JUDGMENT OF 15. 1. 1974 — CASE 154/73 BECHER v HAUPTZOLLAMT EMDEN

In Case 154/73 Reference to the Court under Article 177 of the EEC Treaty by the Hamburg Finanzgericht for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, M. Sørensen (Rapporteur), President of Chamber, R. Monaco, J. Mertens de Wilmars, P. Pescatore, H. Kutscher and C. Ó Dálaigh, Judges, Advocate-General: A. Trabucchi Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

A —. The facts of the case, the subject matter of the request and the views of the parties may be summarized as follows:

I — Facts and procedure

1. On 22 October 1971 Firma Kurt A. Becher of Bremen imported 502500 kg of common wheat originating in the USA into the Federal Republic of Germany. The Customs Office charged a monetary compensatory amount of 19·20 DM per 1000 kg in accordance with Regulation No 974/71 of the Council of 12 May 1971, in conjunction with Regulation No 2122/71 of the Commission of 1 October 1971. Alleging this amount to be excessive to the extent of 1·05 DM per 1000 kg the company entered a complaint with the Hauptzollamt at Emden which, however, dismissed it. The company appealled to the Hamburg Finanzgericht which, by an order of 10 July 1973, decided to ask the Court of Justice, in pursuance of Article 177 of the EEC Treaty, to give a preliminary ruling on the following questions: In the grounds of the order for reference the Finanzgericht points out in particular: ‘… it is not free from doubt whether Article 103 of the EEC Treaty was a sufficient legal basis for Regulation No 974/71 of the Council of the EEC of 12 May 1971, which itself provides the legal basis for Regulation No 2122/71 of the Commission of 1 October 1971; no other legal basis is expressly mentioned… Accordingly, without the plaintiff's expressly raising the point, the validity of the basic Regulation No 974/71 as indeed the interpretation of Article 103 of the EEC Treaty are in question’. With regard to this matter, the Finanzgericht refers to the orders for reference of the Finanzgerichte of Berlin and Bade-Wurtemberg in Cases 5/73 (Balkan), 9/73 (Schlüter) and 10/73 (Rewe). As to the second question, it appears from the order of the Hamburg Finanzgericht that the argument submitted by Becher before that court was as follows: ‘The contested notices with regard to the charging of the compensatory amounts admittedly find some support in EEC Regulation No 2122/71. That Regulation is however irregular from the point of view of substantive law. It infringes Regulation No 974/71 of the Council of the EEC of 12 May 1971 which takes precedence. … The word “prices” within the meaning of Article 2 (1) can only mean c.i.f. prices. The c.i.f. price of the imported product at that time amounted to 193·10 DM per metric ton, whereas the EEC Commission had assessed the compensatory amounts in respect thereof on the basis of a c.i.f. price of 204·30 DM per metric ton, and thus fixed it at too high a level to the extent of 1·05 DM. The over-assessment of the compensatory amount also constitutes an infringement of Article 110 of the EEC Treaty.’

‘1) Is Regulation (EEC) No 974/71 of the Council of 12 May 1971 valid, insofar as it authorizes the charging of compensatory amounts on imports from third countries?

2) If the answer to Question 1 is in the affirmative: Did the compensatory amount of 19·20 DM per 1000 kg fixed by the EEC Commission in Annex I to Regulation No 2122/71 of 1 October 1971 in respect of imports of common wheat from third countries comply at the time of importation with the conditions of Article 2 of EEC Regulation No 974/71?

3) If the reply to Question 2 is in the negative: Must Regulation (EEC) No 2122/71 of 1 October 1971, in respect of the said compensatory amount of 19·20 DM per 1000 kg, be regarded as merely inoperative, or should the correct compensatory amount simply be substituted for the amount fixed by the Commission; and, if so, what is the rate thereof?’

2. The order for reference of the Finanzgericht was lodged at the Registry of the Court on 25 July 1973. In accordance with Article 20 of the Protocol on the Statute of the Court written observations were submitted on behalf of Becher by Dr Mielke of the Hamburg bar and on behalf of the Commission of the European Communities by its Legal Adviser, Mr Gilsdorf. Having heard the report of the Judge-Rapporteur and the opinion of the Advocate-General the Court decidied to open the oral procedure without any preparatory inquiry.

3. The validity of Regulation No 974/71 was examined in the Judgments delivered by the Court on 24 October 1973 in the aforementioned Cases 5/73, 9/73 and 10/73. The Court held in those Judgments that ‘examination of the questions referred has not revealed any elements capable of affecting the validity of Regulation No 974/71 of the Council …’

II — Observations presented before the Court

Becher asserts that Article 103, on which Regulation No 974/71 is based, docs not empower the Council to enact a regulation since in that Article mention is only made, in paragraph (2), of ‘deciding’ and, in paragraph (3), of ‘directives’. Becher leaves aside examination of all other considerations since the issues of law raised in this case ‘have already been the subject of various orders for reference’.

In respect of the first question on the validity of Regulation No 974/71, the Commission refers to its statements in the aforementioned Cases 5/73, 9/73 and 10/73.

As to the second question, the Commission emphasizes the inaccuracy of Becher's argument, which is based on the principle that the reference ‘prices’ specified in Article 2 (1) in relation to importation from third countries can only be c.i.f. prices. Only one conclusion can be drawn from the above provision, namely that the percentage is applied to prices which, while taking account of practical requirements, are closest to reality, in other words closest to actual import prices. Bases of calculation can be conceived which are different from that of the c.i.f. price. In fact, from March 1973 the Commission has instead based its assessment of compensatory amounts on the intervention price; the excessive amounts so obtained have been corrected by a corresponding modification of levies and refunds (cf. Article 5 (3) (b) of Regulation No 648/73 of the Commission of 1 March 1973 and the seventh and eighth recitals of the said Regulation, OJ L 64 of 9 March 1973, p. 1). That method was chosen for reasons of administrative expediency. Even if there is justification for basing the assessment on prices other than c.i.f. prices, there is all the more reason, in the Commission's opinion, not to require that, in a system based on c.i.f. prices, any modification of those prices should necessarily be reflected in the monetary compensation. Article 2 of Regulation No 974/71 thus leaves the Commission a ‘technical margin of discretion’. The Commission has already emphasized this point in the context of Case 5/73 (Balkan), especially when replying to the question whether that legal basis was sufficiently specific.

The Commission then points out that in October 1971 the compensatory amounts were in fact calculated from c.i.f. prices. But, as these prices vary every day it was necessary to adopt a simplified method of assessment so as to avoid having to alter the compensatory amounts too often. For this purpose, the Commission calculated an average c.i.f. price, to be modified only if an appreciable change took place in respect of the price fixed previously. A variation of 10 % up or down was generally considered an appreciable change.

The compensatory amount in question was based on the average c.i.f. price of 204·34 DM, the price valid for the period from 22 to 28 July 1971. From then until 22 October 1971 there was no need for any alteration as there was no appreciable change in the average c.i.f. price. The average c.i.f. price for the reference period before 22 October was 194·90 DM (and not 193·10 DM as the applicant asserts), it was thus only 4·6 % less than the aforementioned average price, so that the internal criterion of 10 % was not fulfilled.

The Commission points out, moreover, that the whole system of monetary compensatory amounts rests on the principle of the flat-rate assessment and the simplification of calculations. In this connexion, it refers to Article 2 (1) and Article 3 of Regulation No 974/71.

The Commission believes that, with regard to variations of the reference price, the 10 % limit should in general be adhered to in practice, since any lower figure would result in too frequent alterations.

The Commission submits that, given that Regulation No 974/71 lays down no rule for the calculation of reference prices, it is free, for the purpose of implementation and in accordance with Article 6 of the said Regulation, to fix the compensatory amounts by means of the method of calculation described above. The Commission recalls with regard to this matter that the amounts are fixed according to the Management Committee procedure and that moreover it submitted a report to the Council in accordance with Article 8 (3), on the principal characteristics of that method. Finally, the Commission makes the point that this method of calculation does not have a uniformly unfavourable effect on imports.

The Commission considers that, after what has been stated above, there is no point in giving a reply to the third question.

As a subsidiary point, the Commission emphasizes that the ‘correct compensatory amount’ cannot be substituted for the erronenous compensatory amount. Under Article 6 of Regulation No 974/71 the Commission alone is competent to fix the compensatory amounts, and the fixing of those amounts is not, as recourse to the Management Committee procedure already shows, a simple matter of arithmetic. If one were to adopt an opposing point of view there would be a risk that national administrations would fix different compensatory amounts when the Commission's assessments proved to be substantially incorrect.

The Commission considers moreover that by asking in its third question if the incorrect compensatory amount is ‘merely inoperative’ or if ‘the correct compensatory amount (should) simply be substituted for the amount fixed by the Commission’ the Finanzgericht is offering an alternative which does not seem very apt. Even if a possible error was found the compensatory amount fixed remains applicable, without prejudice to the consequences resulting for persons concerned.

B —. The oral observations of Becher and the Commission were made at the hearing on 27 November 1973. In the course of the oral procedure Becher asserted that it can be established from Regulation No 974/71 that the reference ‘prices’ envisaged in Article 2 must conform with reality by being based upon actual import prices, in other words that on importation from third countries the criterion must be, if not the c.i.f. price valid on the day of importation, at least a c.i.f. price brought up to date at frequent intervals. There must be similar criteria both for the calculation of the compensatory amount and for that of the levy. In the recitals of Regulation No 974/71 it is expressly declared that the compensatory amounts should be limited to the amounts strictly necessary to compensate the incidence of monetary measures. This legislative objective can only be attained by undertaking a continual review of c.i.f. prices. In reply to a question of the Court the Commission explained in the following manner the difference between the c.i.f. price of 193·10 DM alleged by Becher and that of 194·90 DM which it considered correct: In accordance with Article 6 of Regulation No 156/67 (OJ of 23 June 1967, p. 2533), the amount of the levy is modified only when variations in the components for calculation lead to an increase or a reduction of more than 0·60 u.a. per metric ton in relation to the levy previously fixed. On 30 September 1971 the Commission's departments fixed the c.i.f. price at 52·75 u.a. or 193·10 DM. This gave, with effect from 1 October 1971, a levy equal to 207 DM per metric ton. This levy and not the c.i.f. price was published and enabled Becher to make en approximate calculation of the c.i.f. price at 193·10 DM (threshold price, at the time 400·08 DM, minus levy equals c.i.f. price). From 8 October 1971 the c.i.f. price was fixed at 53·25 u.a. per metric ton. Thus it only exceeded the c.i.f. price in force on 30 September 1971 by 0·50 u.a. and therefore did not lead to an alteration of the amount of the levy.

C —. The Advocate-General delivered his opinion at the hearing on 12 December 1973.

Grounds of judgment

1. By an order of 10 July 1973 lodged at the Court on 25 July 1973 the Hamburg Finanzgericht, in pursuance of Article 177 of the EEC Treaty, referred questions relating to the validity and interpretation of Regulation 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 margins of fluctuation for the currencies of certain Member States, and of Regulation No 2122/71 of the Commission of 1 October 1971, fixing the compensatory amounts in force in agriculture as from 4 October 1971 consequent upon the same circumstances.

As to the first question

2. By the first question it is asked whether Regulation No 974/71 of the Council of 12 May 1971 is valid insofar as it authorizes the charging of compensatory amounts on imports from third countries.

3. The validity of Regulation No 974/71 has already been examined by the Court in Cases 5/73, 9/73 and 10/73 on the occasion of preliminary references by the Finanzgerichte of Berlin and Bade-Wurtemberg in disputes between, on the one hand, the undertakings Balkan-Import-Export, Carl Schlüter and Rewe-Zentrale and, on the other hand, the customs authorities of the Federal Republic of Germany. In its Judgments of 24 October 1973 in those Cases the Court held that examination of questions referred by the national courts had not revealed any elements capable of affecting the validity of Regulation No 974/71. In this case no new element has been adduced capable of casting doubt on that decision.

As to the second question

4. By the second question it is asked whether the amount of 19·20 DM per 1000 kg fixed in Annex I to Regulation No 2122/71 for imports of common wheat from third countries was in conformity with the conditions laid down in Article 2 of Regulation No 974/71.

5. Article 2 (1) of Regulation No 974/71 provides that the compensatory amounts for the products in questions shall be equal to the amounts obtained by applying to the prices the percentage difference between the parity of the currency of the Member State concerned and the arithmetic mean of the markets rates during a period to be determined. The point of dispute concerns the meaning and scope of the word ‘prices’ in that context.

6. The method adopted by the Commission at the time in question consisted in taking an average c.i.f. price calculated for a reference period of one week and modifying that average price only if an appreciable change (in general, 10 % up or down) had occurred in relation to the price fixed previously. The plaintiff in the main action disputes the merits of such a method, asserting that not only should the c.i.f. price have been chosen as reference price, as the Commission in fact did, but that account should also have been taken of price variations, if not from day to day, at least at frequent intervals, which would require frequent publication of adjustments. The plaintiff in the main action has invoked in support of this argument the criteria applied for the assessment of levies on the importation of cereals, as well as the recital of Regulation No 974/71 which declares that the compensatory amounts should be limited to the amounts strictly necessary to compensate the incidence of monetary measures on prices.

7. From an examination of the provisions of Regulation No 974/71 it is clear that the Council did not wish to limit in a strict and detailed manner the Commission's appraisal of the detailed rules for the implementation of the Regulation. In fact, by using the concept of ‘prices’ as its starting point in calculating the compensatory amounts, Article 2 of Regulation No 974/71 does not necessarily oblige the Commission to choose the c.i.f. price as a reference price, but leaves it a certain discretion to adopt another price even if the latter differs from the contract prices actually fixed for commercial transactions. That same Article, by providing among the criteria for calculating the compensatory amounts the arithmetic mean of market rates ‘during a period to be determined’, introduced another element of a flat-rate nature.

8. It is within the Commission's legal powers when enacting detailed rules for the implementation of a system such as that of compensatory amounts laid down by Regulation No 974/71, to have regard to certain imperative requirements of an administrative nature and, in particular, to take care that the measures taken are not subject to minimal modifications occurring with excessive frequency. This is all the more so as these detailed rules for implementation, and in particular the fixing of the compensatory amounts, are established, as is the case under Article 6 of Regulation No 974/71, according to the so-called ‘Management Committee’ procedure provided for by Article 26 of Regulation No 120/67 of the Council of 13 June 1967, on the common organization of the market in cereals (OJ No 117 of 19. 6. 1967, p. 2269).

9. It must therefore be concluded that the Commission, in fixing the compensatory amount in dispute, did not overstep the limits laid down for its activity in this field by the provisions of Regulation No 974/71.

Costs

10. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable, and as these proceedings are, so far as the parties in the main action are concerned, 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 oral observations of the plaintiff in the main action and the Commission; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 38 to 47, 103, 110 and 177; Having regard to Regulations Nos 120/67 of the Council of 13 June 1967, 974/71 of the Council of 12 May 1971 and 2122/71 of the Commission of 1 October 1971; 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 hereby:

1 Declares that examination of the questions referred has not revealed any elements capable of affecting the validity of Regulation No 974/71 of the Council.

2 Declares that the compensatory amount of 19·20 DM per 1000 kg fixed in Annex I to Regulation No 2122/71 of 1 October 1971 in respect of imports of common wheat from third countries complied, at the time of importation, with the conditions of Article 2 of Regulation No 974/71.