Opinion of the Advocate-General
1 In the course of proceedings between the Belgian State and importers of Kashkaval cheese made in Hungary, the Hof van Beroep (Court of Appeal), Antwerp (Belgium), has referred for a preliminary ruling two questions concerning the interpretation of Commission Regulation (EEC) No 1767/82 of 1 July 1982 laying down detailed rules for applying specific import levies on certain milk products (1) (`Regulation No 1767/82' or `the regulation').
2 The national court is seeking both an interpretation regarding the raw material to be used in the production of Kashkaval cheese and to ascertain the consequences of any failure to comply with the requirements relating to completion of the import certificate introduced by the regulation.
I - The relevant Community legislation
3 By Regulation (EEC) No 2307/70 of 10 November 1970, (2) the Council introduced a preferential levy applicable inter alia to `sheep cheeses known as "Kashkaval"' (third recital in the preamble).
4 At the material time the preferential system was provided for in Council Regulation (EEC) No 2915/79 of 18 December 1979 determining the groups of products and the special provisions for calculating levies on milk and milk products and amending Regulation (EEC) No 950/68 on the Common Customs Tariff. (3)
5 Subsequently Council Regulation (EEC) No 1463/82 of 27 May 1982 (4) amended Council Regulation (EEC) No 2915/79, as regards the conditions for the entry of certain cheeses under certain tariff headings, and Regulation No 950/68. Kashkaval cheese came under tariff heading 04.04 E I b) 2. As in the abovementioned regulations, there was a note stating that `entry under this subheading is subject to conditions to be determined by the competent authorities'.
6 As from 1 January 1988, Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (5) amended the tariff nomenclature of the Common Customs Tariff. Henceforth, Kashkaval cheese came under CN Code 0406 90 29, in relation to which footnote 2 stated that `Cheese, imported from a third country in the framework of a special arrangement concluded between that country and the Community subject to the production of an IMA 1 certificate delivered in accordance with the conditions laid down in the relevant Community provisions, is subject to a reduced levy'.
7 The conditions under which Kashkaval may be imported at a reduced rate of levy are set out in Commission regulations. At the material time, Regulation No 1767/82, cited above, was applicable.
8 Under Article 1(1) and (2) of Regulation No 1767/82:
`1. The import levies applicable to the products listed in Annex II to Regulation (EEC) No 2915/79 shall be those listed in Annex I to this Regulation.
2. The products listed in Annex I shall qualify for the abovementioned import levies only on production of an IMA 1 certificate drawn up according to the specimen in Annex II, subject to compliance with the conditions laid down in this Regulation.'
Under Article 3(1) and (2):
`1. A separate certificate must be drawn up for each type and each form of presentation of the products referred to in Article 1.
2. The certificate must contain, in respect of each type and each form of presentation, the particulars set out in Annex III.'
Finally, Article 5(1) stipulates:
`A certificate shall be valid only if duly completed and authenticated by an issuing agency listed in Annex IV.'
9 Annex I to Regulation No 1767/82 refers to Kashkaval (point l) under Common Customs Tariff heading ex 04.04 E I b) 2, without any further information as to the raw material from which the cheese should be made.
10 Annex II contains the specimen IMA 1 certificate referred to in Article 1(2) of the regulation.
11 Annex III sets out the rules for filling out the certificates and provides with regard to Kashkaval cheese that the following must be completed, in addition to boxes 1 to 6, 9, 17 and 18:
`2. Box 10 by specifying "exclusively home-produced sheep's milk"'.
II - Facts and proceedings before the national court
12 Between 24 December 1987 and 13 October 1988, Foodic BV (`Foodic') imported 860 000 kilos of Kashkaval cheese from Hungary. Each of the 16 import declarations was accompanied, in accordance with Article 1(2) of Regulation No 1767/82, by an IMA 1 certificate. Those certificates all stated that it was Kashkaval cheese made from cows' milk.
13 The Belgian authorities had charged the levy on that cheese at the preferential rate. During the course of a check carried out at the end of October 1988 the Belgian authorities realised that the imported Kashkaval had been made from cows' milk. Taking the view that under the Community rules the preferential system applies only in the case of Kashkaval made exclusively from sheep's milk, the Belgian authorities therefore requested Foodic on 18 December 1989 to pay the difference between the amount of the normal rate of levy and the preferential rate already paid.
14 That amount was not paid and on 8 January 1992 the Belgian State brought an action against Foodic seeking payment of BFR 66 424 325, namely the amount of the additional levies plus the securities lodged, being forfeit on the ground that the import certificates had been misused.
15 The Rechtbank van Eerste Aanleg (Court of First Instance), Antwerp, delivered judgment on 29 June 1994, dismissing, for the most part, the Belgian State's application.
16 The Belgian State then appealed against that judgment to the Hof van Beroep, Antwerp.
III - The questions
17 Considering that it was faced with a difficulty in interpreting Regulation No 1767/82, the Hof van Beroep, Antwerp, by an interlocutory judgment of 27 January 1997, referred the following two questions to the Court:
`(1) Does "Kashkaval" in Regulation (EEC) No 1767/82 refer solely to cheese made from sheep's milk?
(2) Does an IMA 1 certificate issued pursuant to Regulation (EEC) No 1767/82 but completed in a manner contrary to the instructions set out in the annexes to that regulation satisfy the requirements of Article 2 of that regulation, and, if not, does this result in forfeiture of entitlement to a reduced rate of import levy?'
The first question
18 It appears from the order for reference that the respondents in the main proceedings (the importers) consider that Kashkaval may also be made from cows' milk. They point out that the Hungarian authority which filled out the IMA 1 certificate expressly stated in Box 10 on the form that it related to cheese made from cows' milk, thereby confirming in their opinion that Kashkaval can equally be made from such milk without forfeiting the name `Kashkaval'.
19 The relevant question here is, however, whether this type of Kashkaval cheese can qualify for the preferential rate of levy under the relevant Community rules.
20 The second recital in the preamble to Regulation No 1767/82 states that: `admission to tariff headings is no longer the sole factor to be considered for the purposes of applying the specific levy'.
21 Article 1(2) of the regulation provides that two conditions must be met in order to qualify for the preferential system, namely:
- production of an IMA 1 certificate drawn up according to the specimen in Annex II
and
- compliance with the conditions laid down in Regulation No 1767/82.
22 One of those latter conditions is specified in Article 3(2), which provides that the certificate must contain the particulars set out in Annex III.
23 Point I of Annex III stipulates, with regard to Kashkaval cheese, that Box 10 of the IMA 1 certificate must specify `exclusively home-produced sheep's milk'.
24 It seems clear therefore that the Community legislature wished to keep entitlement to the preferential levy for Kashkaval cheese made exclusively from sheep's milk.
25 In their written observations, the respondents in the main proceedings claim that `the wording of Regulation (EEC) No 1767/82 of 1 July 1982 does not distinguish between Kashkaval cheese made from cows' milk and Kashkaval cheese made from sheep's milk; that subtle distinction is introduced only in the annex, but one may ask whether the wording of the annex to the regulation prevails over that of the regulation itself. The answer is clearly that it does not' (paragraph 16 of the observations lodged with the Court).
26 In a later paragraph the respondents in the main proceedings add: `Since the original version of the regulation in question mentioned only "Kashkaval", with no further specification, in its tariff headings, the Belgian State may not draw a distinction according to whether the cheese is made from cows' milk or sheep's milk'. By `tariff headings' they clearly mean Annex I to the regulation.
27 Those arguments cannot be accepted, since it is not permissible to reason on the basis of the articles of the regulation without taking the annexes into account, or to take only Annex I into account and totally disregard Annex III.
28 It should be noted that (with a single exception) Annex I does not provide any information regarding the raw material to be used to make the other cheeses which are listed in it by name (Emmental, Cheddar, Tilsit and Finlandia, for example). In the case of all those cheeses it is necessary to refer to Annex III, which specifies the raw material to be used for most of the cheeses concerned. So Annex III serves to clarify Annex I. The two annexes complement one another and form a whole.
29 As the text of Annex I thus cannot take precedence over the text of Annex III, the Community legislature's intention to grant entitlement to the preferential rate of levy only to Kashkaval cheese made from sheep's milk is beyond doubt.
30 This view is further supported, as the Commission points out in its written observations, by the fact that the third recital in the preamble to Regulation No 2307/70 refers to `sheep cheeses known as "Kashkaval"'. Hence the Council, when it first included Kashkaval cheese in the system of preferential levies, stipulated that only Kashkaval cheese made from sheep's milk could receive the preferential treatment. The Commission correctly points out that the Council has not amended its decision in the meantime.
31 Moreover, the use of the adverb `exclusively' stresses that no other type of milk can be used in making Kashkaval cheese (for the purposes of Regulation No 1767/82, of course).
32 In support of their view, the respondents in the main proceedings refer also to Commission Regulation (EEC) No 1225/90 of 10 May 1990, (6) which amended Regulation No 1767/82 by adding in particular to the description `Kashkaval cheese' in Annex I the words `of sheep's milk'. They claim that it is only since the entry into force of that regulation that the preferential rate of levy has applied only to Kashkaval made from sheep's milk.
33 It is indeed apparent from the recitals in the preamble to Regulation No 1225/90 that it was due to difficulties which arose in the description of Kashkaval cheese when the IMA 1 certificate was drawn up that the Commission added those words.
34 The fact remains, however, that an importer who wishes to qualify under a preferential system should read through very carefully the whole of the instrument setting out the details of that system, including the particulars relating to the way in which the special form should be completed.
35 The addition of those words to Annex I in no way altered the system applicable to the cheese in question as it had applied until then under the provisions of the articles of the regulation, read in conjunction with Annex I and Annex III.
36 Moreover, as the Commission correctly states, it was not competent to make any amendments to the characteristics of the Kashkaval cheese concerned, since they had been laid down by the Council in Regulation No 2307/70.
37 There is thus no doubt that the answer to the first question referred by the national court should be in the affirmative: the Kashkaval cheese referred to in Regulation No 1767/82 must have been made exclusively from sheep's milk.
The second question
38 The second question may be divided into two parts. The Hof van Beroep wishes to know first whether an IMA 1 certificate completed in a manner contrary to the instructions set out in the annexes to Regulation No 1767/82 satisfies the requirements of that regulation.
39 There is one preliminary point to be made: the Hof van Beroep, in its second question, refers to the requirements of Article 2 of Regulation No 1767/82. However, Article 2 refers only to the material aspects of the IMA 1 certificate. I think this must be a typographical error, since the question can only relate to the requirements of Article 1 of Regulation No 1767/82. I shall base my answer to the question on that article.
40 Article 1 stipulates that the conditions laid down in the regulation must be complied with. One of those conditions is laid down in Article 3(2), which states that the IMA 1 certificate must contain the particulars set out in Annex III.
41 It is also stated in Article 5(1) that a certificate is `valid only if duly completed'.
42 A certificate is thus valid only if it gives the particulars set out in Annex III, and a certificate which does not contain all the particulars set out in Annex III cannot meet the requirements of Article 1 of Regulation No 1767/82.
43 However, Annex III to Regulation No 1767/82 specifies in the case of Kashkaval cheese that Box 10 of the certificate must contain the particular:
`exclusively home-produced sheep's milk'.
44 Moreover, it is apparent from the answer proposed with regard to the first question that the intention of the Community legislature was always to grant entitlement under the system of preferential levies solely to Kashkaval cheese made from sheep's milk. The particular required under Annex III to be given in Box 10 of import certificates for Kashkaval is therefore not merely a purely formal requirement but also a substantive requirement.
45 In reply to the first part of the second question, therefore, it should be held that an IMA 1 certificate issued pursuant to Regulation No 1767/82, which is filled out in a manner contrary to the instructions set out in the annexes to that regulation, does not satisfy the requirements of that regulation.
46 The Hof van Beroep also asks whether such failure to comply with the instructions results in `forfeiture of entitlement to a reduced import tariff' (see point 17, above).
47 The consequences of failure to comply with the requirements laid down in Regulation No 1767/82 are set out in Article 1(2). That provision, I repeat, states that the products listed will qualify for the preferential rate only if the conditions laid down in the regulation have been complied with.
48 Article 1(2) reflects the intention of the legislature, expressed in the second recital in the preamble to Regulation No 1767/82, that `admission to tariff headings is no longer [to be] the sole factor to be considered for the purposes of applying the specific levy'.
49 Submission of an IMA 1 certificate complying with all the requirements laid down in Regulation No 1767/82, and in particular all the instructions set out in Annex III, as regards both substance and form, is therefore a necessary precondition for qualifying for the preferential rate of levy.
50 The respondents in the main proceedings further maintain, however, that the regulation does not provide for any penalties and that the benefit of the preferential rate therefore cannot be withdrawn.
51 On that view, the goods imported would thus qualify for the preferential rate under the regulation even though the conditions laid down in the regulation were not complied with (Article 1(2)) and even though the certificates submitted were not valid (Article 5(1)).
52 Such an outcome would clearly be absurd. A system which constitutes a derogation does not need to make provision for penalties. If the requirements relating to it are not met ordinary law will apply automatically.
53 The respondents in the main proceedings are thus also wrong in invoking the principle of proportionality. By definition, a system governed by ordinary law which has not been contested as such cannot impose a disproportionate burden on an importer.
54 It must therefore be concluded that the preferential rate cannot apply to imports under IMA 1 certificates which do not meet the conditions laid down in Regulation No 1767/82.
55 If the Court were to answer the questions referred by the Hof van Beroep in this manner, the respondents in the main proceedings submit that Article 5(2) of Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post-clearance recovery of import duties or export duties which have not been required of the person liable for payment on goods entered for a customs procedure involving the obligation to pay such duties (7) would be applicable.
56 The questions referred by the national court do not seek an interpretation of that provision. However, the reference for a preliminary ruling shows that the respondents in the main proceedings have raised this point, and the national court cites Regulation No 1697/79 among those which cause problems of interpretation in the context of the case which has been referred to it.
57 I therefore think it useful to recall certain principles which have been stated by the Court regarding that provision, although it is for the national court alone to determine whether the requirements of the provision are met.
58 Article 5(2) of Regulation No 1697/79 provides:
`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.'
59 That provision thus lays down three requirements for the competent authorities to be able to refrain from taking action for post-clearance recovery, those three requirements being cumulative:
- the duties must have not been collected as a result of an error made by the competent authorities themselves;
- the person liable must have acted in good faith, that is to say, must have been unable to detect the error made by the competent authorities; and
- the person liable must have observed all the provisions laid down by the rules in force as far as the customs declaration was concerned.
60 As regards the criterion of the `error made by the competent authorities', it is clear that the authority of the exporting country, Hungary, was wrong in issuing IMA 1 certificates for cheeses made from cows' milk.
61 At the same time, the competent authority of the importing country made an error in charging the reduced rate of levy when the IMA 1 certificates stated that the cheese had been made from cows' milk. A check on Regulation No 1767/82 would have shown them that such products did not qualify for the preferential rate.
62 Did the person liable act in good faith?
63 Without doubt, the person liable did not commit fraud in this particular case and did not resort to deceptive practices in that there was no misrepresentation to the Hungarian or Belgian authorities as to the raw material used in making the cheeses. However, it was quite wrong to seek IMA 1 certificates from the authorities of the exporting country in respect of products which did not qualify for the preferential rate.
64 It must be stressed that the Court has consistently held that it is for national courts to decide whether the person liable could have detected the error made by the competent authorities, having regard to the nature of the error, the professional experience of the trader concerned and the degree of care which he exercised. (8)
65 As regards the nature of the error, the Court has always held that it is necessary to consider whether the rules concerned are complex or simple enough for an examination of the facts to make an error easily detectable.
66 Was the regulation so badly drafted at the material time that one might presume that the personal liable acted in good faith when applying for the certificates and could not have detected the error made by the competent authorities?
67 As stated above, the Commission acknowledged in the second recital in the preamble to Regulation No 1225/90 cited above that `certain difficulties have arisen in the description of that cheese when the IMA 1 certificate is drawn up'. As a result, it replaced the description `Kashkaval' in Annex I to Regulation No 1767/82 by the description `Kashkaval cheese of sheep's milk', and at the same time added some other particulars concerning the characteristics of that cheese.
68 However, as I have already explained in connection with the answer to the first question, I am of the view that a professional importer seeking to qualify under a derogating system should have read through the whole regulation. He should also have read with particularly close attention Annex III in order to be in a position to give the authority of the exporting country all the information it needed in order to complete the certificate.
69 Thirdly, it is for the national court to consider whether all the requirements contained in the regulations in force have been complied with. It is quite apparent from the answers proposed above in connection with the first question and the first part of the second question that, in my view, the requirements of the rules in force have not been complied with.
70 The respondents in the main proceedings also rely on the principle of legitimate expectations. In that connection, it is sufficient to quote the Krücken judgment, (9) in which the Court ruled that `the principle of the protection of legitimate expectations cannot be relied upon against a precise provision of Community law and that the conduct of a national authority responsible for applying Community law, which acts in breach of that law, cannot give rise to legitimate expectations on the part of an economic operator that he will benefit from treatment which is contrary to Community law'.
Conclusion
71 In the light of the foregoing I consider that the two questions raised by the Hof van Beroep, Antwerp, should be answered as follows:
(1) `Kashkaval', in Commission Regulation (EEC) No 1767/82 of 1 July 1982 laying down detailed rules for applying specific import levies on certain milk products, refers to cheese produced exclusively from sheep's milk.
(2) An IMA 1 certificate issued pursuant to Regulation No 1767/82 but completed in a manner which does not comply with the instructions set out in Annex III to that regulation does not satisfy the requirements of Article 1(2) of that regulation, and the preferential rate of levy is therefore not applicable to imports covered by such a certificate.
(1) - OJ 1982 L 196, p. 1.
(2) - Regulation amending, as regards certain cheeses, Regulation (EEC) No 823/68 determining the groups of products and the special provisions for calculating levies on milk and milk products (OJ, English Special Edition 1970 (III), p. 758).
(3) - OJ 1979 L 329, p. 1.
(4) - OJ 1982 L 159, p. 1.
(5) - OJ 1987 L 256, p. 1.
(6) - OJ 1990 L 120, p. 56.
(7) - OJ 1979 L 197, p. 1.
(8) - See, for example, the judgment in Case C-250/91 Hewlett Packard France [1993] ECR I-1819, paragraph 22.
(9) - Case 316/86 [1988] ECR 2213, paragraph 24.
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