JUDGMENT OF 16. 10. 1980 — JOINED CASES 824 AND 825/79 FOLCI v AMMINISTRAZIONE DELLE FINANZE DELLO STATO
In Joined Cases 824 and 825/79 REFERENCE to the Court pursuant to Article 177 of the EEC Treaty by the Italian Corte Suprema di Cassazione [Italian Supreme Court of Cassation] for a preliminary ruling in the two proceedings pending before that court between
THE COURT (Second Chamber) composed of: P. Pescatore, President of Chamber, A. Touffait and O. Due, Judges, Advocate General : J.-P. Warner Registrar: A. Van Houtte
gives the following
JUDGMENT
acts and Issues
The facts of the case, the course of the procedure and the observations submitted pursuant to 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
A — Facts and procedure before the Italian Corte di Cassazione
1. The Folci undertaking imported into Italy from Yugoslavia on two occasions, in 1975 and 1976, mushrooms which were sliced and dried but included the stalk and cap. In its view customs duty at the rate of 10% laid down for developing countries should be charged on those imports. On the other hand the Amministrazione delle Finanze dello Stato takes the view that imported mushrooms must bear customs duty at the conventional rate of 16 % laid down by the Common Customs Tariff.
2. The difference of opinion is due to the fact that under the terms of the preferential system the reduced rate is charged on “whole” mushrooms. The Corte d'Appello [Court of Appeal], Trieste, by two judgments delivered on 24 March 1977 and 23 February 1978 upheld the view of the Amministrazione delle Finanze. Folci appealed to the Corte di Cassazione against those judgments on the ground that the interpretation of the Common Customs Tariff put forward by the Amministrazione delle Finanze was wrong. The Corte Suprema di Cassazione stayed the proceedings and referred the following question to the Court in one of the appeals: In the other appeal the same question has been referred to the Court but only in relation to Regulation No 3011/75.
“Must tariff heading 07.04 ex B. Other: Whole mushrooms, dried dehydrated or evaporated, excluding cultivated mushrooms, referred to in Annex A to Regulation (EEC) No 3055/74 of the Council of 2 December 1974 and in Annex A to Regulation (EEC) No 3011/75 of the Council of 17 November 1975 which lays down the rate of 10%, be understood as meaning that the above-mentioned reduced rate applies to uncultivated mushrooms, dried, dehydrated or evaporated, even if they are cut or sliced (provided that all their parts are present: stalks, caps etc.), or as meaning that it applies only to mushrooms which are not cut or sliced, are dried, dehydrated or evaporated and are uncultivated?”
B — Community rules
1. Tariff heading 07.04 of the Common Customs Tariff (Annexes to Regulation (EEC) No 2658/74 of the Council of 15 October 1974 (Official Journal L 295 of 1 November 1974, p. 1) and Regulation (EEC) No 3000/75 of the Council of 17 November 1975 (Official Journal L 304 of 24 November 1975, p. 1)) is concerned in both cases with “Dried, dehydrated or evaporated vegetables, whole, cut sliced, broken or in powder, but not further prepared: A. Onions ... B. Others ... The reduced rate of 10 %, laid down by Regulation (EEC) No 3055/74 of the Council (as amended by a Corrigendum published in Official Journal L 121 of 14 May 1975, p. 24) and Regulation (EEC) No 3011/75 of the Council of 17 November 1975 establishing in respect of certain products falling within Chapters 1 to 24 of the Common Customs Tariff a scheme of generalized preferences in favour of developing countries applies, under tariff heading 07.04, to products described in the French version as: The Danish, Dutch, German and Italian versions are worded respectively as follows : However, in the English version the reduced rate applies to : Dried, dehydrated or evaporated vegetables, whole, cut, sliced, broken or in powder but not further prepared : ex B. Other: Whole mushrooms, dried, dehydrated or evaporated, excluding cultivated mushrooms”. It is common ground that in the case of the preferential system applicable for 1972, 1973, 1977, 1978, 1979 and 1980 tariff heading 07.04 reads as follows: and that in the case of the system applicable for 1974, the year preceding the two years during which the disputes arose, it is worded:
“Légumes et plantes potagères desséchés, déshydratés ou évaporés, même coupés en morceaux ou en tranches ou bien broyés ou pulvérisés, mais non autrement préparés :
ex B. autres:
Champignons entiers desséchés, déshydratés ou évaporés, à l'exclusion des champignons de couche
...”
“Grønsager, tørrede, også snittede, knuste eller pulveriserede, men ikke yderligere tilberedte:
ex B. Andre varer:
Svampe, hele, tørrede, undtagen dyrket champignon”;
“Groenten en moeskruiden, gedroogd, gedehydreerd of geëvaporeerd, ook indien in stukken of in schijven gesneden, dan wel fijngemaakt of in poedervorm, doch niet op andere wijze bereid:
ex B. andere:
Gehele paddestoelen, gedroogd, gedehydreerd of geëvaporeerd, met uitzondering van gekweekte paddestoelen”;
“Gemüse und Küchenkräuter, getrocknet, auch in Stücke oder Scheiben geschnitten, als Pulver oder sonst zerkleinert, aber nicht weiter zubereitet:
ex B. andere:
Ganze Pilze, getrocknet, ausgenommen Zuchtpilze”;
“Ortaggi e piante mangerecce, disseccati, disidratati o evaporati, anche tagliati in pezzi o in fette oppure macinati o polverizzati, ma non altrimenti preparati:
ex B. altri:
Funghi interi disseccati, disidratati o evaporati esclusi i funghi di coltivazione”.
“ex B Other:
Mushrooms, excluding cultivated mushrooms”,
“ex B Other:
Dried, dehydrated or evaporated mushrooms, excluding cultivated mushrooms”.
2. The question at issue was discussed at a meeting of the Committee on Common Customs Tariff Nomenclature in January 1977. According to the summary record of this meeting “The view of all the delegates on this point was that the word ‘whole’ contained in the text in question precluded products falling within this tariff heading from being cut into pieces or sliced”.
C — The procedure before the Court
In accordance with Article 20 of the Statute of the Court of Justice of the EEC written observations were submitted by the plaintiff in the main action, Prodotti Alimentari Folci S.a.s., represented by C. A. Pedroni of the Gorizia Bar, by the Italian Government, represented by O. Fiumara, Avvocato dello Stato, and by A. Squillante, head of the department in the Italian Foreign Office dealing with litigation, treaties and legislative matters, acting as Agent, and by the Commission, represented by A. Prozzillo, a member of its legal department, acting as Agent.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure whilst at the same requesting the Commission to answer before the hearing the question reproduced below in Section III.
The Court by an order dated 16 January 1980 ordered that the two cases be dealt with jointly.
By an order dated 7 May 1980, pursuant to Article 95 (1) of the Rules of Procedure, the Court decided to assign the two joined cases to the Second Chamber.
II — Written observations
1. Folci submits that the wording in question must be given a reasonable and pragmatic interpretation. In its view it is common knowledge that almost all mushrooms originating in Yugoslavia and other developing countries are boleti and that boleti cannot be dried without having first been sliced. Since the reduced rate of customs duty is designed to promote imports from developing countries it observes that there would be no point in adopting a preferential system which is illusory. On the basis of etymological research it considers that the concept of “whole” may be reconciled with that of “sliced” if mushrooms all the parts of which are present and which have not therefore lost any of them are regarded as being “whole”, even if they have been sliced. Such an interpretation seems to it to be compatible also with the logical interpretation, from the legal point of view, of the introduction of the word “whole” in the rules. If the legislature had intended to exclude the mushrooms in question from the system, the explicit and unambiguous wording would have been the following: “Mushrooms, dried, dehydrated or evaporated, excluding cultivated mushrooms and cut or sliced mushrooms”. Likewise from the commercial point of view Folci claims that an interpretation such as the one which it advocates is entirely comprehensible since it excludes from the preferential system cut and dried mushrooms which only include the caps, that is a product in much greater demand not forming part of the current production of developing countries.
2. The Commission submits that the word “whole” must be given its ordinary meaning, namely “a single undivided piece”; it adduces as proof of this the words used in the various language versions of the regulations: “interi”, “whole”, “ganze”, “entier”, “hele”, “gehele”. It points out that the ordinary rate applies to all vegetables, whole as well as cut or sliced, provided that they are prepared in a given way, whereas the preferential tariff only applies to part of tariff heading 07.04, excluding subheading A, subheading B being limited to mushrooms and horse-radish. It points out that in the case of mushrooms there is a further condition: they must be “whole”. It takes the view that there is therefore not only a logical and linguistic contrast between the Common Customs Tariff and the preferential system but a real legal contrast between a rule of general application and a specific rule. Even if the regulations applicable to the two years in question are assumed to have intended to exclude the importation of dried mushrooms normally produced by developing countries that would simply be the intention of the legislature.
3. The Italian Government supports the Commission's point of view and refers to the summary record of the meeting of the above-mentioned Nomenclature Committee. Technically it finds that there is a difference between treatment such as drying, dehydration and evaporation which leaves the mushroom in one piece and treatment such as cutting, breaking and pulverization which transforms the product. The application of the preferential system to the latter would make it moreover difficult to establish in practice whether a product which has been broken or pulverized contains all the parts of the mushroom or not. Finally from the linguistic point of view it appears to it to be plain that the word “whole” can have no meaning other than “intact”.
III — Questions raised by the Court
The Court asked the Commission: “Is it possible to explain the reasons for which the word ‘whole’ was first omitted, then inserted and finally removed from tariff heading 07.04 in connexion with the preferential system applicable from 1972 to 1980?” The Commission in a letter dated 4 June 1980, gave the following reply:
1. “Until 1974 both proposals from the Commission and Council regulations on generalized preferences concerning certain agricultural products falling within Chapters 1 to 24 of the Common Customs Tariff referred to tariff heading 07.04, mushrooms other than cultivated mushrooms, without giving any other particulars. The proposal from the Commission for 1975 was drawn up along the same lines; but the Council during its proceedings came to the conclusion that there were grounds for adding the word ‘whole’ in order to prevent preserved mushrooms from also including cultivated mushrooms, which are excluded from the preferential tariff system, and which it would have been impossible to identify in the form of preserved, cut mushrooms. It appears in fact to be impossible to distinguish cultivated mushrooms from others once they are no longer ‘whole’.
2. For the same reasons the proposal from the Commission and the Council regulation for 1976 contained the word ‘whole’.
3. The Commission during its preparations for its proposal for 1977 discovered that certain developing countries were only producing preserved, cut mushrooms and considered it more important to allow them to participate in the preferential scheme than to make sure of excluding preserves illegally containing cultivated mushrooms. In fact this did not happen very often. The Council adopted this reasoning.
4. Since 1977 the word ‘whole’ under tariff heading 07.04 has been excluded from both proposals from the Commission and Council regulations.”
IV — Oral procedure
At the sitting on 26 June 1980 Folci, represented by C.A. Pedroni of the Gorizia Bar, and the Commission, represented by A. Prozzillo, a member of its Legal Department, acting as Agent, presented oral argument.
The Advocate General delivered his opinion at the sitting on 18 September 1980.
Decision
1. By an order dated 22 June 1979 which was received at the Court on 21 December 1979 the Corte Suprema di Cassazione [Italian Supreme Court of Cassation] referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty the following question: By an order of the same date the same court raised a similar question save that it relates only to Regulation No 3011/75.
“Must tariff heading 07.04 ex B. Other: Whole mushrooms, dried, dehydrated or evaporated, excluding cultivated mushrooms, referred to in Annex A to Regulation (EEC) No 3055/74 of the Council of 2 December 1974 [Official Journal L 329, p. 114, as amended by a Corrigendum published in Official Journal L 121 of 14 May 1975] and in Annex A to Regulation (EEC) No 3011/75 of the Council of 17 November 1975 [establishing in respect of certain products falling within Chapters 1 to 24 of the Common Customs Tariff a scheme of generalized preferences in favour of developing countries (Official Journal L 310, p. 114)] which lays down the rate of 10 %, be understood as meaning that the above-mentioned reduced rate applies to uncultivated mushrooms, dried, dehydrated or evaporated, even if they are cut or sliced (provided that all their parts are present: stalks, caps etc.), or as meaning that it applies only to mushrooms which are not cut or sliced, are dried, dehydrated or evaporated and are uncultivated?”
2. The questions have been raised during two actions between S.a.s. Prodotti Alimentari Folci and Amministrazione delle Finanze dello Stato [Italian State Finance Administration] brought to decide whether customs duty at the conventional rate of 16 % laid down by the Common Customs Tariff or at the rate of 10 % laid down for developing countries should be applied to two consignments of wild, sliced and dried mushrooms, including the stalk and cap, imported in 1975 and 1976 from Yugoslavia into Italy.
3. It is common ground that this product is within subheading 07.04 B of the Common Customs Tariff which, in the versions other than the English version, is worded as follows : All theses versions are clearly based on the French version of the Customs Cooperation Council Nomenclature of which only the French and English versions are authentic. The English wording, which is based on the English version of the said nomenclature, reads as follows:
“Légumes et plantes potagères desséchés, déshydratés ou évaporés, même coupés en morceaux ou en tranches ou bien broyés ou pulvérisés, mais non autrement préparés :
...
B) autres;”
“Grønsager, tørrede, også snittede, knuste eller pulveriserede, men ikke yderligere tilberedte :
...
B) andre”;
“Gemüse und Küchenkräuter, getrocknet, auch in Stücke oder Scheiben geschnitten, als Pulver oder sonst zerkleinert, aber nicht weiter zubereitet:
...
B) andere;”
“Ortaggi e piante mangerecce, disseccati, disidratati o evaporati, anche tagliati in pezzi o in fette oppure macinati o polverizzati, ma non altrimenti preparati:
...
B) altri”;
“Groenten en moeskruiden, gedroogd, gedehydreerd of geëvaporeerd, ook indien in stukken of in schijven gesneden, dan wel fijngemaakt of in poedervorm, doch niet op andere wijze bereid:
...
B) andere”.
“Dried, dehydrated or evaporated vegetables, whole, cut, sliced, broken or in powder but not further prepared:
...
B) Other”.
4. The regulations which govern, for each year, the scheme of generalized preferences in favour of developing countries including Yugoslavia, list in Annex A thereto the products to which the scheme applies. As far as concerns the products falling within heading 07.04 the annexes reproduce the wording of the above-mentioned heading but list only two products coming under subheading B, one of which is mushrooms, excluding cultivated mushrooms. The disagreement between the parties in the main action derives from the fact that, for the years in question, and only those years, the description of the product in the annex contains an additional condition, namely that the mushrooms must be “whole”.
5. Folci submits that the word “whole” need not necessarily be understood as meaning that all their parts are present.
6. However, although the language versions which are modelled on the French wording of the Customs Cooperation Council Nomenclature make it possible to consider the interpretation advocated by Folci, that is not so in the case of the English version. The latter clearly indicates that the word “whole” applies only to products which are not “cut, sliced, broken or in powder”. These qualifying words may be regarded as being implicit in the expression “even cut” etc. of the other language versions.
7. Folci also maintained before the Court that a literal interpretation is inadequate but that the wording must be interpreted reasonably and pragmatically. As almost all the wild mushrooms originating in Yugoslavia and other developing countries are boleti, and as boleti are not suitable for drying unless they have first been sliced, Fold's interpretation should be adopted. Otherwise the preferential system would be illusory as far as wild mushrooms are concerned.
8. The Commission, in answer to a question put to it by the Court, explained why the word “whole” was inserted in the two regulations in question and then removed from the regulations governing the preferential system for the following years: the purpose of this condition is to prevent preserved mushrooms from also containing cultivated mushrooms which could not be identified in the form of preserved, cut mushrooms. However, it was discovered that certain developing countries were only producing preserved, cut mushrooms and it was therefore thought more important to allow them to participate in the preferential scheme than to make sure of excluding preserves illegally containing cultivated mushrooms. For that reason, it is stated, the condition was abolished for 1977 and subsequent years.
9. In fact the mere reproduction of the title of tariff heading 07.04 — which includes not only cut or sliced products but also those which are broken or in powder — and the exclusion at the same time of cultivated mushrooms are likely to create prolems with regard to inspection. The question whether such problems must prevail over the interests of certain developing countries is the responsibility of the political institutions of the Community.
10. Consequently the solution which appears expressly in one of the language versions, which is in no way inconsistent with the other versions and moreover supplies a complete answer to any problems concerning inspection, should be upheld.
11. Therefore the appropriate answer to the question referred to the Court by the Corte Suprema di Cassazione is that tariff heading 07.04 “ex B. Other” set out in Annex A to Regulation (EEC) No 3055/74 of the Council of 2 December 1974 and to Regulation (EEC) No 3011/75 of the Council of 17 November 1975 establishing in respect of certain products falling within Chapters 1 to 24 of the Common Customs Tariff a scheme of generalized preferences in favour of developing countries for the years 1975 and 1976 must be interpreted as meaning that the reduced rate does not apply to cut or sliced mushrooms even if all the parts are present.
Costs
12. The costs incurred by the Italian Government and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main actions are concerned, in th nature of a step in the actions 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 referred to it by the Corte Suprema di Cassazione, by order of 22 June 1979, hereby rules: