OPINION OF MR ADVOCATE-GENERAL TRABUCCHI

DELIVERED ON 30 APRIL 1974 (*1)

Mr President,

Members of the Court,

1.The present proceedings arise from a dispute over the classification for customs purposes of a consignment of an alcoholic product imported into the Federal Republic of Germany from Belgium in September 1968. It concerns rough brandy distilled from molasses spirit, the analysis of which showed it to be completely neutral and chemically pure, and which was therefore classified under tariff heading 22.09-A-II as ethyl alcohol or neutral spirits, undenatured, of a strength of less than 80° . Prior to the analysis, the product had been classified under tariff heading 22.09-C-V-b comprising spirituous beverages. Once classified under heading 22.09-A-II, the product was subject to a customs duty, whereas it would have been exempt if its classification under heading 22.09-C-V-b had been maintained.

The interpretation of these tariff headings has caused grave and more complex preliminary questions to be raised concerning Article 38 (1) and (3) of the EEC Treaty and the validity of a regulation of the Council adopted on the basis of Article 38 (3). We are concerned here with Regulation No 7a, dated 18 December 1959 but published in the Official Journal of 30 January 1961, by which the Council, acting precisely by virtue of the powers conferred by the said paragraph (3), added to the list of agricultural products contained in Annex II to the Treaty three groups of products: sugars, syrups and molasses, flavoured or coloured, by reason of their interchangeability with pure analogous products; ethyl alcohol obtained from the processing of agricultural products, by reason of the close connexion such processing has with the economic value of such products, which it enhances; vinegar, the market in which cannot be dissociated from those in ethyl alcohol and wine.

The first question put by the German court raises doubt as to the validity of this Regulation by reason of the fact that it was published after the expiration of the period laid down by Article 38 of the Treaty for the exercise of the power conferred by paragraph (3) thereof to add further products to those listed in Annex II.

The second question, on the power of the Council to add ethyl alcohol to the list appearing in Annex II, without taking into account the strength thereof, has regard to the material content of the power itself. In order to give a reply, therefore, we must examine the relationship between the provision of Article 38 (1), concerning the definition of agricultural products, and the list of products referred to in paragraph (3) of the same Article.

It is interesting to note, incidentally, that the Bundesfinanzhof, in referring the said questions on validity, states that it does not consider itself to have jurisdiction to pronounce on the validity of a regulation of the Council.

The third question, which is put only in the event of Regulation No 7 a as not being declared invalid, relates to the criterion for distinguishing between goods falling under heading 22.09-A-II of the Common Customs Tariff and those falling under heading 22.09-C-V-b.

The connexion between the question relating purely to the Tariff and the other questions of a more general nature is explained by the fact that the imposition of a customs duty on intra-Community trade in the product in question is conceivable only in so far as that product is capable of being considered as an agricultural product and, as such, is excluded from the application of Article 1 of the Acceleration Decision of the Council of 26 July 1966, which obliged the Member States finally to abolish, as from 1 July 1968, the customs duties then in force on products other than those listed in Annex II to the Treaty. It was solely by virtue of this exception to the application of the dismantling of customs barriers to intra-Community trade that it was still possible in 1968 for the products classified under tariff heading 22.09-A-II of the Common Customs Tariff to be subject to national customs duties, whilst the products classified under heading 22.09-C-V-b of the same Tariff were excluded, as being non-agricultural products.

2.During the course of the hearing, the Council submitted that the Court did not have jurisdiction to pronounce on the validity of Regulation No 7a, on the ground that the Treaty of Accession of 22 January 1972 and the Act concerning the Conditions of Accession of the new Member States to the Community had the effect of conferring on that Regulation the same legal status as the Treaty which governed the accession of the new States to the Community. The Council stresses that Regulation No 7a had the effect of supplementing the Treaty (which perhaps involves a tacit reference to Article 1 of the Treaty of Accession according to which the new members shall become parties to the Treaties ‘as amended or supplemented’) and that Articles 7 and 8 of the Act of Accession, relating to the retention of the status in law of acts of the Community, do not concern the Regulation in question. The Council refers further to Protocol No 19 annexed to that Act, paragraph (2) of which provides that the necessary measures to facilitate the use of Community cereals in the manufacture of spirituous beverages may be taken within the framework of the Regulation on the common organization of the markets to be adopted in the sector of alcohol. It is argued that if it were possible to invalidate Regulation No 7a, this Protocol would lose all meaning.

Without its being necessary to adopt a position on the merits of the Council's argument relating to the change in the legal status of the rules contained in the Regulation under examination, it is sufficient here to note that any change which could possibly have been effected in this respect by the operation of the Treaty and the Act of Accession could only have effect from the entry into force of the Act itself. Therefore, for the period prior to that date, a regulation of the Council the validity of which might be contested, would continue to be subject to review by this Court under Article 177, and such a possibility cannot be considered inconsistent with the view that the system established by the regulation may have ceased to be open to question once it became an integral part of an international treaty concluded between the Member States. In respect of the period prior to this hypothetical transformation of the nature of the provisions in question, the possibility still remains, on the basis of the guiding rules of the EEC Treaty, of ascertaining whether the said provisions of the regulation were vitiated, in which event it would follow that they would not be applicable in individual cases. Such a view cannot therefore redound to the detriment of the common organization of the markets in alcohol, to which the above-mentioned provision of Protocol No 19 appears to refer.

I consider therefore that the plea of lack of jurisdiction put forward by the Council is unfounded.

3.In order to reply to the first question, we must define the power conferred on the Council by Article 38 (3), in so far as the detailed rules and the procedure for its exercise are concerned.

The German court observes in its decision of reference that Regulation No 7a, on supplementing the list of agricultural products, was published in the Official Journal of the Communities more than one year after the expiration of the prescribed period laid down in this respect by Article 38 (3). The fact that the Regulation declares that it takes effect from 31 December 1959, that is to say, from the last due day for the adoption of the measures of integration provided for by the above-mentioned provision, does not change the terms of the problem. In fact, the point of interest in determining whether the power provided for by Article 38 (3) has been validly exercised does not relate to the date from which the act was to take effect, but presupposes that it should be established whether, at the time when the act was adopted, the Council still had the power to adopt it. The fact that the Regulation in question was dated 18 December 1959 does not really alter the terms of the problem.

Since, under the terms of Article 191 of the EEC Treaty, regulations are to be published in the Official Journal of the Community, the German court doubts whether Regulation No 7a was validly adopted because such acts must be given constitutive effect by publication, in the sense that before its publication the Regulation would not legally exist.

It is certain, however, that within the period laid down by Article 38 (3) the Council, after due deliberation and acting by a qualified majority on a proposal from the Commission, had effectively decided to add all the products covered by Regulation No 7a to the list contained in Annex II. The adoption of this decision is apparent above all from the minutes of the XXVI meeting of the Council on 18 December 1959. Furthermore it was communicated to the press soon afterwards in terms which left no doubt as to its definitive nature. The fact that this act of the Council did not yet constitute a regulation, if for this purpose one considers — as I do — that publication in the Official Journal of the Communities is necessary, does not in this case affect the observance of the period laid down by Article 38 (3) of the Treaty. Since, in fact, Article 38 (3) does not specify the legal form of the act by which the Council may add to the list contained in Annex II, one can consider the definitive position (with regard to the fixing of the products to be added) adopted by the Council within the said period to be sufficient, independently of its form.

One must in fact distinguish the determining content of an act from the form which the decision in question takes: deliberation is not to be confused with communication, even when the latter is necessary to produce effects with regard to those to whom it is addressed, such effects only being able to be envisaged for the future. What had to be done within the prescribed period was to take the decision by which the Council of Ministers' power to act was expressed. In other words, it is the power to take the decision which had to be exercised within a fixed maximum period; the effect of the act is a different matter, for which, on the contrary, one does not think in terms of a maximum period ad quern but of an initial date a quo. These effects, if bound to the instrument of the Community regulation, must only operate for the future, that is, after publication. The regulation can therefore also be published afterwards because its effects will only be subsequent, but the validity of the act depends on the fact that its normative content has been established before the expiration of the period fixed for the exercise of the respective powers. Although the lack of publication of this decision in the Official Journal within the period itself might have constituted an obstacle to the application of the Community agricultural system to the products in question, by delaying it until the publication more than one year later of Regulation No 7a, which implemented that ‘decision’, it does not, on the other hand, prevent the power provided for by Article 38 (3) of the Treaty from being able to be considered as exercised within the legal period.

4.The second question the concept of ‘products of first-stage processing’ which have a direct connexion with products of the soil, of stockfarming and of fisheries. This concept assumes decisive importance in the definition of the limits of the power conferred on the Council to supplement that list, according to the provision of Article 38 (3).

If one starts with the idea that two different definitions of agricultural products cannot exist, but that only one emerges from the conceptual definition of paragraph (1) and from the list contained in Annex II which determines its detailed scope, and if therefore all the products enumerated in the list in Annex II must be considered as corresponding to the definition in paragraph (1), or one admits at least that the list of products comprised in Annex II, according to the enumeration made by the authors of the Treaty themselves, provides factors for defining the content and scope of the concept to which the provision of paragraph (1) refers, one must admit, however, in connexion with the examination of the products listed in Annex II, that the definition of agricultural products set out in paragraph (1) is quite wide. One may note, in fact, that Annex II contains goods which, in addition to not being products of the soil, of stockfarming and of fisheries, could not even be considered as products of first-stage processing if one were to adopt a rigid attitude on this point. Let us take by way of example starches, gluten, hydrogenated or refined fats, margarine, imitation lard, preparations of meat, of fish, of vegetables and fruit and prepared animal fodder. These are products which, although extracted from an agricultural product, require in their manufacture more or less complex procedures which in general are not limited to a single operation. If, therefore, the concept of the products to which Article 38 (1) refers must be interpreted in the light of the list of products contained in Annex II, it will be necessary to keep to a wide concept of ‘products of first-stage processing’, with the result that there would be no difficulty in including therein the product in question.

The doubt of the German court arises simply from the fact that, in adding ethyl alcohol to the list contained in Annex II, the Council did not take its strength into account, considering the alcohol in question therefore as a product of first-stage processing even when the distilled product has been diluted by the addition of water.

On the other hand, the two intervening governments fundamentally contest that the Council, acting on the basis of Article 38 (3), may add alcohol to the list in question.

They have maintained that the provision of Article 38 (3) should be placed in relation only to the provision of paragraph (1) and to the concept of agricultural products expressed therein, considered by itself, without its being permitted to interpret the concept of ‘products of first-stage processing’ by taking by way of example the list of products inserted in Annex II by the authors of the Treaty, since those authors, unlike the Council, were not obliged to restrict themselves within the limits of the concept laid down in paragraph (1).

The intervening governments maintain a rigid interpretation of the concept of ‘first-stage processing’, which they identify with a single operation of a productive process starting from a primary agricultural product.

Thus, for example, in the case of alcohol derived from cereals, the representative of the British Government sees therein two distinct operations, fermentation of the primary agricultural product and distillation, with the result that the product thus obtained is one of second-stage processing; whereas the representative of the Irish Government sees again two further preliminary operations, one the blending of various types of cereals and the other their fermentation, which precludes the view that the alcohol is ‘directly related’, as it must be, to the primary agricultural product, inducing one to see therein a product of fourth-stage processing!

In analysing the properties or a product the good anatomist does not neglect to arrange them in proper order in the whole which they serve to comprise and in which they assume their true significance. I have the impression that, in carrying out a detailed analysis of the manufacturing process of alcohol, the submission of the intervening governments has lost sight of the unitary nature of the process itself and has arrived at a result the arbitrary nature of which is exhibited by the Irish representative in the fragmentation of a single productive process which he obtained by the consistent application of the method which also forms the basis of the British argument.

In reality, what results from the maceration or fermentation of cereals is not a product of second or third-stage processing; it is simply a material, normally unusable as such, which merely constitutes a point in its passage to becoming the actual processed product to which these operations relate, that is to say, alcohol.

The concept of first-stage processing is undoubtedly difficult to define. It belongs to a category of concepts of which every legal system avails itself, to allow the executive power a certain elasticity in the face of different factual situations, when it is a matter of defining the distinguishing criteria in an imprecisely delimited economic field. We see also in the individual national legislations that when reference is made to agricultural activity, in order to differentiate it from the system for other types of productive processes, the legislature always takes the wider view than that of a narrow field of products in the first phase of their harvesting in order to include therein as well those processes and activities directed to the commercial presentation of the product, which are traditionally bound to that activity of production according to the criterion of normal agricultural practice.

In our case, also certainly bearing in mind the traditional criteria distinguishing agriculture from other productive activities, the Community legislature refers to the criterion of ‘first-stage processing’ which allows — I repeat — a certain margin of interpretation. But this is a definition which is not left to individual judgment for direct application by the persons concerned; there must be specification . and precise clarification made either in the Treaty itself, in Annex II, or by the Council within the two-year period laid down by Article 38 (3). What is this power conferred on the Council? It certainly is of a declaratory nature and applies a criterion; but, in order to see just what the criterion stated in paragraph (1) is, it is necessary to interpret its content-.

The intervening States — as we have seen — make a clear distinction between the powers of implementation already exercised in Annex II and the powers recognized for completing the list within the two-year period by an implementing act of the Council. And it is correct. But it is not correct to stop at this purely evident distinction. It is a basic rule of interpretation that an act immediately applying a rule made at the same time by the same author who formulated the principle is endowed with an interpretative significance of prime importance. Interpretation as a rational act is based upon the basic criterion of consistency, and for this very reason it is established that the search for the meaning of an act may be undertaken from observation of the concomitant conduct of the author of the act itself. If the authors of the Treaty contemporaneously adopted a rule and fixed some facets of its application, these tell us also what system is desired by the authors of the Treaty itself. Therefore the criterion of breadth demonstrated in the lists in Annex II is also a criterion allowing the determination of the scope within which the Council was authorized to fill the inevitable lacunae which the first examples of the application of the Treaty brought into relief.

In this sense it appears certain that the concept of ‘first-stage processing’ cannot be identified purely and simply with either the first change of form to which a basic product is subjected or to any chemical change which alters the original characteristics of such product. Otherwise one would have to exclude typical agricultural products (such as, for example, olive oil, to obtain which one must crush the olives, press the pulp, filter it and perhaps carry out further operations to correct the taste, or cheese, because in order to turn into cheese, the milk must undergo various operations and changes) which, on the purely abstract plane of the definition of agricultural products maintained by the intervening governments, would appear unsatisfactory. There would remain a fortiori excluded from the category of agricultural products, and with effects which would not be limited to the theoretical plane alone, sugars, syrups and molasses, flavoured and coloured, which Regulation No 7a, in order to satisfy the obvious requirements of the functioning of the common organization of the market in sugar, included in Annex II by reason of their interchangeability with corresponding products in a pure state. Since sugars, syrups and molasses are already processed products, it would be sufficient to have recourse to the simple expedient of adding a flavour or colour in order to withdraw those products from the category of agricultural products, according to the interpretation proposed to us by Article 38 (1), which could create serious difficulties for the functioning of the common system of the market in sugars.

These examples are sufficient to confirm, on both the conceptual and the practical plane, the unacceptability of the interpretation advanced by the intervening governments. If the existence of various operations in production and the occurrence of external and structural alterations of a raw material cannot therefore by itself deprive the result of a production process of the character of . a product of first-stage processing, we must look for other criteria to delimit the concept in question by reverting to the ratio of the rule which lays it down.

If the goods resulting from the processing of agricultural products to which the Community agricultural system applies are expressly limited by Article 38 (1) to those of first-stage processing having a direct connexion with the primary agricultural product, this indicates without doubt the desire of the authors of the Treaty to limit the field of products which may be subject to the special agricultural rules: it would certainly not be a case of turning to the principle of the Physiocrats! Therefore there are excluded in principle processed products which require a production process which by its production cost is such as to cause the price of the basic agricultural product to have a wholly marginal position. As has been observed in fact in legal writing (Olmi, Commentario al Trattato CEE di Quadri-Monaco-Trabucchi, Vol. I p. 244), in such cases the level and the oscillations of such a price do not have a decisive bearing on the cost of production and it is not therefore a case of discriminating in favour of such products as opposed to other industrial products.

On the other hand, if this is the ratio of the limitation placed by the authors of the Treaty on the admission of processed products to the agricultural rules, one must also admit that the products for which the cost of the primary agricultural product remains a relevant factor with regard to the price must in principle be capable of being admitted to benefit from the agricultural system; and this all the more so in the case of processed products which constitute an important form of utilization of the primary agricultural product, as is for example the case of bread in relation to wheat. In fact, as the abovementioned author observes, ‘the dependence on the primary agricultural product extends to the cost of production of the processed product the characteristics of instability and unpredictability of agricultural prices, which necessitates stabilizing measures at the frontier and inside the market. Furthermore, if the primary agricultural product is the object of a market organization which maintains its price at a high level, whilst the processed product is the object of a free system, the processing industry will not withstand the industrial competition of other countries which use primary agricultural products at low prices; and, in the long run, the crisis in the processing industry will extend to the very production of the primary agricultural product used by it’.

If the criterion of cost can be of great importance (and it is not possible for it not to be so in matters of economic classification), it will not however be the only criterion, and we shall in addition have to consider decisive another criterion consisting in the fact that a processed agricultural product constitutes a normal means of economically valid presentation of the product itself, which thus takes on an essential importance for its marketing, even if the cost of the processing must prevail over the sale price of the agricultural product taken stricto sensu.

Such considerations explain why the authors of the Treaty have been liberal in inserting processed products in the list in Annex II. Analogous considerations should lead us to adopt the broad concept, thus discernible, of ‘products of first-stage processing’, adopted as a delimiting criterion for defining the power of the Council referred to in Article 38 (3), not so much the greater or lesser complexity of the operations necessary to obtain the processed product but rather the incidence of the cost of the primary agricultural product on the price of the processed product or the importance of the latter product for the marketing of the basic agricultural product. In such cases, when the said cost remains the predominant factor in the price of the processed product, or when in any event the processed product plays an important economic role in enabling the basic product to be marketed, the function and the objectives pursued by the common organization of the markets in agriculture allow the insertion of the product under consideration in an extension of Annex II, on the basis of Article 38 (3).

On the basis of this criterion one should be able to reach the same conclusion even if it had to be excluded — quod non — that the list of products inserted by the authors of the Treaty in Annex II can serve to define the scope of the concept of agricultural products in Article 38 (1).

In such a perspective, even if one admits that the Council did not have the power to add all processed products to the list in Annex II to the same extent and with the same freedom as the authors of the Treaty were able to do, it appears difficult however to deny the Council the possibility of admitting products to the list for the sole reason that their processing required more than one stage of work, when their insertion in Annex II meets real necessities of the common agricultural policy, in pursuing the objectives of the Treaty and consistently with inferences drawn from the contents of Annex II. Even starting from a restrictive concept of agricultural products, within the meaning of Article 38 (1), it would not be reasonable to base oneself solely on a rigidly literal exegesis of the rule in order to deny the Council any possibility of taking account of the traditional conceptions of agricultural activity and of attaching importance to the above-mentioned criterion of the predominant nature of the cost of the primary agricultural product on the price of the processed product, or of a single presentation on the market in an appropriate economic form, and therefore of taking account of the objective requirements which result therefrom in terms of the protection desired by the authors of the Treaty themselves for basic agricultural products.

If one admits the power of the Council to add alcohol to the list in Annex II, one will certainly not exclude alcohol the original strength of which was lessened by simple dilution with water, since such addition does not change the nature and the chemical properties of the alcohol, or the direct agricultural derivation of the product.

The third question posed by the Bundesfinanzhof concerns the classification for customs purposes of a product which the importer had described as ‘brandy for drinking, from molasses spirit, flavoured’, and which the customs authorities had considered in the first instance as being a spirituous beverage, classifying it therefore under heading 22.09-C-V-b of the Common Customs Tariff; whereas subsequently, as the result of analysis showed the product to be completely neutral and without the addition of flavouring substances, it was classified as ethyl alcohol or neutral spirits, undenatured, of a strength of less than 80° and as such fell under tariff heading 22.09-A-II.

The Common Customs Tariff in force at the time when the goods in question were cleared through customs in September 1968 comprises, under tariff heading 22.09-C-V-b, other spirituous beverages. Tariff heading 22.09 covers ethyl alcohol or neutral spirits, undenatured, of a strength of less than 80°; liqueurs and other spirituous beverages; compound alcoholic preparations (known as ‘concentrated extracts’) for the manufacture of beverages. Under the letter A, this tariff heading covers in particular ethyl alcohol or neutral spirits, undenatured, of a strength of less than 80°.

Whilst in respect of the goods comprised in tariff heading 22.09-C-V-b, to the extent to which they fall within the field of application of the Common Customs Tariff, it was not possible to apply any internal customs duty, as the goods comprised in tariff heading 22.09-A-II were inserted by Regulation No 7a in the list in Annex II to the EEC Treaty, they were as such excluded from the area of application of Regulation No 950/68 which established the Common Customs Tariff. In respect of there goods, as agricultural products, national tariffs continued to apply and the maintenance of national customs duties on imports from other Member States was thus permissible. Therefore an internal customs duty of 110-35 DM per hectolitre was applied to the products in question.

We must straight away specify, in order to avoid confusion of concept and of method which appears to have occurred in prior stages in the proceedings pending before the national authorities, that for the interpretation of the Common Customs Tariff it is not a good rule to base oneself on concepts or situations of domestic law and on commercial practices pertaining to a particular State. Therefore the distinction between the concept of spirituous beverages falling within tariff heading 22.09-C-V-b and the concept of ethyl alcohol or neutral spirits, undenatured, of a strength of less than 80°, covered by the (other) tariff heading, must be made exclusively within the framework of the Community which must have uniform meaning throughout the Community.

It follows from the observations made by the Commission in these proceedings and from the references made by it to the Brussels Nomenclature and its Explanatory Notes that the distinction between the two types of products mentioned above is not based on the effective use for which each of them is intended, but on the objective properties of each of such products. This conforms to a criterion, already admitted by the case law of this Court, answering to the requirement of safeguarding legal certainty and of simplifying administrative activity (v., for example, the judgment in Case 36/71, Henck, Rec. 1972, p. 197). It also emerges particularly from the examples of spirituous beverages quoted in order to illustrate the meaning of subheading 22.09-C-V that it is a question of beverages which are differentiated one from the other by their particular flavour and smell, conferred in general by the addition of additives during distillation. Such are essentially the factors which distinguish the products under this tariff subheading from alcohol, rectified or neutral, in so far as it lacks particular flavouring additives which can characterize it, and is therefore essentially devoid of flavour and smell, which falls under subheading 22.09-A, independently of whether or not it has been made fit for human consumption by the addition of water.

I propose that you should reply to the questions of the Bundesfinanzhof in the following manner:

The fact that Regulation No 7a of the Council of 18 December 1959 was published in the Official Journal of the European Communities after the expiration of the period laid down by Article 38 of the EEC Treaty does not call in doubt the validity of the act since it emerges that it was decided upon during the prescribed period.

The Council, in the exercise of the power conferred on it by Article 38 (3) of the EEC Treaty was able validly to add ethyl alcohol to the list contained in Annex II to the Treaty, without the necessity of taking its strength into account.

The goods comprised in heading 22.09-A-II of the Common Customs Tariff are products which are determined essentially by their basic chemical composition and, as such, are distinguished from those under heading 22.09-C-V-b which, by reason of a subsequent operation, acquire individual characteristics by means of the addition to them of a particular flavour or smell.

* Language of the case: English.

ECLI:EU:C:2025:140

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