DELIVERED ON 15 MARCH 1984 (*1)

Mr President,

Members of the Court,

1. The purpose of this reference for a preliminary ruling is to obtain an interpretation of the Community rules governing the payment of aid in respect of exports of feedingstuffs made from milk powder. It must be decided whether those rules allow such aid to be paid according to different procedures and at different times depending on whether the products are exported or marketed within the country. For the first category of products, Community rules provide for special inspections to be carried out by the importing country and it is only when this has been done that the aid is paid. No such inspections are carried out in the case of feedingstuffs sold on the national market (and therefore there are no delays).

Denkavit Nederland BV, a private limited company whose registered office is in Voorthuizen in the Netherlands, exports in bulk feedingstuffs processed from milk powder and is thus granted Community aid pursuant to Article 10 of Regulation No 804 of the Council of 27 June 1968 on the common organization of the market in milk and milk products. In the case of deliveries in bulk to other Member States, the competent Netherlands agency (Hoofdproduktschap voor Akkerbouwprodukten) pays the aid only after proof has been supplied that the delivery was made to a farm or a breeding of fattening concern which uses compound feedingstuffs. If the delivery is made in Belgium, this is proved by production of a document known as Benelux 5 (Article 58 of Council Regulation No 222/77). In all other cases, the document proving delivery, which must be produced before the aid is paid, is the T 5, which is a form completed by the person concerned, containing information about the use to which the exported goods have actually been put (Article 10 of Commission Regulation No 223/77). Because such documents must be certified by the State of destination if they are to constitute valid proof, the aid is normally paid some time after the application is made. In the case of exports within the Benelux countries, the average delay in payment is one month.

As a result, there is a difference between the rules applied to aid granted in respect of exports and that granted in respect of goods sold on the domestic market, since payment in the first case is made much later than in the second. Considering that this delay constituted an obstacle to exports, Dankavit applied to the Hoofdproduktschap for the aid in respect of the products delivered in bulk to the Belgian market to be paid to it during the month following that in which the delivery took place, subject to the condition that the aid would be repaid if it emerged that the goods had not been used in the required way. That application was rejected and, on 1 March 1982, Denkavit instituted proceedings before the College van Beroep voor het Bedrijfsleven, seeking annulment of the decision and an order directing the agency to pay the aid more quickly, subject to the conditions that it would be repaid if necessary.

By order of 25 January 1983, the court stayed the proceedings and referred the following question to this Court for a preliminary ruling under Article 177 of the EEC Treaty.

“Must Articles 34, 40 (3) and 43 (3) (b) of the Treaty, Regulation (EEC) No 804/68, the principle of proportionality, or any of these, as well as any other principle underlying the Treaty be construed as meaning that the provisions of article 6 (2) read together with Article 7 of Regulation (EEC) No 1725/79 are incompatible therewith inasmuch as the effect of those provisions is that the aid referred to in that regulation for skimmed-milk powder which has been processed into compound feedingstuffs in one of the Member States and delivered by tanker or container is paid one month later in respect of exports than it is for inland deliveries.”

2. I shall consider first the relevant provisions of Regulation No 1725 of 26 July 1979 on the rules for granting aid to skimmed milk processed into compound feedingstuffs and skimmed-milk powder intended for feed for calves.

Article 4 (2) of that regulation provides that feedingstuffs of the kind to which the regulation applies are to be packed in bags containing not more than 50 kg on which the following information is to be printed :

A statement that the contents are compound feedingstuffs;

A marking enabling the undertaking to be identified;

The month and year of manufacture;

The skimmed-milk powder content of the finished product.

According to Article 5 (b), which is the essential provision in this case, the aforementioned provisions do not apply “to compound feedingstuffs delivered by tanker or container to a farm or a breeding or fattening concern” which uses them under the supervision of the competent authorities of the importing country. Article 6 deals with that supervision. Article 6 (1) (b) provides that delivery is to be made “under administrative supervision” to ensure that delivery is made to a farm or to a breeding or fattening concern which uses feedingstuffs. Article 6 (2) provides that the aid is to be paid only “when the undertaking has supplied the competent agency with supporting documents” establishing that delivery was made under the aforementioned conditions.

When the goods are exported to another Member State, proof that the conditions have been complied with is, as I have already said, to “be furnished by the production” of Control Copy T 5 (Article 10 of the aforementioned Regulation No 223/77). Belgium, Luxembourg and the Netherlands, which may apply to the Community transit documents the agreements concluded between them with a view to reducing or abolishing frontier formalities (Article 58 of Council Regulation No 22/77 of 13 December 1976), are however allowed to use a different document. It is precisely the time that it takes this document, called Benelux 5, to circulate which gave rise to the present dispute.

3. Articles 6 and 7 of Commission Regulation No 1725/79 are central to the dispute. Those articles provide for special prior inspections to be carried out by the importing State with a view to ensuring that feedingstuffs delivered in bulk are actually used for the purposes laid down in the regulation. It is clear that, because of those inspections, aid to exporters is paid later than that paid in respect of products sold on the domestic market. It is also certain that as regards exports from the Netherlands to Belgium the delay is about one month. Nor can it be denied that this makes the aid granted in respect of imported products less favourable than that paid in respect of products sold on the domestic market.

In Dankavit's opinion, that situation is illegal. By adopting those measures, it contends, the Commission has in the first place infringed Regulation No 804/68 of the Council which enabled it to enact implementing provisions. It also considers that the Commission has infringed a series of provisions of the Treaty:

Article 34, which prohibits the introduction of measures, including measures taken by the Community institutions, which have an effect equivalent to quantitative restrictions on exports;

the second paragraph of Article 40 (3) which provides that the common organization of the market is to exclude any discrimination between producers or consumers within the Community: and

Article 43 (3) (b), which provides that any such organization is to ensure conditions for trade within the Community similar to those existing in a national market.

The Commission, the plaintiff continues, has also infringed the principle of proportionality, because the delay in paying aid in respect of exports is not necessary to attain the objectives pursued by the inspections provided for in Regulation No 1725.

I shall now consider these criticisms more closely. Article 10 of the basic regulation (No 804/68) provides that the rules governing the granting of aid for skimmed milk and skimmed-milk powder are to be adopted by the Council (see paragraph (2)), while the Commission is to adopt, after consultation with the Management Committee for Milk and Milk Products, the detailed rules for the application of the system (paragraph (3)). The Council laid down the general rules in Regulation No 986 of 15 July 1968. For its part, the Commission adopted the measures within its area of responsibility by means of the aforementioned Regulation No 1725 (which replaced Regulation No 990 of 15 May 1972).

In Denkavit's view, however, the inspections provided for in that regulation (Articles 6 and 7) are not in conformity with Regulation No 804. It concedes that that regulation presupposes that it is in the Community interest for skimmed milk and skimmed-milk powder intended for use in animal feeds actually to be used for that purpose and it is for this reason that payment of the aid is conditional upon the appropriate proof being furnished. Denkavit adds, however, that it certainly does not accept that that interest can be guaranteed by the adoption of rules contrary to the Treaty or to general principles. The measures in question are contrary, in the first place, to Article 34 of the Treaty and to the second indent of Article 22 (1) of Regulation No 804 which, confirming the provisions of that article of the Treaty, prohibits, as regards the common organization of the market in milk and milk products, any quantitative restriction or measure having equivalent effect. In fact, Articles 6 and 7 create obstacles to intra-Community trade by increasing the cost of exported goods in comparison with goods sold on the internal market. They are thus measures having equivalent effect.

That argument is wide of the mark. In the first place Article 6 of Regulation No 1725 imposes the requirement of inspections as a precondition for the payment of aid in respect of all feedingstuffs in bulk, whether they are exported or marketed domestically. In other words, the Commission considered it indispensable in both cases to ensure that deliveries were made to concerns which used feedingstuffs and to make payment of the aid conditional upon the production of documents which proved that fact. There is thus only one difference between the two cases, and that is provided for in article 7 with regard to the delivery of feedingstuffs “in a Member State other than the selling Member State”. It deals with the type of document which must be produced in order to obtain the aid: document T 5 or, in trade between the Netherlands and Belgium, the Benelux 5 document.

It is precisely the circulation of this document which gives rise to delays in the payment of aid, since it must be certified by the authorities of the importing country. However, such delays are justified. For objective reasons, marketing within a Member State and intra-Community exports cannot be treated in the same way. As the Agent for the Commission observed during the oral procedure, where products are sold in bulk the risk of fraud is much greater in the case of exports. Supervision is therefore more difficult. It was that difficulty, above and beyond the fact that considerable sums are granted to producers of feedingstuffs processed from milk powder, which led the Commission to prescribe prior supervision.

Furthermore, the Court has already dealt with document T 5 in relation to aid for skimmed-milk powder and has recognized its essentially verificatory function in its judgment of 7 February 1979, in Case 18/76, Federal Republic of Germany v Commission ([1979] ECR 343). The Court stated that in order to prove that the goods have been placed under control in the exporting country, “The Community rules... are drawn up in terms which do not give the national authorities the option of accepting any other proof... than the formal proof” provided by “The control copy of the transit document correctly completed and stamped”. Admittedly, that case was concerned with a particularly rigorous set of rules but — the Court added — the Community provisions have a specific objective: “to exclude the possibility of double payment” (in respect of both domestic and export transactions), “and the possibility of the goods being returned to ordinary commercial channels” (paragraph 20).

