at the point of import (Emmerich), the cost of transport between these two places should have been taken into account. In the event, the German authorities calculated this cost in a purely arbitrary way, having no regard to the circumstances, notwithstanding the fact that, within the Federal Republic, transport costs are the subject of public regulations establishing minimum charges payable even by the national authorities.

‘Sundry items’. These are various expenses incurred by the importer, for example, administrative expenses, the cost of employing specialised personnel, of maintaining the good name of the firm, or expenses related to the opening of new markets.

B — Observations submitted by the Federal Republic of Germany

The Federal Republic of Germany draws attention to the fact that in calculating the threshold price pursuant to Regulation 19/62, the cost of marketing imported goods, as calculated from the most favourable point of entry (in the case of the Federal Republic: Emmerich), up to the first wholesale marketing stage in the area to which the basic target price applies (in the case of the Federal Republic: Duisburg) should be deducted from the basic target price.

The costs to be deducted must of course be ‘inevitable’, since the threshold price cannot fall below the basic target price, and they should not be confused with those to be taken into account for the fixing of the ‘c.i.f.’ or ‘free-at-frontier’ price.

However, since the threshold price is not calculated separately for each importation, being fixed annually by the Member States (Article 4 of Regulation No 19/62), it was impossible to take account of costs incurred on the occasion of a single importation. Rather, costs to be deducted from the basic target price had to be calculated at a flat rate. Taking these considerations into account, the German Government draws the following distinctions between the costs relevant to this case:

a) ‘Costs to be taken into account’, as being inevitable:

‘Cost of mandatory security’;

‘Cost of examining plants’, for the purpose of checking that imported goods comply with the legal provisions of the Law of 23 August 1957;

‘Cost of customs formalities’, these generally being conducted by haulage firms for a standard fee;

‘Cost of transport from Emmerich to Duisburg’;

‘Turnover equalization tax’;

‘Cost of financing the purchase of the goods’, to the extent that this comprises expenses incurred after the import of the goods, during the time necessary for conveying them to Duisburg. Expenses incurred between the time of payment of the purchase price and the arrival of the goods at Emmerich had been taken into account for the calculation of the free-at-frontier price;

‘Profit margin’, having regard to the importer's profit and fixed import costs. Only import costs should be covered in calculating this margin, not the costs of the other stages of the marketing process.

b) ‘Costs not to be taken into account’:

‘Customs clearance charges’. In fact, only those customs formalities executed, at the request of the parties concerned, otherwise than at the officially appointed place and during normal working hours, are subject to charges;

‘Control costs’ with regard to the weight and quality of the goods, such inspection being made only after delivery and unloading of the goods at the free warehouse at Duisburg;

‘Cost of financing the purchase of the goods’, from the time of payment to their arrival at the frontier (Emmerich);

‘Cost of method of payment’. Regulation 19/62 is based upon the principle that the import occurs during the period of validity of the free-at-frontier price (or the c.i.f. price). Costs incurred during such a short period are not inevitable. Overseas imports are subject to such costs, but since, for these imports, the levy is generally fixed in advance, it is not possible to take them into account, because the threshold price is calculated solely upon the basis of daily trading figures. Furthermore, exchange transactions cannot be taken into account since not all cereal imports involve costs of this nature, particularly in the case of imports from other Member States;

‘Cost of certain operations connected with the results of the examination of plants’, some expenses (eosination) are not involved in the import of cereals, and others (fumigation) are not necessary.

C — Observations submitted by the Commission of the European Communities

The Commission remarks that for the purposes of Regulation No 19/62 the threshold price is designed to bring up the sale price of goods imported onto the trading market of the area with the greatest deficit — and therefore the highest prices — to the level of the basic target price. Thus the threshold price — account being taken of other factors — is equal to the basic target price less the total marketing costs incurred from the crossing of the frontier to the first stage of the Marketing process in the target price area. Marketing costs to be included in the calculations are not those incurred in each case as it arises, (these being largely dependent upon decisions made by the importer), but are to be calculated at a flat rate, assuming the most favourable circumstances, and only insofar as they prove to be ‘inevitable’. The Commission, having stated that the concept of ‘inevitable’ costs does not necessarily correspond to that of costs in the context of ‘commercial usage’, maintains that in this case only those import costs arising between the frontier post at Emmerich and the first wholesale marketing stage at Duisburg should be taken into account. Costs already considered in relation to the calculation of the free-at-frontier (or c.i.f.) price, and those arising after the goods are put on sale at Duisburg, are not to be taken into account.

Proceeding to a detailed examination of the various costs, the Commission submits the following distinction:

a) Import costs incurred upon entry, which are inevitable for any importer:

‘Cost of customs formalities’, insofar as such formalities are necessary;

‘Cost of examining plants’;

‘Cost of mandatory security’;

‘Turnover compensation tax’.

b) Import costs incurred upon entry, but which are not inevitable for every importer:

‘Customs clearance charges’, being payable only in regard to special operations or those performed outside normal working hours;

‘Cost of fumigation’, being necessary only for cereals infected with parasites;

‘Cost of denaturing’ (eosination), the quality and intended use of the cereals being immaterial for the calculation of the levy.

c) Import costs incurred between arrival at the frontier post (Emmerich) and the first stage of the marketing process (Duisburg). The following may be taken as being such costs:

‘Cost of transport’ from the frontier (Emmerich);

‘Cost of financing the purchase of the goods’. This includes items which could not all be taken into account (e.g. deposits made against operations in foreign exchange, expenses of opening credit facilities etc.);

‘Cost of control of quality and quantity’;

‘Profit margin’, taking account of fixed import costs and the importer's profit.

The Commission maintains that the costs to be taken into account in calculating the threshold price are those listed above under (a) and (c). However, the various elements of cost of financing the purchase should not all be taken into account.

Grounds of judgment

1. By orders dated 5 February 1973 and 18 June 1973, filed at the Court of Justice on 21 February 1973 and 22 June 1973 respectively, the Hessisches Finanzgericht referred, under Article 177 of the EEC Treaty a question on the interpretation of Articles 2 and 4 of Regulation No 19 of the Council dated 4 April 1962 (P.I. 1962, No 30), concerning the gradual establishment of a common organisation of agricultural markets in the cereals sector;

2. The question is whether, in calculating the levy in accordance with the above Regulation, various costs of import should be deducted from the threshold price, in particular, costs of examining plants, costs of inspection, costs of customs clearance, bank charges and expenses relating to presentation of documents and to the mandatory security;

3. The question seeks not only an interpretation of Articles 2 and 4 of Regulation No 19/62, but also an answer by the Court to the particular problems raised by the application of Community law to the specific circumstances forming the subject matter of the main action; However, the Court is not enabled under Article 177 to apply the Treaty to specific circumstances, and must therefore extract, from the wording of the order referring the matter, those questions alone which relate to the interpretation of Community law; The question may thus be understood as asking in general which items of import costs must be taken into account when calculating the amount of the levy.

4. By Article 2 of Regulation No 19/62, the amount of the intra-Community levy upon cereal imports such as common wheat and barley was equal to the difference between the free-at-frontier price for the product as between the exporting and importing Member States, and the threshold price within the importing State; Under Article 4 of this Regulation, the threshold price was fixed annually by the Member States for an identical standard quality, in such a way that the selling price for the imported product in the marketing centre of the main deficit area within the relevant Member State was equal to the basic target price laid down under Article 5 of the said Regulation;

5. In order to avoid disturbances resulting from the import of low-priced goods, the threshold price provided by Regulation 19/62 was intended, by means of levies, to fix the level to which the price of the imported product must be raised to preclude its being offered for sale on the market in question at a price lower than the basic target price; To meet this condition the price of the imported product after crossing the frontier had to be the same as the basic target price, and thus the threshold price had to be equal to the basic target price less marketing costs;

6. Marketing costs include those expenses inherent in the procedures and formalities of import, which every importer must inevitably incur, as well as the normal expense of transporting those goods to the decisive marketing stage in the main deficit area. However, in accordance with the general system of levies provided under Regulation 19/62, marketing costs should not be calculated on the basis of costs actually incurred by the importer for a specific delivery — these being largely dependent upon decisions made by the importer-but should be calculated at a flat rate in relation to those expenses which an importer of the products in question must inevitably incur;

7. Thus the question should be answered to the effect that Articles 2 and 4 of Regulation 19/62 of the Council must be interpreted as meaning that the items of import costs to be taken into account in calculating the amount of the levy are those which every importer must inevitably incur in complying with the procedures and legal formalities necessary for the import of the products in question and in transporting those products to the first wholesale marketing stage in the area to which the basic target price applies;

Costs

8. The costs incurred by the Federal Republic of Germany and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable, and as these proceedings are, insofar 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 observations of 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 Article 177; Having regard to Regulation No 19 of the Council of 4 April 1962 on the gradual establishment of a common organisation of agricultural markets in cereals; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, 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 question referred to it by the Hessisches Finanzgericht (VIIth Senate) by orders of that Court dated 5 February 1973 and 18 June 1973, hereby rules: