OPINION OF MR ADVOCATE-GENERAL

DELIVERED ON 13 JANUARY 1971 (*1)

Mr President,

Members of the Court,

As you know, EEC Regulation No 805/68 on the common organization of the market in beef and veal, as well as Regulations Nos 888/68 and 1082/68 which were adopted in implementation thereof, contain certain provisions relating to the meat processing trade. Under certain conditions to which I will refer later the import of frozen beef and veal intended for processing gives rise to a right to a total or partial suspension of the Community levy which would normally have been imposed.

The customs authorities in each Member State are responsible for the application of this provision, particularly as the processing must take place in the territory of the State into which the meat has been imported.

The German federal authorities have not considered it necessary to adopt special implementing measures with regard to these transactions but under a principle laid down by a law of 25 June 1962 they merely applied to the said transactions the provisions of Article 55 of the German Customs Code concerning the processing of goods in bond.

It was in these circumstances that on 13 September 1968 Fleischkontor, a company specializing in the manufacture of preserved meats, sought authorization for the Community provisions to be applied to a consignment of imported frozen beef intended for the manufacture of preserved meat.

The German customs authorities refused to grant the authorization on the grounds that this company did not meet one of the conditions laid down by Article 55 of the German Customs Code, which requires the individual seeking the authorization to be ‘trustworthy’ in the eyes of those authorities. The competent authorities in Hamburg did not consider the applicant undertaking to fall within this category as it has once supplied the customs with an invoice concerning a specific transaction which showed an amount lower than that appearing in the invoice made out by the foreign supplier, and had been fined for having done so.

It must be noted at once that in the proceedings which followed the suspicions of fraud entertained by the German customs authorities in this case were found to be groundless and it was acknowledged beyond doubt that Fleischkontor had not infringed any legislation on fiscal or customs matters. This was expressly stated in the judgment of 3 November 1970 acquitting the company, which the advocate for the plaintiff in the main action laid before you during the oral procedure. In the meantime, however, the plaintiff in the main action had naturally challenged before the competent fiscal court the rejection of its application for an import authorization for goods intended for processing.

The action having come before the Finanzgericht Hamburg, that court has referred to you a question which may be summarized as follows: Is the list which appears in the Community regulations of the conditions which must be satisfied before an importer may benefit from suspension of the levy exhaustive in nature?

Are national authorities entitled to add other conditions based on their own legislation, in particular a condition of the kind laid down in Article 55 of the German Customs Code, which requires the importer to be ‘trustworthy’ in the discretionary judgment of those authorities?

I propose to reply to this question in two parts.

In the first part I will set out the limits within which, in order to prevent fraud, the national authorities may supplement the provisions of the Community regulations by means of implementing measures or, for the same purposes, apply to the transactions covered by these regulations certain procedures laid down under national law.

In the second part I must, I think, find that to add a requirement based upon a subjective appraisal by the national authorities of the degree of trust to be accorded to the importer to the conditions laid down for the suspension of the levy by the Community regulations which you are asked to interpret exceeds the limits laid down therein.

On the first point, your case-law has already laid down a certain number of principles relating to the cooperation of national authorities in the implementation of Community regulations and the limits to the powers held by the Member States in this respect.

I consider that your case-law may be summarized as follows:

Community law must be equally enforceable in all Member States and in all these States the provisions of the Community regulations must be applied in a uniform manner.

Under Article 5 of the Treaty Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations resulting from action taken by the institutions of the Community and shall facilitate the achievement of the Community's task.

It follows from a combination of the two principles summarized above that Member States may adopt any necessary implementing measures to the extent to which such measures are indispensable, that their object or effect is not to modify the scope nor add to the provisions of the Community measure in question and finally that they respect all Community legislative provisions.

The problem raised by the present case is that of applying these principles to ‘customs supervision’.

By its very nature this is a difficult problem because at the present time it involves holding a delicate balance between the abovementioned principles and the need to combat fraud.

In my opinion the war on fraud must be the constant and predominant concern of both the Member States and the Community authorities.

As was to be expected, it is clear that the establishment of the Common Market aroused great hopes among the unscrupulous and, it must be admitted, provided them with certain opportunities to acquire considerable gains illegally at the expense of the whole Community.

This constitutes a great danger which must be quickly countered since over the long term it could threaten the whole European structure, as is clearly illustrated by the way in which those who are still reluctant to accept our hopes and convictions have exploited some recent scandals.

This need to combat fraud by the most efficient means has been stressed recently in your judgment of 22 October 1970 in the Craeynest Case.

I believe, therefore, that the action necessary to prevent and combat fraud justifies wider cooperation between the Member States in the application of the Community regulations than is permitted in other spheres, for example, that of tariffs, by a strict application of the principles referred to above and already defined by your case-law.

In my opinion the Member States may not only adopt all the implementing measures necessary to anticipate or prevent the fraudulent use by individuals of the opportunities offered by Community provisions (for example, by prescribing formalities to permit or facilitate the exercise of control by the customs authorities) but I believe that they must go even further.

I consider that, in certain cases, national authorities may adopt certain measures either directly or under existing provisions of national law to supplement Community regulations where they contain a gap which can be exploited to fraudulent ends, but only in so far as the object and effect of such measures is to fill the gap.

To summarize my opinion on this point, I consider that although in the interests of combating fraud Member States enjoy greater powers in the implementation of Community Regulations than in other spheres, there are at least three limitations on such powers:

They may only be used where a serious gap likely to give rise to a risk of fraud exists in the Community rules.

The measures adopted to fill that gap may not exceed this purpose either in their object or effect.

Such measures must not be contrary to the general principles of Community law or to its formal requirements.

The second part of the reply which I propose you give to the Finanzgericht is that, in my opinion, an interpretation of Regulation Nos 805, 888 and 1082/68 must lead you to the conclusion that the measure which you have been asked to interpret, that is, the application of Article 55 of the German Customs Code does not satisfy any of the abovementioned three conditions.

II

I consider this to be so and I shall now endeavour to persuade you that:

no serious gap likely to give rise to a risk of fraud exists in the Community rules;

even accepting that, as regards customs supervision, these rules are neither complete nor perfect, the addition of a new prior condition based upon a subjective assessment of an importer by a national authority exceeds in its object and effect the power of the national authorities to supplement a Community regulation;

finally, this additional requirement is contrary both to the general principles of Community law and to its express rules.

Let me now reconsider each of these aspects of the question.

A —

Community Regulations Nos 805, 888 and 1082/68 contain several provisions designed to prevent or combat fraud:

The processing must take place in the importing country, so that the whole transaction comes under the supervision of the same customs authority.

The importer must undertake to process the meat in the manner provided for.

The importer shall lodge a deposit: if the processing does not take place, not only is this deposit forfeited but the importer may be required to pay an additional sum in order to prevent any possibility of a speculative profit being made out of a variation of the rates of levy.

Finally, and this is the important point, it is for the importer to prove that the imported meat has in fact been processed within six months from the date of importation.

Does any serious gap exist in these provisions likely to give rise to a risk of fraud?

I think not.

The risk of fraud may proceed in this instance from a temptation on the part of the importer to sell for consumption the meat imported without payment of the levy. However, the precise object and effect of the Community regulation is to eliminate any such temptation, since in such a case:

If the importer does not furnish proof that the imported meat has been processed within six months

first, he loses his deposit, which is equal to the amount of the levy,

secondly, he may be required to pay an additional sum corresponding to any variations in the rate of levy which may have occurred during that six months.

These general conditions appear adequate to discourage swindlers and to enable them to be penalized if necessary.

This contention is, however, challenged by the German Government which has developed before you an argument which merits close attention.

If I have understood it properly this argument is that although the Community provisions are probably adequate to prevent fraud in five of the Common Market countries, they are inadequate in Federal Germany as a result of certain special characteristics of German customs law.

As you have been told, this law differs from the laws of other Member States in that, in the event of any irregularity, the burden of proof falls on the customs authority.

You have been told that from this principle are derived all the general features of the German system of inspection and supervision. This explains and justifies the provisions of Article 55 of the Customs Code, as the reversed burden of proof imposed on the German customs authorities would make their task impossible if they were not free to refuse to authorize any transaction carrying a serious risk of fraud, such as the processing of goods in bond unless the importer appears ‘trustworthy’.

When I had read this argument and had heard it developed orally in this Court it appeared to be very sound and difficult to refute.

However, a study of the text has now led me to believe that, on the contrary, this argument rebounds against the case which it was put forward to support.

The Community regulation expressly provides that it is for the importer to furnish evidence that the imported meat has been processed. It follows that in the application of this regulation at least, even in Germany, the burden of proof does not fall on the customs, but on the importer.

Therefore, although the primary justification of the requirement of trust laid down in Article 55 of the German Customs Code is the system of proof generally applicable in customs matters, it does not exist as regards the transactions referred to in the Community regulation, since, precisely for these transactions, it is not the general German system which will apply but the special and opposite system established by the Community regulation.

Moreover, this system of proof established by the Community regulations appears to correspond to the basic details of a system of supervision which is very different from that envisaged by the German customs authorities.

Article 1 (4) of Regulation No 888/68 provides that the proof to be furnished by the importer ‘shall not be considered as furnished unless the quantities of preserved meat manufactured from frozen meat imported with total suspension of the levy are at least equivalent to the quantity of that meat. Such equivalence shall be established by means of coefficients expressing the meat content of each kind of preserved meat’.

This article—and especially its last sentence—necessarily implies that the German customs authority will have to overcome its traditional dislike of physical inspections in its application of the Community regulation.

To sum up, I do not believe that the German Government is justified in claiming that the Community regulations in question contain a serious gap which must be filled in order to avoid serious risks of fraud, simply because these regulations provide for systems of proof and inspection different from those applied to similar transactions under the German Customs Code.

B —

Does it follow that the Community regulation is complete and ‘perfect’?

It would be an exaggeration to claim that it is and it is obvious that at least on some points, as for instance the formalities to be complied with by the importer in order to qualify for exemption from payment of the Community levy, it must be supplemented.

Similarly, although the question is more controversial, the exclusion from the benefit of these provisions of those who have already been convicted by the competent court of infringing the rules governing the trade in goods intended for processing, which is provided for in the laws of certain of the Member States, might, in my opinion, be justified, first by the essential need to deal with fraud which I emphasized earlier and secondly by a teleological interpretation of the Community regulation. However, the application of Article 55 of the German Customs Code to the transactions covered by the Community regulations produces quite different effects.

Instead of merely ensuring a correct and reasonable application of the Community regulations it restricts their scope in one Member State.

Whereas in the other five Member States, the importer (at least the importer without previous convictions) may be eligible for the suspension of the levy if he enters into the undertakings required and lodges the deposit, in Germany he must also meet another condition: he must enjoy the trust of the German customs authorities.

The present case enables us to see to what extent this condition restricts the scope of the Community regulations. I stated earlier that Fleischkontor had been cleared of any suspicion of fraud. However, it appears that this verdict in no way deters the German customs from continuing to regard it as not “trustworthy” since, during the proceedings, the competent German authorities maintained that even if the issue were one of a misunderstanding arising out of the erroneous production by a secretary or junior employee of a bona fide invoice, this fact was sufficient to justify the firm's being regarded as untrustworthy.

It is clear that the application of Article 55 of the German Customs Code to the transactions covered by the Community regulations leads to results which are contrary to the aims of the authors of those regulations.

These authors wished the guarantee of the transaction's being properly carried out to be provided solely by a deposit system.

However, according to the explanations which we have been given, the German customs authorities in some way classify importers into three categories according to the degree of trust which they inspire:

One of these categories is made up of those who might be described as “good” importers, that is those to whom, as a general rule, the customs authorities grant the authorizations requested, without any formality or security.

At the other extreme there are those who could be described as “bad” importers, whose requests for authorizations are turned down out of hand and whose only recourse is the hope—a very feeble one as I shall shortly explain—that a court will support them some years later.

Between these two, there is an intermediate category comprising those who might be called “doubtfuls”, to whom the authority issues the authorizations sought but makes them conditional upon the lodging of a deposit, as it is undecided about the degree of trust to be accorded to them.

You can see how difficult it is to reconcile this system with that laid down in the Community regulation.

Those whom I have described as “good” importers are obliged to lodge a deposit in accordance with the Community provisions, although under German law they would have been exempt from this; this is, however, of no great consequence.

On the other hand, those whom I have described as “doubtfuls” would be required to lodge two deposits to guarantee the same obligation to do the processing: first, like all importers, a deposit under the Community regulation and then a second because the German authorities were not sure of the degree of trust to be accorded to them.

These examples show to what extent the application of Article 55 of the German Customs Code to the transactions covered by the Community regulations exceeds in both its object and effects the measures necessary to ensure the correct implementation of these regulations and almost succeeds in changing their character.

Lastly, it must be observed that the provisions of national law which it is sought to apply in this case appear to be contrary to the fundamental principles of Community law.

You have been told that the present provisions in Article 55 of the German Customs Code derive from a law of 1939 which gave the Minister for Finance of the Reich the power to authorize the German customs to issue the necessary authorizations in respect of trade in products intended for processing only to those importers whom the authorities considered to be “trustworthy”.

This was, therefore, a provision linked to the requirements of a self-sufficient economy which was well on the way to becoming a war economy.

One might have thought that it would disappear with the establishment of the Common Market.

Not only did it continue in being but, when the German courts tried to control the authorities' exercise of this wholly extraordinary prerogative, a law was passed providing specifically that in this field the authorities enjoyed a discretionary power (Ermessensbegriff).

As the Finanzgericht emphasizes in its order making the reference this specific provision, which was made by a law of 1961, virtually eliminated any possibility of review by the courts, which until then had sought to carry out this review within the framework of their powers under German public law in relation to indefinite legal concepts (unbestimmter Rechtsbegriff).

The Agent for the German Government is a specialist too well versed in Community law not to have seen how little this whole system is consistent with the general principles of that law.

In Court, therefore, he staged a sort of strategic withdrawal saying: ‘Do not interpret the Community regulations in such a way as to condemn the requirement of trust laid down in Article 55 of the German Customs Code: say only that the establishment of the German Market invalidated the provision in Article 55 which provides that the authorities have a discretionary power of assessment in this matter’.

However, in my opinion, this discretionary power is only one of the reasons for the incompatibility which exists between the principles of Community law and the provisions of Article 55 of the German Customs Code.

The real reason for this incompatibility is to be found in the fact that, through the operation of this provision, the application of a Community regulation does not depend on objective requirements, but on a subjective appraisal made by a national authority.

However, the principle of such a subjective appraisal is contrary to several fundamental rules of Community law. It is contrary, first, to a rule which has been confirmed on many occasions in your case-law and to which I referred earlier: that Community law must be equally enforceable in all the Member States and that Community regulations must be applied uniformly in all those States (cf. for example, your judgments in Costa of 15 July 1964, Salgoil of 19 December 1968, Böllmann of 18 February 1970 and Krohn of 18 June 1970 or, more recently still, in Bakels of 8 December last).

Secondly, it is contrary to the rule which prohibits Member States from restricting, for example, by the imposition of a requirement which depends upon the subjective judgment of a national authority, the rights conferred on private persons by Community regulations which, like those concerning the trade in products intended for processing, have direct effect. This rule is specifically referred to in the last paragraph of Article 20 of Regulation No 805/68 which you have been asked to interpret.

Let me add that even if one has, as I have that full confidence in the German customs authorities which they merit, one cannot help thinking that, in spite of all the efforts at objectivity on the part of the officials required to form this judgment, one as subjective as that made by the authorities regarding the degree of trust to be accorded to an importer certainly contains the seeds of discrimination.

This is so because although the imported meat must be processed in the importing country the importer concerned is not necessarily a national of that country, but may be a foreigner.

It is quite clear that any customs administration, however impartial it may be, will naturally tend to recognize as trustworthy the national importers who are known to it more readily than foreign importers of whom it may have little or no knowledge.

For all these reasons I consider that you should find that although the Member States which are responsible to the Community for the payment of the Community levy may adopt all the necessary implementing measures to prevent any fraudulent transaction under the provisions of Regulations Nos 805, 888 and 1082/68 relating to the total suspension in certain cases of the Community import levy on frozen beef and veal in bond intended for processing, the requirements laid down by these regulations for the grant of this suspension may not be supplemented by an additional condition based upon a subjective view formed by the national authorities of the degree of trust which may be placed in an importer.

*

(1) Translated from the French.