4. Articles 6 and 7 of Commission Regulation No 1725/79 are central to the dispute. Those articles provide for special prior inspections to be carried out by the importing State with a view to ensuring that feedingstuffs delivered in bulk are actually used for the purposes laid down in the regulation. It is clear that, because of those inspections, aid to exporters is paid later than that paid in respect of products sold on the domestic market. It is also certain that as regards exports from the Netherlands to Belgium the delay is about one month. Nor can it be denied that this makes the aid granted in respect of imported products less favourable than that paid in respect of products sold on the domestic market.

I shall now consider the alleged infringement of the second subparagraph of Article 40 (3) and of Article 43 (3) (b) of the EEC Treaty. The former provides that the common organization of the market is to “exclude any discrimination between producers... within the Community”. In Denkavit's view, the disputed measures discriminate between those producers who sell feedingstuffs on the internal market and those who export them, and are therefore illegal. I do not believe, however, that there is any question of discrimination. The reason for this is, once again, the fact that exports entail a much greater risk of fraud and are much more difficult to supervise than domestic transactions. Since the situations are different, it is right that the rules governing them should be different, particularly since the differences between the rules correspond exactly to the differences between the actual circumstances in each case.

The recent decision of 23 February 1983 in Case 8/82 (Wagner, [1983] ECR 371) confirms this view. The Court had to decide whether aid to offset the storage costs for sugar was payable when the goods were in transit between warehouses located in two different Member States. The Court ruled that by contrast with the position regarding goods in transit between warehouses situated in the same Member State, the aid was not payable in that case, and it based that difference of treatment on “requirements of supervision which may be justified objectively” (paragraph 19). In other words, reasons relating to the functioning of the common organization of the market may, if they are of sufficient consequence and are linked to objective circumstances, prevail over the principle laid down in Article 40 (3) which requires domestic and intra-Community trade to be treated in the same way.

This is equally true of Article 43 (3) (b), which provides that the common organization of the market must ensure “conditions for trade within the Community similar to those existing in a national market”. Denkavit contends that the contested measures infringe that article because they treat exports less favourably. In reality, the different treatment is justified by the objective difference between the two situations and by the specific requirements of supervision applicable to intra-Community trade.

Denkavit's final complaint is based on the principle of proportionality. The supervision exercised over the use of exported feedingstuffs may indeed be intended to serve a higher Community interest and, in the abstract, must be considered to be in conformity with the system and thus legal. But the articles in question are conceived in such a way that they go beyond what is necessary. In order to attain the worthy objective of supervision, another no less essential Community interest has been sacrificed: the uniform treatment of domestic trade and trade between States. In Denkavit's view, the same result could have been achieved without giving rise to that problem if the Commission had established a less rigorous system of supervision.

Once again, I disagree. It is true that this Court has often recognized that the burdens imposed by Community law must be limited to what is necessary to attain the objective in view and must require the minimum possible sacrifice of those who are affected by them. However, in the situation to which these proceedings relate, the principle of proportionality does not exclude — in fact it presupposes — consideration and coordination of all the requirements of the System. In the present case, it is essential to the functioning of the common organization of the market for exported feedingstuffs to be subject to stricter supervision than that required for products sold on the domestic market. The sacrifice required of traders is thus not disproportionate.

A final remark is called for. I have based my arguments so far on the premise that the longer time required for the payment of aid to exporters is attributable exclusively to the supervisory measures, that is to say, it arises from the fact that they constitute a precondition for payment and require cooperation from the authorities in the various countries. In the course of the oral procedure, however, it was pointed out on several occasions that the delays arc also due to shortcomings on the part of the national administrative authorities. If that is the case, the problem cannot be dealt with by reference to the interpretation of Articles 6 and 7. Solving it would require a greater degree of cooperation among the States or indeed legislative action.

In view of the foregoing considerations, I suggest that the Court reply to the question submitted to it for a preliminary ruling by the College van Beroep voor het Bedrijfsleven by order of 25 January 1983 in the proceedings between the private limited company Denkavit Nederland BV and the Hoofdproduktschap voor Akkerbouwprodukten as follows:

“Articles 6 and 7 of Commission Regulation No 1725 of 26 July 1979 on the rules for granting aid to skimmed milk processed into compound feedingstuffs and skimmed-milk powder intended for feed for calves, must be interpreted as meaning that the system of prior supervision provided for therein for compound feedingstuffs for animals delivered by tanker or container by virtue of which the aid is paid later in the case of exports than in the case of inland deliveries is justified by objective circumstances. Therefore, it is not contrary to Articles 34, 40 (3) or 43 (3) (b) of the EEC Treaty, to the principle of proportionality or to Regulation No 804/68 of the Council.”

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(1) Translated from the Italian.