JUDGMENT OF 13. 3. 1980 — CASE 124/79 VAN WALSUM v PRODUKTSCHAP VOOR VEE EN VLEES

In Case 124/79 REFERENCE to the Court under Article 177 of the EEC Treaty by the College van Beroep voor het Bedrijfsleven [Administrative Court of Last Instance in Matters of Trade and Industry], The Hague, for a preliminary ruling in the action pending before that court between

THE COURT (Second Chamber) composed of: A. Touffait, President of Chamber, P. Pescatore and O. Due, Judges, Advocate General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and written procedure

In the context of the General Agreement on Tariffs and Trade (GATT) the Community undertook to open annually, at a consolidated rate of duty of 20%, a Community tariff quota for frozen beef and veal falling within subheading 02.01 A II (b) of the Common Customs Tariff for importation from nonmember countries. Expressed in terms of boned or boneless meat, the amount of this quota came to 22000 tonnes in 1962 and as from 1973 was increased to 38500 tonnes. The Community quota is imported exempt from levy and subject to a uniform consolidated duty under the Common Customs Tariff of 20%.

By Regulation No 3063/78 of 18 December 1978 opening, allocating and providing for the administration of a Community tariff quota for frozen beef and veal falling within subheading 02.01 A II (b) of the Common Customs Tariff (Official Journal L 366, p. 6) the Council opened the Community tariff quota of 38500 tonnes for 1979 and proceeded to allocate it amongst the Member States.

Article 2 (1) of Regulation No 3063/78 provides that the Community tariff quota shall be divided into two parts, one totalling 22000 tonnes and the other 16500 tonnes, of which 2423 and 1817 tonnes respectively are allocated to the three Member States forming and represented by the Benelux Economic Union.

Of the sub-quota of 4240 tonnes reserved to the Benelux countries a quota share of 65% amounting to 2756 tonnes was apportioned to the Netherlands in accordance with an internal scale of apportionment used by the Benelux countries.

Under Article 3 (1) of Regulation No 3063/78 the Member States shall take all appropriate steps to guarantee all persons concerned established within their territories free access to the quota shares allocated to them.

The annual sub-quota allocated to the Netherlands is divided amongst the persons concerned by the Produktschap voor Vee en Vlees.

Under the scale of apportionment used by the Produktschap since 1977, the allocation to Netherlands undertakings is made on the basis of their average share of the imports of beef and veal taken into account in the period of three calendar years immediately preceding the relevant quota year. The Produktschap takes into account only importations from nonmember countries which are subject to a full or partial levy or for which a Community quota has been opened and it excludes importations which have benefited from a total suspension of levy.

On 11 July 1979 the Produktschap decided in future to take into account for the division of the national quota amongst the undertakings concerned also those imports which had been effected under application of Article 14 (1) (b) of Regulation No 850/68 of the Council of 27 June 1968 on the common organization of the market in beef and veal (Official Journal, English Special Edition 1968 (I), p. 187) as amended by Article 3 of Council Regulation No 425/77 (Official Journal L 61, p. 1). That provision stipulates, in effect, that meat intended for the processing industry for the manufacture of preserved food which does not contain characteristic components other than beef and jelly shall qualify for a total or partial suspension of levy. Those imports have actually been subject to a levy of 55% of the full rate as from 1 July 1979.

J. A. van Walsum B.V., a company having its registered office at Rotterdam, considered itself to have been adversely affected by the Produktschap's decision of 11 July 1979 in that the decision reserved one half of the national quota to the processing industry and reduced the opportunities for importing under preferential tariff arrangements open to undertakings which do not carry on processing.

Consequently, J. A. van Walsum B.V. instituted proceedings before the College van Beroep voor het Bedrijfsleven in The Hague for annulment of the Produktschap's decision and requested that court to order the adoption of interim measures. In support of its application it submitted, in particular, that the decision to include imports falling within Article 14 (1) (b) of Regulation No 425/77, amending Regulation No 805/68, was not compatible with Article 3 (1) of Regulation No 3063/78 and the obligation thereby imposed on the Member States of guaranteeing all persons concerned established within their territories free access to the quota shares allocated to them.

By order of 31 July 1979 the President of the College van Beroep voor het Bedrijfsleven ordered the suspension until final judgment of the Produktschap's decision of 11 July 1979 and, pursuant to Article 177 of the EEC Treaty, stayed the proceedings until the Court of Justice has given a preliminary ruling on the following question:

Is it incompatible with the provision in Article 3 (1) of Council Regulation (EEC) No 3063/78 of 18 December 1978 opening, allocating and providing for the administration of a Community tariff quota for frozen beef and veal falling within subheading 02.01 A II (b) of the Common Customs Tariff (1979), or indeed with the principle which underlies that provision, and which in accordance with that provision is normally formulated in the Council regulations in which the GATT quotas are opened annually, or with any other provision of the Treaty or with any other binding Community rule or legal principle, for the national authority, in the allocation of the GATT quota, the administration of which is entrusted to that authority, to use methods whereby:

a) entitlement to a considerable part of the GATT quota is reserved to the processing industry if and so far as that industry has imported frozen beef and veal in application of the favourable system contained in Article 14 (1) (b) of Regulation (EEC) No 805/68 of the Council as last amended and

b) traders to whom this favourable system does not apply are denied access to a considerable part of the GATT quota in the event of no share in that considerable part of the GATT quota being allocated to them by the national authority? The order of the President of the College van Beroep voor het Bedrijfsleven was received at the Registry of the Court on 6 August 1979.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted on 11 October 1979 by the Commission of the European Communities, represented by H. Bronkhorst, a member of its Legal Department; on 22 October 1979 by J. A. van Walsum B.V., the appellant in the main action, represented by J. H. Koolschijn, Advocate of The Hague; and on 24 October 1979 by the Produktschap voor Vee en Vlees, the respondent in the main action, represented by J. P. Pluim Mentz, the director of its Legal Department.

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.

By order of 30 January 1980 the Court resolved to assign the case to the Second Chamber, in accordance with Article 95 (1) and (2) of the Rules of Procedure.

II — Written observations submitted to the Court

J.A. van Walsum B.V., the appellant in the main action, submits that the decision of the Produktschap which is in dispute has the effect of reserving a significant part of the GATT quota to a specific group of importers, namely those forming the meat processing industry, while access to the remainder of the quota is open to all importers, including the processing industry.

a) Article 3 (1) of Regulation No 3063/78 is of general scope and is not subject to any qualification. “Traditional importers” are just as much “persons concerned” as the processing industry. A significant part of the GATT quota having been reserved by the Produktschap's decision to the processing industry, the “traditional importers” have access only to the remaining quota share, and that in competition with the processing industry. The decision under attack is therefore incompatible with the wording of Article 3 (1) of Regulation No 3063/78.

b) That provision is based upon the principle, expressed in the second recital of the preamble to Regulation No 3063/78, that equal and continuous access to the quota should be ensured for all persons concerned until the quota is used up. All persons concerned are therefore entitled to equal access to the whole of the quota; however, by reason of the decision in dispute the traditional importers do not have access to the significant part of the quota which is reserved to the processing industry. The Produktschap's decision accordingly offends also against the principle expressed in Regulation No 3063/78.

c) Moreover, the decision in dispute is contrary to Article 40 (3) of the EEC Treaty under which, in the establishment of a common organization of agricultural markets, any discrimination between producers or consumers shall be excluded. By favouring in important respects one finite group of importers in comparison with another group of importers, the Produktschap's decision constitutes discrimination.

d) The Member States do not have power to adopt, at a national level, complementary implementing measures in regard to products covered by a common organization of the market, especially when those measures may affect the price-formation mechanism. In the present case, since a large part of the GATT quota is reserved to the processing industry and since meat imported under that quota may be freely sold, the processing industry is placed in the position of being able to play a decisive role in fixing the price of the product in question. Accordingly, the principle flowing from Article 40 of the Treaty has been contravened.

e) The answer to all the points in the question referred to the Court for a preliminary ruling should therefore be in the affirmative.

The Produktschap voor Vee en Vlees, the defendant in the main action, sets forth details of the way in which the annual sub-quota allocated to the Netherlands is divided and administered and it reminds the Court, in particular, that imports effected under exemption from levy are excluded, in order to avoid the giving of a double benefit. Since imports effected under application of Article 14 (1) (b) of Regulation No 805/68 as amended by Regulation No 425/77 were again subjected to a partial levy as from 1 July 1979 they had to be taken into consideration. By Commission Regulation No 1136/79 of 8 June 1979 (Official Journal L 141, p. 10) adopted following the judgment of the Court of 6 March 1979 in Case 92/78, Simmenthal [1979] ECR 777, the benefit of that system was restricted to persons who have been engaged in the meat processing industry for at least a year. Under that system, importers who are not processors, such as the appellant company, can no longer apply for an import licence in their own name; but they may acquire import licences indirectly by assignment. The effect of the Produktschap's decision of 11 July 1979 was to make only about 12% of the GATT quota for 1980 inaccessible to importers who are not processors: processors avail themselves to a relatively substantial extent of the power to assign the “import opportunities” represented by an import licence under application of Article 14 (1) (b) of Regulation No 805/68, with the result that a significant portion of the GATT quota remains accessible to importers who are not processors. Moreover, the final part of the question referred to the Court proceeds upon a premise which is not accurate: “traders to whom this favourable system [under Regulation No 805/68] does not apply” enjoy rights of importation obtained by assignment and the Produktschap allocates to them, on that basis, a portion of the GATT quota on a footing of absolute equality with processors who carry out their own importation. According to the forecasts, the decision of the Produktschap in dispute appears to make hardly any alteration in the share of the 1980 GATT quota which every party involved in the market will obtain.

The question put to the Court ought therefore to be formulated as follows: May an authority charged with the administration of a GATT quota bring into account, in allocating the quota, imports carried out under the system of 14 (1) (b) of Regulation No 805/68 as amended by Regulation No 425/77 where, consequent upon Community measures, a specific group of traders may indeed no longer apply for licences under that system with the result that they may no longer acquire directly, under that system, rights which would be taken into account in the allocation of the GATT quota, but where that group is not however precluded from importing under that system and thus acquiring such rights, by reason of their having the possibility of obtaining a licence by way of assignment?

The Community rules leave to the Member State concerned the discretion of selecting a method of administration, but require it to proceed to an allocation which is appropriate from an economic point of view. Those rules enshrine two principles, that of equality and the “economic principle”. The Produktschap has not acted in contravention of those rules and has not acted unlawfully in regard to Community law in deciding to include the system under Article 14 (1) (b) of Regulation No 805/68 in the basis of allocation of the 1980 GATT quota.

Since the principles of equality and of economic logic could be in opposition to each other, the seeking of a fair balance between them is a matter of policy. The Produktschap has achieved that balance in the system which it applies consistently and which provides for the sub-quota allocated to the Netherlands to be shared amongst the persons concerned on the basis of the average imports of frozen beef and veal carried out in their own name during a reference period of three years and subject to a full or partial levy on importation.

Having regard to the opportunities available in the trade of arranging importations in the framework of the system under Article 14 (1) (b) of Regulation No 805/68 the continuance of the present policy does not involve any serious affront to the principle of equality. On the other hand, any alteration of that policy would conform less with the economic principle confirmed by the Commission.

3. The Commission notes in general terms that the GATT quota is a Community quota and that it is therefore for the Community to determine the conditions under which it should be utilized, subject to the obligations which the Community has undertaken at an international level or in accordance with the general or sectoral aims of the economic policy which the institutions pursue in the context of their powers. The rules laid down by the Community for the allocation by the Member States of the quota must be regarded as purely implementing measures of an administrative nature; the limited nature of that delegation does not leave any power for action at national level which is contrary to Community principles of economic policy or which may offend against the principle of equality of treatment for all citizens of the Community. In regard to the quota subject to Regulation No 3063/78, the Member States have power only to lay down the technical and procedural rules necessary to ensure that the quota limits are observed and to guarantee equality of treatment for those benefiting from the quota. Within that framework, however, the Member States enjoy a certain margin of manoeuvre; they may make rules and lay down objective criteria for the allocation of the quota. It follows from the recitals of the preamble to Regulation No 3063/78 that “it appears best to leave to each Member State the choice of a management system for its share of the quota, so that it may ensure an allocation which is appropriate from an economic viewpoint”. The Member States are therefore free to determine their own criteria for the allocation of the quota; in fact, they have actually opted for different systems of allocation. Moreover, the regulation does not oblige Member States to effect the division amongst all the persons concerned in such a way that the quantities allocated are too small to be of any economic interest. The Community legislature intended to avoid the sub-quotas being broken down too far by the Member States. (a) In regard to the Produktschap's decision of 11 July 1979 it is appropriate to examine whether the criteria adopted by it effectively guarantee equality of treatment for all traders concerned. Rules which take account, in the scale of apportionment, of quantities imported for the processing industry under a favourable system do not appear to be contrary to that principle. The processing industry or those who import for that industry in accordance with the system provided for in Article 14 (1) (b) of Regulation No 805/68 as amended are just as concerned in the Community quota as other categories of importers of beef and veal. The fact of their having imported beef and veal under a favourable system is not a circumstance warranting the exclusion of the imports concerned. The rule laid down by the Produktschap is an objective one. The position would be otherwise if certain categories of persons concerned were entitled to a percentage of the quota, fixed arbitrarily and in advance. In the present case, importers who import for the processing industry are treated, in their capacity as traders concerned to have access to the sub-quota, on the same footing as other importers, namely, in proportion to imports carried out in the course of a fixed reference period. Moreover, the Netherlands system does not take account in calculating individual quota shares of imports which have benefited from a total suspension of levy. That provision is also wholly objective and guarantees equality of treatment for all traders concerned. (b) It is appropriate to give the following answer to the question put by the College van Beroep: National rules, drawn up in implementation of Council Regulation No 3063/78, which have the result of reserving a significant part of the GATT quota to the processing industry which imports under the system provided for in Article 14 (1) (b) of Regulation No 805/68 with the consequence that other traders do not have access to that part of the GATT quota are not incompatible with the principle of free access to the national quotas, which the Member States must guarantee to all persons concerned established within their territories, or with any other provision of the Treaty or with any other binding provision or principle of Community law.

IIII — Oral procedure

J. A. van Walsum B. V., the appellant in the main action, represented by A. J. Sandberg, of the Bar of The Hague, the Produktschap voor Vee en Vlees, the respondent in the main action, represented by J. P. Pluim Mentz, and the Commission of the European Communities, represented by Peter Kuyper, a member of its Legal Department, submitted oral argument and replied to questions from the Court at the sitting on 28 February 1980.

The Advocate General delivered his opinion at the same sitting.

Decision

1. By order of 31 July 1979, which was received at the Court on 6 August 1979, the College van Beroep voor het Bedrifjsleven referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Article 3 of Council Regulation No 3063/78 of 18 December 1978 opening, allocating and providing for the administration of a Community tariff quota for frozen beef and veal falling within subheading 02.01 A II (b) of the Common Customs Tariff for the year 1979 (Official Journal, L 366, p. 6)

2. It appears from the file that, in the context of the General Agreement on Tariffs and Trade (GATT), the Community has agreed to open, at a rate of duty of 20 %, an annual Community tariff quota for the importation of beef and veal from nonmember countries which have subscribed to GATT (subheading 02.01 A II (b) of the Common Customs Tariff). The quota is allocated each year by the Community amongst the Member States, a single sub-quota being fixed for the Benelux countries which reallocate it amongst themselves. The quota allocated to the Benelux countries for 1979 by Regulation No 3063/78 amounts to a total of 4240 tonnes of which 2756 tonnes are allotted to the Netherlands under an internal scale of apportionment between the Benelux countries.

3. By decision of 11 July 1979 the Produktschap voor Vee en Vlees, which is responsible in the Netherlands for the allocation of the national quota, laid down a scale of apportionment of the quota amongst the undertakings concerned. On that occasion, as in previous years, it decided that the allocation would be made in proportion to the average imports of beef and veal taken into account and effected in the period of three calendar years immediately preceding the year in question. For that purpose the Produktschap regards as imports of beef and veal only those amounts which are subject to a full or partial levy or for which a Community quota has been opened. Imports for which the levy has been totally suspended are not taken into account.

4. By its decision of 11 July 1979 the Produktschap also included amongst the imports of meat taken into account for the purpose of dividing the quota imports which had been effected on the basis of Article 14 (1) (b) of Regulation No 805/68 of the Council of 27 June 1968 as amended by Article 3 of Council Regulation No 425/77 of 14 February 1977 (Official Journal, English Special Edition 1968 (I), p. 187, and Official Journal L 61, p. 1respectively). That provision provides for a total or partial suspension of levy for frozen meat intended for the processing industry for the manufacture of certain preserved foods. The amounts imported under that provision were taken into account by the Produktschap by reason of the fact that, during the period under consideration, they had benefited only from a partial suspension of levy.

5. The appellant in the main action considered itself to have been adversely affected by that new method of calculation adopted by the Produktschap. It maintained that since that new scheme reserved a significant part of the quota to the processing industry the opportunities for importing at the reduced rate of duty open to importers which do not carry on processing were significantly reduced. Since the allocation is carried out in proportion to imports in previous trading years that method would have the result of gradually increasing the share of the processing industry to the prejudice of importers so as completely to exclude the latter in the long term.

6. During the procedure before the national court the question arose whether the Produktschap's decision to include imports covered by Article 14 (1) (b) of Regulation No 425/77 in the reference figures for the allocation of the national GATT quota was, in those circumstances, incompatible with Article 3 (1) of Council Regulation No 3063/78 which obliges Member States to guarantee all persons concerned established within their territories free access to the quota shares allocated to them.

7. According to the College van Beroep, the compatibility of the Produktschap's decision with Community law is seriously in doubt. The College therefore decided to suspend the said decision, ad interim, since it was proved that it affected the interests of the appellant, and to make a reference to the Court of Justice under Article 177 of the EEC Treaty by requesting it to give a preliminary ruling on the following question: “Is it incompatible with the provision in Article 3 (1) of Council Regulation (EEC) No 3063/78 of 18 December 1978 opening, allocating and providing for the administration of a Community tariff quota for frozen beef and veal falling within subheading 02.01 A II (b) of the Common Customs Tariff (1979), or indeed with the principle which underlies that provision, and which in accordance with that provision is normally formulated in the Council regulations in which the GATT quotas are opened annually, or with any other provision of the Treaty or with any other binding Community rule or legal principle, for the national authority, in the allocation of the GATT quota, the administration of which is entrusted to that authority, to use methods whereby: (a) entitlement to a considerable part of the GATT quota is reserved to the processing industry if and so far as that industry has imported frozen beef and veal in application of the favourable system contained in Article 14 (1) (b) of Regulation (EEC) No 805/68 of the Council as last amended; and (b) traders to whom this favourable system does not apply are denied access to a considerable part of the GATT quota in the event of no share in that considerable part of the GATT quota being allocated to them by the national authority?

8. In terms of Article 3 (1) of Regulation No 3063/78 “the Member States shall take all appropriate steps to guarantee all persons concerned established within their territories free access to the quota shares allocated to them”.

9. It appears from the second and fourth recitals in the preamble that that provision has the aim of ensuring “equal and continuous access to the quota ... for all persons concerned” while leaving “to each Member State the choice of a management system for its share of the quota so that may ensure an allocation which is appropriate from an economic viewpoint”.

10. The system practised by the Netherlands Produktschap, which consists in taking imports carried out in the course of previous trading years as a reference criterion, satisfies, in principle, those requirements in that it guarantees both continuity in the flow of imports and the adjustment of supplies to economic needs.

11. In fact, the complaint of the appellant in the main action relates exclusively to the fact that as from the 1979 season the Produktschap has included importers benefiting from the system of importation laid down in Article 14 (1) (b) of Regulation No 805/68, as amended by Regulation No 425/77, amongst the undertakings invited to take part in the allocation of the quota in question.

12. It does not appear, however, that, by that expansion, the Produktschap has unduly restricted free access by other persons concerned to the quota in question. Indeed, it appears from the explanations provided in the course of the proceedings that the taking into account of imports carried out under the said provision is due to the fact that those imports are at present subject to levy, albeit at a reduced rate. Contrary to what has been contended by the appellant in the main action, that expansion of the number of persons benefiting from the quota does not have the result, even in the long term, of excluding importers who do not satisfy the conditions for access to the benefit of the special system of importation provided for in Article 14 (1) (b) of Regulation No 805/68. If any relative disadvantage to the category of importers to which the appellant in the main action belongs were to arise, that disadvantage would only be the consequence of extending the benefit of participation in the GATT quota to a category of importers who unquestionably come within the concept of “persons concerned” referred to in Article 3 (1) of Regulation No 3063/78 and who have accordingly a legitimate interest in being included in the allocation of the quota.

13. It appears therefore that, according to the test laid down by the Court in its judgment of 23 January 1980 in Case 35/79 Grosoli and Others [1980] ECR, the Produktschap did not, by its decision of 11 July 1979, go outside the bounds of the power of management left to the Member State concerned.

14. It does not appear” necessary to consider separately the argument based by the appellant in the main action on Article 40 (3) of the EEC Treaty in terms of which the common organization of a market “shall exclude any discrimination between producers or consumers within the Community”. Indeed, as moreover the appellant itself recognizes, Article 3 of Regulation No 3063/78 amounts only to a specific expression of that principle in the light of the particular facts of the allocation of the quota in question, regard being had to the objectives of economic policy which are pursued in the context of the common organization of the market in beef and veal.

15. The answer to the question submitted should therefore be that any methods of allocation laid down by a competent national authority, which involve including undertakings which benefit from the system contained in Article 14 (1) (b) of Regulation No 805/68 of the Council, as amended by Council Regulation No 425/77, amongst the “persons concerned”, who are referred to in the provisions of Article 3 (1) of Council Regulation No 3063/78 of 18 December 1978 opening, allocating and providing for the administration of a Community tariff quota for frozen beef and veal falling within subheading' 02.01 A II (b) of the Common Customs Tariff (1979), are compatible with those provisions, even if they result in a corresponding reduction in other importers' shares in the allocation of the quota in question.

Costs

16. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these 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, THE COURT (Second Chamber), in answer to the questions submitted to it by the President of the College van Beroep voor het Bedrijfsleven by order of 31 July 1979, hereby rules: