JUDGMENT OF 10. 10. 1974 — CASE 25/74 HENCK v EINFUHR- UND VORRATSSTELLE GETREIDE

In Case 25/74

THE COURT composed of: R. Lecourt, President, C. Ó Dálaigh, Lord Mackenzie Stuart (Rapporteur), Presidents of Chambers, A. M. Donner, R. Monaco, J. Mertens de Wilmars, P. Pescatore, H. Kutscher, Judges, Advocate-General: A. Trabucchi Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts

The judgment making the reference and the written observations submitted under Article 20 of the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts

The firm Günter Henck imported into the Federal Republic of Germany residues from the manufacture of starch from maize, called ‘maize gluten’ (Cornglutenfeed) falling within heading No 23.03 of the CCT, which did not come under the organization of the markets in cereals and as result were exempt from levies.

The firm Henck claims to have manufactured from this product gluten flour coming under tariff heading No 11.09 of the CCT, which it exported to Denmark in May 1967.

The defendant granted the plaintiff a refund of only DM 47.40 per metric ton.

The plaintiff requested the grant of a refund at the rate of DM 398 per metric ton on the ground that the refund for 100 kg of products exported should be calculated according to the rate of levy applicable to 200 kg of maize and that the rate of levy for 100 kg of maize was fixed at the date of export at DM 199.

The defendant rejected this claim by the plaintiff on the ground that the amount of the refund fixed at DM 195.20 per metric ton should be reduced by the refund to producers of DM 171.50 per metric ton granted by the exporting State. The difference of DM 23.70 per metric ton corresponds to a rate of refund of DM 47.40 per metric ton, calculated at a conversion rate of 1000 kg gluten per 2000 kg maize.

In Germany the refund to producers was granted at the time in the form of a reduction of the levy on import of the basic product, in the present case, maize. The action brought by the firm Henck was unsuccessful and it accordingly appealed on a point of law to the Bundesfinanzhof.

The point at issue is whether the export refund for exported gluten flour under heading No 11.09 of the Common Customs Tariff must be reduced by the refund to producers allowed on the imported maize gluten used in its production, although no refund to producers was in fact granted.

Article 15 of Regulation (EEC) No 141/64 of the Council of 21 October 1964 (OJ 1964, p. 2666) provides that the refund on the export of certain processed cereal products, including maize gluten, to third countries is determined having regard to the conditions on the world market and the prices of the raw materials. Article 18 of the same Regulation provides that ‘in calculating the amount of the refund on exports, refunds to producers allowed in respect of maize, … for the manufacture of starch… shall be taken into account…’.

Article 3 of Regulation (EEC) No 163/64 of the Commission of 29 October 1964 (OJ 1964, p. 1741) relating to the incidence of the grant of a refund to producers on the system … of gluten, provides that ‘when a Member State grants a refund to producers… the amount of the refund which may be granted on the export of the processed products … to third countries … shall be reduced by the amount of the refund to producers granted by the exporting Member State on the date of exportation’.

By order dated 19 February 1974 the Bundesfinanzhof decided to stay the proceedings and to refer the following questions to this Court for a preliminary ruling:

Is Article 18 of Regulation (EEC) No 141/64 in conjunction with Article 3 (b) of Regulation (EEC) No 163/64 to be interpreted as meaning that the refund to producers in respect of the manufacture of starch from maize etc. is to be set off against the export refund for gluten under heading 11.09 only in those cases in which a refund to producers was actually granted upon the maize product imported for the purpose of manufacture of the gluten flour?

If the answer is in the affirmative: is this also so in cases where a refund to producers does not arise by reason of the imported goods not being subject to levy?

The order of reference was registered at the Registry of the Court on 21 March 1974.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC written observations were submitted on behalf of the firm Günter Henck by Mr Roll of the Hamburg Bar, on behalf of the Einfuhr- und Vorratsstelle für Getreide und Futtermittel by Mr Stockbürger of the Frankfurt Bar and on behalf of the Commission of the European Communities by its Legal Adviser, Mr Kalbe, acting as agent.

Having heard 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.

II — Written observations submitted to the Court

The firm Henck considers that according to the wording and general scheme of Regulations Nos 141/64 and 163/64 it is permissible to take into account the refund to producers in assessing the refund on export if a refund to producers was provided in every case in a general way in respect of the basic product of the goods exported which may be the subject of a refund.

Article 10 of Regulation No 141/64 does not mention the basic product of tariff heading No 23.03. As a result, Article 17 of the same Regulation does not provide a refund to producers in respect of this product.

The defendant claims that the processed product under heading No 23.03 must be regarded as a basic product within the meaning of Regulations Nos 141/64 and 163/64.

The plaintiff proposes to give the following reply to the question raised by the Bundesfinanzhof:

Article 18 of Regulation (EEC) No 141/64 in conjunction with Article 3 (b) of Regulation (EEC) No 163/64 is to be interpreted as meaning that the refund to producers granted by the said Regulations for maize, common wheat and broken rice used in the manufacture of potato starch is to be set off against the export refund for gluten under heading 11.09 only in those cases in which a refund to producers was actually provided for in a general manner as regards the basic product imported for the purpose of manufacture of the gluten.

The defendant observes that the objective of the refund to producers of starch and quellmehl was basically to put the necessary raw material at the disposal of the national starch industry at a price which would allow it to compete with substitute products (Regulation (EEC) No 141/64 final recital). The necessary raw materials therefore had to be supplied at the stage of production at a lower price than that which would have obtained if the levy system had been applied.

Independently of this refund to producers there were refunds on export for gluten flour which aimed at preserving the competitiveness of these products on the world market.

The purpose of the provisions of Article 18 of Regulation (EEC) No 141/64 in conjunction with Article 3 (b) of Regulation (EEC) No 163/64 was to coordinate in a logical manner the two kinds of refunds.

The defendant considers that the form of Article 18 of Regulation (EEC) No 141/64 proves that the refunds to producers are only general factors for calculation to determine the amount of the refunds on export for the products in question.

This interpretation is confirmed by an interpretation of the wording of Article 3 (b) of Regulation (EEC) No 163/64, which provides that the amount of the export refund is to be reduced by the incidence of the refund to producers granted by the exporting Member State on the date of exportation: the amount of the reduction is thus determined in a general way without reference to the circumstances of the particular case.

In cases where the exporter manufactures starch for export from the usual raw materials, maize, common wheat or broken rice, he is entitled to the refund to producers enabling him to reduce his cost prices. The question of whether he can claim this refund is his concern alone.

As regards the ultimate calculation of the export refund it is sufficient that the exporter has a general right to claim payment of the refund to producers. It would not have been possible to require the administrative authorities to check each time, in all cases of the export of processed products, whether the exporter had already previously claimed a refund to producers.

The purpose of the provisions, the interpretation of which is requested, is to prevent the grant of two full refunds from being used to enable products to be supplied on the world market below the level of world prices. Otherwise the refund would indirectly have endangered the level of prices even within the Community.

The answer is the same in cases where the products for export capable of benefiting from a refund have been produced from raw material for which no refund to producers was provided. If on the export of gluten flour, manufactured from a product exempt from levy, the maximum rates of refund had likewise been paid, the objective of the export refund, to remove the disparity in prices between the internal and external markets, would not be attained.

For these reasons the reduction of the maximum rates of refund on export of gluten flour which has been produced in the Federal Republic of Germany is provided for in a general manner without regard to the particular circumstances of the actual case.

The Commission observes that, in the system of Community law, levies, as well as export refunds relating to products processed from cereals, are not as a rule amounts related each time to the circumstances of each import or export transaction but indentical amounts on a weight basis related to the quality of the product in question calculated after a general comparison of the situation of the external and internal markets and not depending on the special cost factors of each export.

It is not impossible to take into consideration the individual cost prices, but, since it is exceptional, this method of calculation must be clearly expressed in the provisions in question.

Article 18 of Regulation (EEC) No 141/64 is limited to stating in a general way that on the calculation of the amount of the export refunds, including those for maize gluten, regard should be had to the refunds to producers granted in respect of maize.

Under Article 3 of Regulation (EEC) No 163/64 the deduction of the refund to producers from the export refund for processed products depends solely on the following fact: 'When a Member State grants a refund to producers …

The Commission recalls that this wording is the same as that which provides for the deduction of the amount of the refund to producers from the levy, (Article 1 of Regulation No 163/64). There could be no doubt that in the context of the system of levies the levy on processed products must be deducted on a general basis.

The wording of the Regulation provides no basis permitting the conclusion to be drawn that the same wording must be interpreted in a completely different way when it applies to export refunds.

Under Article 3 of Regulation No 163/64 the amount of the refund to producers to be taken into account is that granted at the date of the export of the processed product. It is thus a question of an amount which cannot directly influence the costs of the production of gluten in the particular case.

This flat-rate rule based on the date of export enables a great number of controls to be done away with, which would have been inevitable if it had been necessary to determine in each case what the incidence of the amount of the refund was on the production costs and the export costs of processed products.

These calculations already prove difficult when the processed product has been manufactured from several batches of maize. If the exporter and the manufacturer are not the same or if the goods are from different manufacturers, it becomes almost impossible.

The refund to producers is simply intended to compensate for the increase due to the increase of prices of the main raw materials on the internal market. This compensation is not required for the raw materials intended for the manufacture of starch and gluten which do not come under either the common organization of the markets in cereals or its levy system, since they can be bought at world market prices.

To interpret the wording as the firm Henck suggest would be to use this public system of aid to derive, vis-à-vis other producers and exporters of gluten, a competitive advantage which neither the economic result nor the objective of the system of export refunds justifies.

The grant of the whole amount of the export refund would mean treating the plaintiff as if it had produced its gluten from imported maize entirely subject to the levy. Since the plaintiff produced the gluten it exported from goods which are not subject to the price rules in the Community and thus was able to obtain supplies freely in accordance with the conditions of world market, there was no reason to compensate for the difference in prices between the raw materials within and outside the Community, which compensation is the sole objective of the export refund granted for processed products. The plaintiff is therefore not entitled to any export refund.

But it is only because the export refund is conceived at a flat rate as an identical amount per unit of weight that the plaintiff can in truth claim a right to an export refund for its gluten.

The Commission therefore proposes that the first question on which a preliminary ruling is sought should be answered as follows:

Article 18 of Regulation (EEC) No 141/64 in conjunction with Article 3 (b) of Regulation (EEC) No 163/64 must not be interpreted as meaning that the refund to producers in respect of the manufacture of starch from maize, etc., is to be set off against the export refund for gluten under tariff heading 11.09 only in those cases in which a refund to producers was actually granted on the maize product imported for the purpose of manufacture of the gluten flour.

III — Oral procedure

At the hearing in open court on 9 July 1974 the oral observations of the Einfuhr- und Vorratsstelle fur Getreide und Futtermittel were presented by Mr Stockbürger and those of the Commission of the European Communities by Mr Götz zur Hausen.

The Advocate-General delivered his opinion on 17 September 1974.

Law

1. By order dated 19 February 1974, filed at the Court Registry on 21 March 1974, the Bundesfinanzhof referred to the Court for a preliminary ruling, under Article 177 of the EEC Treaty, questions on the interpretation of Article 18 of Regulation (EEC) No 141/64 of the Council (OJ 27. 10.1964, p. 2666) and Article 3 of Regulation (EEC) No 163/64 of the Commission (OJ 31. 10. 1964, p. 2741).

2. The questions are raised in an action relating to the amount of export refund for gluten flour from maize, a by-product of the manufacture of starch, sub heading 11.09 of the CCT. The plaintiff in the main action exported a consignment of this flour made not from maize but from ‘maize gluten’, a by-product of the manufacture of starch, which does not come under the common organization of the markets and which can therefore be freely imported into the Common Market at the world price. On assessing the amount of the export refund the defendant in the main action reduced it by the amount of the refund to producers granted by the Federal Republic of Germany at the date of exportation, for maize imported and used to manufacture gluten flour, under Article 18 of Regulation (EEC) No 141/64 in conjunction with Article 3 of Regulation (EEC) No 163/64.

3. The Court is asked to declare whether these provisions must be interpreted as meaning that the refund to producers in respect of the manufacture of starch from maize is to be deducted from the export refund for gluten under tariff heading 11.09 only in those cases in which a refund to producers was actually granted upon the maize product imported for the purpose of manufacture of the gluten. If this question is answered in the affirmative, it is asked whether the answer would be the same where there could be no refund to producers in respect of the raw material from which the exported goods are manufactured since such raw material is not liable to the levy.

4. According to the second recital of Regulation No 19, which governed cereals at the time, this sector has special importance in the economy of the Community both as a direct source of income for producers and as a source of supply for processing purposes. Thus the system of prices, of levy and of export refund provided for by this Regulation had to cover not only certain direct agricultural products, listed in Article 1 (a), but also, according to Article 1 (d), certain products processed from these and listed in the Annex to the Regulation, including gluten and gluten flour. In pursuance, inter alia of the second sentence of Article 20 (2) of Regulation No 19, the Council issued Regulation No 141/64 relating to the system of products processed from cereals.

5. According to the 11th recital of this Regulation the objective of the export refund for products processed from cereals is ‘to compensate for the difference between the prices of the basic products within the exporting Member State and prices on the world market’. The ‘basic products’ are defined in Article 1 (3) of the said Regulation as broken rice and the cereals listed in Article 1 (a) of Regulation No 19, which includes maize, but not ‘maize gluten’.

6. Although the preliminary question could be asked whether a Member State is authorized to grant an export refund when the exported product has not been manufactured from a basic product so defined, such a question has not however been put in the present case.

7. In order to allow starch manufacturers to maintain competitive prices in relation to substitute products, Regulation No 141/64 authorized Member States to grant a refund to producers having the effect of making available to manufacturers of starch the necessary basic products at a price lower than that which would arise if the system of levies were applied. Article 15 provides that, as regards trade in processed products with third countries, the refund which Member States may grant shall be determined having regard to the conditions of the world market and the prices of the basic products. Nevertheless, according to Article 18, in calculating the amount of the refunds on exports for processed products, refunds to producers allowed in respect of maize for the manufacture of starch shall be taken into account. Article 3 (b) of Regulation No 163/64 provides that when a Member State grants a refund to producers, the amount of refund which may be granted on the export of the processed products shall be reduced by the amount of the refund to producers granted by the exporting Member State on the date of exportation. It follows from Regulation No 60/66/EEC of the Commission (OJ 103, p. 1854/66) that the maximum amount of the export refund for the processed product which a Member State may grant is at a flat rate, without taking into account the individual cost prices of the exporter.

8. It appears from the system thus established that after the export refund has been at the flat rate for a quantity of the basic product which is regarded as being used in the manufacture of the processed product, the amount of the refund to producers to be deducted is that granted at the date of exportation of this same basic product. Under this system the individual cost factors cannot affect the amount of the refund.

9. It is therefore right to reply that Article 18 of Regulation (EEC) No 141/64 in conjunction with Article 3 (b) of Regulation No 163/64 must be interpreted as meaning that the amount of the refund on export of one of the processed products referred to in these Regulations must be produced by the refund to producers granted at the date of exportation by the exporting Member State for the basic product on which the refund was calculated.

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, in so far as the parties to the main action are concerned, a step in the action pending before the Bundesfinanzhof, costs are a matter for that court.

On those grounds, THE COURT in answer to the questions referred to it by the order dated 19 February 1974, hereby rules: