Opinion of the Advocate-General
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Mr President,
Members of the Court,
1. In these proceedings the French Republic is seeking the partial annulment of Commission Decision 92/491/EEC of 23 September 1992. (1) That decision concerns the clearance of the accounts presented by the Member States in respect of the expenditure for 1989 financed through the European Agricultural Guidance and Guarantee Fund (EAGGF), guarantee section. In that decision the Commission refused to recognize an amount of some FF 8.5 million borne by the French authorities as expenditure chargeable to the EAGGF.
2. That amount represented refunds of co-responsibility levies for cereals paid by the French authorities to farmers who had sold cereals subject to a repurchase clause and who subsequently actually repurchased the cereals. The Commission considers that those amounts were wrongly refunded by the French authorities. The Commission points out that under the relevant rules the levy must be paid when cereals are placed on the market and that cereals sold subject to a repurchase clause are placed on the market within the meaning of those rules.
3. The co-responsibility levy was introduced as a result of the surplus cereal production in the Community. In order to ensure that supply corresponded to demand and to make producers aware of the lack of market outlets the Council decided to introduce a co-responsibility levy for cereals. That levy was introduced by Council Regulation No 1579/86 of 23 May 1986 (2) amending Regulation No 2727/75 on the common organization of the market in cereals. (3) Article 4 of Regulation No 2727/75, as amended, provided that the levy was to be collected inter alia for cereals undergoing "first processing". It further provided that "the definition of the first processing" and operations exempted from the co-responsibility levy would be the subject of implementing rules.
4. The Commission adopted implementing rules in Regulation No 2040/86 of 30 June 1986, (4) which was subsequently amended by Regulation No 2572/86 of 12 August 1986. (5) Article 1(2) of Regulation No 2040/86, as amended, provides:
"For the purposes of this Regulation, 'first-stage processing' shall mean any treatment of grain such that the product obtained may no longer be classified under Chapter 10 of the Common Customs Tariff. Processing of cereals delivered or placed at the disposal of an undertaking by a producer with a view to subsequent utilization on his holding shall be considered first-stage processing.
Cereals shall be exempted from the levy where first-stage processing is carried out by the farmer on his own agricultural holding and the products of the processing are used as animal feed on the holding, provided that:
° the processing machinery is part of the temporary or permanent agricultural installation of the farm ...".
5. By judgment of 29 June 1988 in Case 300/86 Van Landschoot v Mera (6) the Court of Justice ruled on the validity of that provision. The Court held:
"(1) The second subparagraph of Article 1(2) of Commission Regulation No 2040/86 of 30 June 1986, as amended by Commission Regulation No 2572/86 of 12 August 1986, is invalid in so far as it exempts from the co-responsibility levy the first-stage processing of cereals carried out on the producer' s own agricultural holding by means of the machinery of the farm, provided that the products of the processing are used on that holding, but does not provide for such exemption for first-stage processing carried out off the producer' s agricultural holding or by means of machinery which does not form part of the agricultural installations of the farm, where the products of the processing are used on that farm.
(2) It is for the Community legislature to act upon this judgment by adopting such measures as may be appropriate in order to establish equal treatment for operators as regards the contested exemption rules."
6. Before that judgment, the Council had amended the rules on the co-responsibility levy by Regulation No 1097/88 of 25 April 1988 amending Regulation No 2727/75 on the common organization of the market in cereals. (7) Article 4 of Regulation No 2727/75 was amended so that the event giving rise to the levy was no longer defined as the processing but as the placing on the market by the producers. New implementing provisions applying to the co-responsibility levy were laid down in Commission Regulation No 1432/88 of 26 May 1988 (8) which repealed Regulation No 2040/86, which was the subject of the Court' s judgment. Following the Court' s judgment, the Commission amended Regulation No 1432/88 by Regulation No 2324/88 of 27 July 1988 (9) since the Commission considered that Regulation No 1432/88 might be subject to the same criticism as Regulation No 2040/86.
7. Article 1(2) of Regulation No 1432/88, as amended, defines placing on the market as
"sales ... by producers of the products referred to in paragraph 1 either as such or in the form of processed products ... to collection, trading and processing undertakings, to other producers and to the intervention agency".
That provision thus makes it possible for a producer to pass cereals to a processing undertaking for processing into feed for use on the producer' s own holding ° contract processing ° without giving rise to any payment of levy. It is common ground that, even if it is not expressly stated in that provision, it was always interpreted and applied as meaning that the exemption from the levy was not conditional on the cereals consigned for processing and the processed products being identical. This dispute concerns the interpretation and application of that provision.
8. The Commission laid down the rules concerning the reimbursement of the co-responsibility levies wrongfully charged under Regulation No 2040/86 in Regulation No 3779/88 of 2 December 1988. (10) That regulation was the subject of the Court' s judgment of 20 September 1990 in Case C-203/89 Van Landschoot v Mera (11) which is of relevance to these proceedings.
9. The main proceedings in Case C-203/89 ° which, incidentally, also gave rise to the reference for a preliminary ruling leading to the Court' s 1988 judgment ° concerned a situation in which a farmer had sold some 5 000 kilograms of wheat to a processing undertaking which subsequently sold the farmer some 13 000 kilograms of compound feedingstuffs for hens. The compound feedingstuffs consisted of 35% wheat, some 4 500 kilograms. On that basis the farmer contended that in respect of 4 500 kilograms no co-responsibility levy was payable. The Cantonal Court of Brasschaat, before which the dispute was brought, referred a question to the Court of Justice on whether the regulation on reimbursement of the levy was valid in so far as the levy continued to be charged for cereals sold to a processing undertaking "even if they are later bought back by the producer in the form of feed with a view to using it on his own agricultural holding".
10. The Court held that the regulation was not invalid. In paragraph 22 it stated that the objective of the levy, which is to limit surplus cereal production, "provides justification for imposing the levy only on the processing of cereals placed on the market, since the quantities of cereals remaining in a closed circuit do not contribute to the creation of surpluses". It further held in paragraph 24 that "having regard to the objective pursued by the co-responsibility levy, the question whether or not the products are placed on the market is the distinguishing criterion for determining whether or not traders are liable to pay the levy". It further stated in paragraphs 25 and 27:
"In that regard, it should be noted that placing on the market occurs as soon as a producer divests himself of the cereals which he has produced to sell them to a processor, whoever he may be, even if the producer subsequently buys back the cereals from the processor in the form of processed products.
In the light of the same criterion, it must also be considered that producers are in different situations and may thus be accorded different treatment according to whether they sell the cereals to a processor, even with a view to buying back from him, for the needs of their farm, compound feedingstuffs produced from those cereals, or whether they merely have the cereals processed on their account by a processor. In the former case, the products are placed on the market, but in the latter case they are not."
11. The issue in these proceedings is whether the sale of cereal subject to a right for the producer to repurchase can be regarded as placing on the market. Sale subject to a right of repurchase ° "vente avec clause de réméré" ° is a form of contract regulated in Articles 1659 and 1673 of the French Civil Code.
12. The French Government has explained the background for the application of that form of contract in the cereal trade by stating that following the Court' s 1988 judgment in Case 300/86 and the amended rules to which it led there was a possibility of exemption from the levy, on the one hand, in situations in which the producer had cereals processed by a third party for the purposes of subsequent use on his holding and the same corn was returned to him after processing, and, on the other, in situations where the producer consigned cereals to a third party for processing but the processed cereals returned to him did not come from the same cereals supplied by the producer. According to the French Government, the situation where the cereals supplied and the cereals processed are not identical would be treated for value added tax purposes as two sales. The Sixth VAT Directive leaves it to the individual Member States themselves to determine whether such a situation is to be regarded as a double sale and the French Government has undertaken to do so. Since the transaction in question is, under French law, classified as one sale, that transaction cannot be exempt from the payment of the co-responsibility levy. So that French farmers, like other farmers in the Community, should not have to pay the levy in that situation, it was decided to inform French farmers that no levy was to be payable on the return of cereals sold subject to a repurchase clause. The detailed rules were set out in a circular from the French intervention agency, Office National Interprofessionnel des Céréales (ONIC).
13. According to that circular the use of that form of contract is subject to a number of conditions, including in particular the following:
° the agreement subject to the right of repurchase must be concluded before the supply of the cereals;
° there can be no repurchase before the supply;
° the agreement may be concluded only for the current harvest year;
° the co-responsibility levy is actually paid on sale, with the result that the burden of financing it is borne by the producer;
° upon the conclusion of the agreement, an estimate must be submitted of the quantities subject to the right of repurchase for processing into feed which will be used on the producer' s holding;
° at the simple request of the seller, the buyer is obliged to return the quantity of cereal covered by the right of repurchase.
14. In the course of its negotiations with the Commission before the clearance of the accounts the French Government gave the following details of that form of contract and its application:
"Where a producer considers that a quantity of cereals is to be reserved for him, i.e. for his own use or for subsequent processing, he sells it with a repurchase clause at the price applicable on the date of sale but with payment of the co-responsibility levy. There is thus no question of any exemption from the levy ... but it is a normal sale since the effect of the agreement subject to a right of repurchase is simply that in law on the repurchase of the quantity in question the sale is cancelled with the result that the situation remains as it was as if the sale had never taken place. The effect of the repurchase is thus to cancel the sale and consequently the placing on the market. Under French law, the repurchase may be from the first buyer but also from persons acquiring the cereals subsequently in whom ownership of the quantities in question is vested at the time of the repurchase, which may be the processing undertaking."
15. The French Government has contended that the quantities of cereals which are sold subject to a repurchase clause and which are repurchased cannot be considered to have been placed on the market. It does not deny that ownership of the cereals has passed to the buyer on sale. It considers, however, that that circumstance is legally immaterial. In support of its view that when the cereals were sold there was no placing on the market, the French Government points inter alia to the conditions applying to the use of that form of contract and to the fact that the buyer' s right to dispose of the cereals is limited in so far as he must be able when the time comes to fulfil his obligation under the repurchase clause.
16. The starting point for resolving the issue in this case is the concept of "placing on the market" as defined by the Court. It seems to me that it is clear from the 1990 judgment that the Court considered that in determining the time of placing on the market it is not decisive whether the cereals in question are, after the sale, returned to the holding from which they came. The Court' s judgment must be construed as meaning that the fact that a holding uses cereals does not in itself lead to exemption from the levy. The use by the holding of cereals or processed cereals is only exempt from the levy in so far as the cereals have not been placed on the market.
17. I agree with the Commission that in determining the time of placing on the market account must be taken of the fact that the price is fixed and also invoiced when the agreement is concluded. After supply of the cereals, the producer is not under any obligation as regards the cereals and in that respect is in the same position as someone who has sold cereals without any right of repurchase. Perhaps he is in an even better position since, depending on price trends, he can speculate as to whether he will make use of his right of repurchase. In so far as it is considered likely, when the contract is concluded, that the repurchase will take place, it is of course conceivable that the effect on the market will be less than in the case of sale without any possibility of repurchase. It may be assumed that in the latter case the processing undertaking will be more inclined to try to resell the cereals. However, so long as the producer may refrain from using his right of repurchase the difference between sale subject to a right of repurchase and an ordinary sale is of less importance. Moreover, the limitation on the buyer' s right to dispose of the cereal can hardly be onerous if, in a market characterized by surpluses, he can fulfil his obligations under the repurchase clause using other cereals.
18. I thus do not doubt that what the French Government has stated regarding the application of the form of contract and the precautions taken so that it is not misused is correct. That information might, for example, have been relevant if the aim of the levy had been to impose a charge on the use of cereals, with the exception of a farmer' s own use. However, the aim is to keep cereals off the market and that aim is frustrated once cereals are placed on the market, whether or not that is subject to a repurchase clause. I therefore conclude that the Commission should not hold that the French authorities were right to refund the levy for quantities which were subsequently repurchased by the producer in question for use on his holding.
Conclusion
19. I therefore propose that the Court:
° dismiss the action against the Commission, and
° order the French Republic to pay the costs.
(*) Original language: Danish.
(1) ° OJ 1992 L 298, p. 23.
(2) ° OJ 1986 L 139, p. 29.
(3) ° OJ 1975 L 281, p. 1.
(4) ° OJ 1986 L 173, p. 65.
(5) ° OJ 1986 L 229, p. 25.
(6) ° [1988] ECR 3443.
(7) ° OJ 1988 L 110, p. 7. That regulation also introduced an additional co-responsibility levy which, in so far as concerns the point at issue in this case, is subject to the same rules as the co-responsibility levy.
(8) ° OJ 1988 L 131, p. 37.
(9) ° OJ 1988 L 202, p. 39.
(10) ° OJ 1988 L 332, p. 17.
(11) ° [1990] ECR I-3509.
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