Report for the Hearing delivered in Joined Cases 244 and 245/85

I — Facts and procedure

Between October 1981 and June 1982 the two applicants carried out a number of commercial operations involving durum wheat and durum-wheat meal under authorizations granted under the inward processing arrangements established by Council Directive 69/73 of 4 March 1969 (Official Journal, English Special Edition 1969 (I), p. 75). The authorizations included the possibility of having recourse to the system of ‘equivalent compensation’ provided for in Article 24 and to the system of ‘prior exportation’ provided for in Article 25 of the directive.

The undertakings carried out prior exportations of processed cereal products (durum-wheat meal) from Italy to non-member countries and finally discharged those inward processing operations by importing primary products (durum wheat) released for free circulation in Italy. However, at the same time as the durum wheat was released for free circulation in Italy it was the subject of a declaration of exportation to two other Member States, namely France and Belgium.

Initially the Naples customs officers took the view that the operations fell within the scope of Article 20 of Commission Regulation No 1371/81 of 19 May 1981 laying down detailed rules for the administrative application of monetary compensatory amounts (Official Journal 1981, L 138, p. 1) according to which, in the version in force at the relevant time, ‘Member States are authorized not to grant or levy monetary compensatory amounts on products declared at the same time both for release at import and for re-export. In such cases Member States shall ensure that no monetary compensatory amount is applied’. The monetary compensatory amounts which were not levied exceeded LIT 2500 million.

However, at the end of June 1982, as a result of observations submitted by officials of the European Agricultural Guidance and Guarantee Fund after an inspection visit, in which they questioned the aforementioned manner of proceeding, the Italian customs authorities changed their position and requested the applicants to provide a security for that amount.

On 12 October 1983 the Italian Government asked the Commission whether or not there were grounds for recovering the monetary compensatory amounts in this case pursuant to Article 5 (2) of Council Regulation No 1697/79 of 24 July 1979 on the post-clearance recovery of import duties (Official Journal 1979, L 197, p. 1), which provides as follows: ‘The competent authorities may refrain from taking action for the post-clearance recovery of import duties or export duties which were not collected as a result of an error made by the competent authorities themselves which could not reasonably have been detected by the person liable, the latter having for his part acted in good faith and observed all the provisions laid down by the rules in force as far as his customs declaration is concerned.’ In a decision notified to Italy on 6 February 1984 the Commission stated that the conditions laid down by the aforementioned provision were not satisfied and that, consequently, there were no grounds for waiving post-clearance recovery of the monetary compensatory amounts.

On 23 November 1984, in view of those circumstances, the Italian Government, in reliance on this occasion on the first paragraph of Article 13 of Council Regulation No 1430/79 of 2 July 1979 on the repayment or remission of import or export duties (Official Journal 1979, L 175, p. 1), which provides that ‘import duties may be repaid or remitted in situations resulting from special circumstances in which no negligence or deception may be attributed to the person concerned’, and in reliance on the provisions of Commission Regulation No 1575/80 of 20 June 1980 laying down provisions for the implementation of Article 13 of Regulation No 1430/79 (Official Journal 1980, L 161, p. 13), applied to the Commission for a decision whether or not the remission of monetary compensatory amounts was justified in this case.

By a decision dated 22 March 1985 the Commission stated that remission of the monetary compensatory amounts was not justified in the particular case for reasons which may be summarized as follows:

a) According to the relevant rules monetary compensatory amounts were payable on the re-exportation of the durum wheat in question to France and Belgium. The customs officials in question were therefore wrong in believing that the re-exportation did not give rise to the application of monetary compensatory amounts.

b) The two undertakings, which specialized in international trade in cereals, could not have been unaware of the scope of the relevant rules.

c) In those circumstances the Commission considered that Article 13 of Council Regulation No 1430/79 was not applicable.

That decision is the subject of these proceedings.

II — Written procedure and conclusions of the parties

By applications lodged at the Court Registry on 5 August 1985, the applicants instituted proceedings against the Commission of the European Communities.

They claim that the Court should:

1) Declare the decision adopted by the Commission on 22 March 1985 in respect of a submission made by Italy (Decision REM 40/84) void;

2) Order the Commission to pay the costs.

The Commission contends that the Court should:

1) Dismiss the application as unfounded;

2) Order the applicants to pay the costs.

Upon 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. However, it requested the Commission to reply to a question before the hearing.

By a decision of 4 June 1986 the Court ruled that the two cases be joined.

Pursuant to Article 95 (3) of the Rules of Procedure, the Court assigned the case to the Fifth Chamber by a decision of 4 June 1986.

III — Summary of the submissions and arguments of the parties

The admissibility of the applications is not disputed.

The applicants made three submissions.

1. First submission: the relevant provision, namely Article 20 of Regulation No 1371/81 in this case, exempts the operation at issue from payment of monetary compensatory amounts

a) The main contentions of the applicants are as follows.

First they maintain that the wording of Article 20 of Regulation No 1371/81 is perfectly clear and that it applies to an operation such as the one at issue where the imported durum wheat is intended from the beginning to be unloaded in the ports of other Member States because the goods are considered to be in transit.

They also maintain that the provisions of Article 5 of Commission Directive 75/349 of 26 May 1975 on detailed rules concerning equivalent compensation and prior exportation under inward processing arrangements (Official Journal 1975, L 156, p. 25), which are not very clear and which were laid down merely in a directive, cannot take precedence over the provisions of a regulation adopted six years later which are general, unambiguous and directly applicable.

Thirdly they state that Article 20 of Regulation No 1371/81 is not merely a procedural provision but a true substantive provision.

They go on to state that the amendment of that provision by Article 1 (4) of Commission Regulation No 2883/83 of 14 October 1983 (Official Journal 1983, L 283, p. 14) clearly shows that at the time of the facts at issue the provision was applicable to a situation such as that with which this case is concerned.

Finally, they argue that only if Article 20 of Regulation No 1371/81 is inapplicable is it necessary to consider the question of the remission of monetary compensatory amounts on the basis of Article 13 of Regulation No 1430/79.

b) The Commission submits a number of arguments in opposition to those contentions.

It states that the provisions of Article 5 of Directive 75/349, according to which ‘compensation goods by their substitution for import goods shall, for customs purposes, take the same status as the latter, in the same way that import goods on substitution shall, for customs purposes, take the same status as compensation goods’, lays down a clear principle which is, in addition, the logical result of the system of prior exportation. These proceedings relate to goods (durum wheat) which were imported as compensation for the prior exportation of processed products (durum-wheat meal). For customs purposes, the processed products had therefore the same status as the compensation goods, that is to say the primary products (durum wheat) used in the manufacture of the exported processed goods (meal). The inward processing arrangements cannot be used to avoid the application of monetary compensatory amounts in trade between Member States and that principle cannot be altered by recourse to prior compensation. Consequently, once the imported durum wheat had been released into free circulation it was subject to payment of monetary compensatory amounts if it was exported to another Member State, in the same way as local durum wheat. If the national product used is subject to payment of monetary compensatory amounts on exportation to another Member State the position must necessarily be the same for a product imported by way of discharge of an inward processing operation.

The Commission also contends that Article 20 of Regulation No 1371/81 does not constitute a substantive provision intended to relieve the financial obligations of traders: its sole purpose is to avoid unnecessary administrative work where monetary compensatory amounts are applied in equal amounts, positively and negatively, to products which are being imported and re-exported simultaneously. Article 20 therefore applies only where on application of the basic provisions relating to monetary compensatory amounts the two operations of simultaneous importation and re-exportation cancel each other out financially. Consequently, there is no inconsistency between Article 20 of Regulation No 1371/81 and Article 5 of Directive 75/349 and it follows that there is no need to consider the question of which takes precedence over the other. In any event, the special provision laid down in the directive takes precedence over the general provision contained in the regulation.

The Commission goes on to state that the applicants were wrong to regard as a single operation under the inward processing arrangements what were in fact two distinct operations: in the first place, the importation of durum wheat by way of discharge of the prior exportation of durum-wheat meal under the inward processing arrangements, and in the second place the despatch of durum wheat from Italy to France and Belgium. Consequently, Article 20 of Regulation No 1371/81 is not applicable since it presupposes that monetary compensatory amounts are applicable to the imports whereas such amounts are not applicable to imports made under inward processing arrangements. There was therefore no possibility of compensation between the monetary compensatory amounts applicable to the imports, of which there were none, and the amounts in fact applicable to the exports to other Member States.

In the Commission's view, the applicants' arguments, which are contrary to the scheme and purpose of the inward processing arrangements and the system of monetary compensatory amounts, would lead to unjust enrichment in view of the application of negative monetary compensatory amounts to virtually all types of Italian agricultural products. The durum wheat re-exported from Italy would circulate within the Community at the Italian price level and not at the common price level, which is higher than the Italian price. That would give them an improper competitive advantage.

2. Second submission: the existence of a subjective right on the part of traders to exemption from payment of monetary compensatory amounts pursuant to Regulation No 1430/79, in the absence of negligence or deception

a) The applicants maintain that in any event from the time when Article 20 of Regulation No 1371/81 was considered applicable by the Italian authorities post-clearance recovery of monetary compensatory amounts on the imported and re-exported goods must be regarded as excluded. The very wording of the provision recognizes the existence of a ‘subjective Community right on the part of the undertakings to exemption from payment of monetary compensatory amounts’. Consequently, the Commission, when asked to adopt a decision under Article 13 of Regulation No 1430/79, cannot call into question the exemption from payment of monetary compensatory amounts except in the case of negligence or deception. Consequently, the decision by a Member State to apply Article 20 of Regulation No 1371/81 should be regarded as a special circumstance within the meaning of Article 13 of Regulation No 1430/79. The subsequent uncertainty on the part of the Italian customs authorities and of the Commission staff also constitutes a special circumstance in the applicants' view. In this case there was neither negligence nor deception on the part of the applicants but merely a difference of interpretation between the Commission on the one hand and the applicants and the customs authorities of Italy and the other Member States on the other. In those circumstances the argument that the undertakings concerned were specialists in the field is invalid and unacceptable, above all since the Commission staff themselves were uncertain until September 1982 and since it was not until July 1984 that the Commission staff requested the national authorities to proceed with recovery of the monetary compensatory amounts. In addition, the circumstances in which the imported durum wheat was put into free circulation (without being unloaded in Italy, without being released onto the market, with a transit declaration and subject to the tariff treatment applicable to ‘recoveries’ as a result of the prior exportation of compensation products) under customs control and supervision shows clearly that there was no negligence on the part of the undertakings and certainly no ‘deception’.

b) The Commission rejects those arguments. In the Commission's view there are therefore no equitable grounds in this case for granting remission, which would give the applicants a wholly unjustified competitive advantage.

It states that Article 2 of Council Regulation No 1697/79 on the post-clearance recovery of import duties expressly obliges the authorities of the Member States to recover sums which have not been collected as a result of an error.

It goes on to state that Article 13 of Regulation No 1430/79 is applicable in the case of a specific customs debt and provides for the possibility of remitting such a sum on equitable grounds. However, its provisions do not apply where no customs debt has arisen. Consequently, the applicants' contention with regard to the existence of a subjective right amounts to a denial that there was a customs debt and is therefore irreconcilable with the procedure set out in Article 13. In addition, Article 13 merely empowers the competent authority to grant the remission of duties.

The Commission also maintains that the applicants are two undertakings specializing in international trade in cereals and products processed from cereals, in particular under the inward processing system. They cannot therefore be unaware of the rules in force and should know that monetary compensatory amounts must be applied to imported durum wheat on its exportation to another Member State. It should be apparent to the undertakings that if monetary compensatory amounts, which are intended to offset the difference between the Italian price and the common price, are not levied, the wheat re-exported from Italy would be sold on the Community market at an abnormal profit. Neither the favourable attitude adopted by the customs officers at Naples nor, moreover, the authorizations improperly granted by other Member States exclude negligence on the part of the applicants.

3. Third submission: breach of the principle of non-discrimination

a) The applicants maintain that the system known as ‘three-way traffic’ was considered lawful by the French and British customs authorities in at least two cases in 1981 and 1982. Monetary compensatory amounts were not claimed from the importers and exporters concerned. Consequently, there was discrimination between those traders and the applicants. In addition, by failing to take account of the legal position of the undertakings competing with the applicants, the Commission exceeded its powers in its decision. Finally, the mere fact that infringement proceedings against other Member States were considered, in fact after some delay, is incapable of eliminating the discrimination suffered by the applicants.

b) The Commission accepts that the French and British authorities authorized operations under inward processing arrangements involving, from the beginning and in accordance with the request of the traders concerned, subsequent importation of the primary product into a Member State other than the one in which the processing took place. Although those operations differed somewhat from an economic point of view from those effected by the applicants, they were comparable. That is why the Commission claims that as soon as it became aware of the irregular operations it requested that the corresponding own resources should be made available. In July 1985, on failing to obtain satisfaction, it instituted the procedure provided for in Article 169 of the EEC Treaty against France and the United Kingdom.

IV — Reply to the question put by the Court

Question put to the Commission

At what stage are the procedures instituted by the Commission under Article 169 of the EEC Treaty against France and the United Kingdom? (Reply to be given within one month.)

Reply:

On 12 February 1986 the Commission decided to deliver reasoned opinions in the two cases. As a result of delays on technical grounds those opinions had still not been delivered on 14 July 1986 but were expected to be delivered in the near future.

V — Oral procedure

At the sitting on 22 October 1986 oral argument was presented for Cerealmangimi SpA and Italgrani SpA by P. De Caterini, Avvocato, and for the Commission of the European Communities by G. Marenco, a member of its Legal Department, acting as Agent, and by Mr Vital, an expert in the field.

The Advocate General delivered his Opinion at the sitting on 25 November 1986.

The Court requested both the applicants and the Commission in writing to reply to the following questions at the hearing:

‘1. The Court has held that Article 13 of Regulation No 1430/79 constitutes a ‘general equitable provision’ (see its judgments of 15 December 1983 in Case 283/82 Papierfabrik Schoellershammer H. A. Schoeller v Commission [1983] ECR 4219 and of 15 May 1986 in Case 160/84 Oryzomyli Kavallas v Commission [1986] ECR 1633). Should it not be concluded that those provisions are intended solely to enable traders to be exempted from payment of duties which they are strictly liable to pay in law when certain specific conditions are satisfied? If that is the case, is it relevant for the applicants to attempt to show, by two of the three arguments submitted by them, that the decision by which they were subjected to payment of monetary compensatory amounts in respect of the operations at issue is unlawful? 2. Have the applicants instituted proceedings before the national courts challenging the second decision of the Italian customs authorities which required them to lodge a security for the monetary compensatory amounts in respect of the operation at issue?’

C — The applicants' reply

1. The first question: the applicants state that the reason why the main part of their written submissions was directed at the question of the legality of their subjection to the monetary compensatory amounts and not to questions of equity was that part of the reasons on which the disputed decision was based concerned the legality of the obligation to pay monetary compensatory amounts in this case. In view of the wording of Article 13 of Regulation No 1430/79 and the Court's most recent decisions, of which they were unaware, the applicants stated that they intended to concentrate their submissions at the hearing on questions of equity. In those circumstances they expressly withdrew the submission referred to above (heading III.2) with regard to the existence of a subjective right on the part of those persons concerned to exemption from payment of monetary compensatory amounts under Article 13 of Regulation No 1430/79 in the absence of negligence or deception in view of the fact that the national authorities considered Article 20 of Regulation No 1371/81 applicable. However, they did not withdraw the arguments put forward in support of that submission since they concern the existence of special circumstances within the meaning of Article 13 of Regulation No 1430/79. The applicants also maintained for the first time at the hearing that the contractual relationships established with their trading partners at the time of the operations in question were disrupted. It was the normal practice for the importer to pay the monetary compensatory amounts to the exporter where the durum wheat was exported from Italy to a Member State which also applied negative monetary compensatory amounts. Since the exports in question were effected at that time without the payment of the monetary compensatory amounts by the applicants they were unable to claim reimbursement from the importer of the monetary compensatory amounts applicable to the imports and it was no longer possible to obtain such reimbursement today. Finally, at the Court's request, the applicants produced the customs documents which accompanied the goods in question on their dispatch from Italy.

2. The second question: the applicants maintained that no decision had been adopted by the Italian authorities. They decided, of their own motion, to offer a bank security in order to avoid proceedings for a court order.

D — The Commission's reply

The Commission stated that although no decision had been adopted by the national authorities requiring the payment of monetary compensatory amounts by the applicants, the latter would be free to contest the legality of such a decision should it be adopted.

Since the applicants had not challenged the Commission's decision of 6 February 1984, referred to in the fifth paragraph of heading I above, they could not now submit such arguments in respect of the contested decision based on Article 13 of Regulation No 1430/79.

The Commission maintained that until the hearing the applicants had not raised the question of equitable grounds and that their new submission relating to the alleged disruption of commercial and contractual relationships between trading partners constituted an inadmissible new issue. Since the arguments adduced in support of that submission are based on questions of fact the Commission stated that it was not in a position to reply to them without extensive research.

Finally, the Commission stated that, in connection with the procedures referred to under heading IV above, the reasoned opinions were delivered to the Member States concerned on 23 September 1986.

Y. Galmot

Judge-Rapporteur

1 Language of the Case: Italian.