Court of Justice of the European Communities (including Court of First Instance Decisions)

(Common Customs Tariff Combined Nomenclature Tariff classification Frozen cuts or offal of cocks and hens Accession of Estonia Transitional measures Agricultural products Surplus stocks Regulation (EC) No 1972/2003)

In Case C-140/08,

REFERENCE for a preliminary ruling under Article 234 EC from the Tallinna Halduskohus (Estonia), made by decision of 19 March 2008, received at the Court on 7 April 2008, in the proceedings

Rakvere Lihakombinaat AS

Põllumajandusministeerium,

Maksu- ja Tolliameti Ida maksu- ja tollikeskus,

composed of J.N. Cunha Rodrigues, President of the Second Chamber, acting as President of the Third Chamber, A. Rosas, U. Lõhmus, P. Lindh (Rapporteur) and A. Arabadjiev, Judges,

Advocate General: D. Ruiz'Jarabo Colomer,

Registrar: C. Strömholm, Administrator,

having regard to the written procedure and further to the hearing on 3 September 2009,

after considering the observations submitted on behalf of:

Rakvere Lihakombinaat AS, by K. Kask, advokaat,

the Estonian Government,, by L. Uibo, acting as Agent,

the Commission of the European Communities, by A. Sipos, H. Tserepa'Lacombe and K. Saaremäel'Stoilov, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

1. This reference for a preliminary ruling concerns the interpretation of Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1), as amended by Commission Regulation (EC) No 1789/2003 of 11 September 2003 (OJ 2003 L 281, p. 1), and the interpretation of Commission Regulation (EC) No 1972/2003 of 10 November 2003 on transitional measures to be adopted in respect of trade in agricultural products on account of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia (OJ 2003 L 293, p. 3), as amended by Commission Regulation (EC) No 230/2004 of 10 February 2004 (OJ 2004 L 39, p. 13, 'Regulation No 1972/2003').
2. The reference was made in the course of proceedings between Rakvere Lihakombinaat AS ('RLK') and the Põllumajandusministeerium (Ministry for Agriculture) and Maksu- ja Tolliameti Ida maksu- ja tollikeskus (Eastern Tax and Customs Centre of the Tax and Customs Office, 'MTA') concerning the levying of charges on surplus stocks of frozen chicken meat.

Legal context

Community law

Combined Nomenclature

3. The Combined Nomenclature ('CN') established by Regulation No 2658/87 is based on the international Harmonised Commodity Description and Coding System ('the HS') drawn up by the Customs Cooperation Council, now the World Customs Organisation, adopted by the International Convention concluded in Brussels on 14 June 1983, which was approved on behalf of the European Community by Council Decision 87/369/EEC of 7 April 1987 (OJ 1987 L 198, p. 1). The CN reproduces the headings and subheadings of the HS to 6 digits, with only the 7th and 8th figures creating subheadings which are unique to it.
4. In the version of the HS from the year 2002, heading 0207, which appears in Chapter 2 and which is entitled 'Meat and edible offal, of the poultry of heading No 0105, fresh, chilled or frozen' contains, for the purpose of classifying cocks and hens, the sub'heading 0207 14, itself entitled 'Cuts and offal, frozen'.
5. According to the General Explanatory Notes to Chapter 2 of the HS, concerning meat and edible offal:

'This Chapter applies to meat in carcasses (i.e., the body of an animal with or without the head), half carcasses ..., quarters, pieces, etc., to meat offal, and to flours and meals of meat or meat offal, of all animals ..., suitable for human consumption.

...

Offal generally can be grouped in four categories:

(1) That which is mainly used for human consumption (e.g., heads and cuts thereof (including ears), feet, tails, hearts, tongues, thick skirts, thin skirts, cauls, throats, thymus glands).

(2) That which is used solely in the preparation of pharmaceutical products (e.g., gall bags, adrenal glands, placenta).

(3) That which can be used for human consumption or for the preparation of pharmaceutical products (e.g., livers, kidneys, lungs, brains, pancreas, spleens, spinal cords, ovaries, uteri, testes, udders, thyroid glands, pituitary glands).

(4) That, such as skins, which can be used for human consumption or for other purposes (e.g., manufacture of leather).

...

This Chapter covers meat and meat offal in the following states only, whether or not they have been previously scalded or similarly treated but not cooked:

(1) Fresh ...

(2) Chilled ...

(3) Frozen ...

(4) Salted, in brine, dried or smoked.

...

Meat and meat offal in the states referred to in Items (1) to (4) above remain classified in this Chapter whether or not they ... have been cut, chopped or minced (ground).'

6. The version of the CN applicable to the facts at issue in the main proceedings flow from Regulation No 1789/2003, which came into force on 1 January 2004. The second part thereof contains the schedule of duties. Section I of that part, entitled 'Live animals; animal products', includes a Chapter 2 entitled 'Meat and edible meat offal' in which appears heading 207, worded as follows:

'0207 Meat and edible offal, of the poultry of heading 0105, fresh, chilled or frozen:

Of fowls of the species Gallus domesticus:

...

0207 14 --- Cuts and offal, frozen:

---Cuts

020714 10 ---- Boneless

...

---Offal:

0207 14 91 ---- Livers

0207 14 99 ---- Others.'

7. In the Explanatory Notes to the Combined Nomenclature of the European Communities, published on 23 October 2002 (OJ 2002 C 256, p. 1), under 'General' Nos 2, 4 and 5 concerning the second part, Section 1 of Chapter 2 of the CN states:

'2. For the purposes of this chapter the scope of the words 'meat' and 'offal' is as described in the HS General Explanatory Notes to this chapter.

...

4. Guidance is also given, in the HS General Explanatory Notes to this chapter, on the distinction between meat and offal of this chapter and that of chapter 16. However, this chapter covers meat offal, raw, minced, or finely chopped but not further prepared, wrapped in plastic material (even in the form of sausages) solely for ease of handling or transport.

5. For the purposes of distinguishing between bone-in and boneless cuts, cartilage and tendons shall not be regarded as bone.'

8. The Explanatory Note concerning subheadings 0207 14 10 to 0207 14 99 indicates that the Explanatory Notes to subheadings 0207 13 10 to 0207 13 99 apply, mutatis mutandis. The latter are worded as follows:

'0207 13 10 Boneless

This subheading covers meat of fowls, without bones, regardless of the part of the carcase from which it comes.

...

0207 13 99 Other

This subheading covers edible offal, in particular hearts, combs and wattles, but excluding livers.

This subheading also includes the feet of fowls.'

9. The General rules for the interpretation of the CN, which are set out in the Part One, Title I A, provide, in particular:

'Classification of goods in the Combined Nomenclature shall be governed by the following principles:

1. The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions.

2. ...

(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. ... The classification of goods consisting of more than one material ... shall be according to the principles of rule 3.

3. When by application of rule 2(b) or for any other reason, goods are prima facie classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed ... goods ..., those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods;.

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.

...'

Regulation No 1972/2003

10. The first paragraph of Article 41 of the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded (OJ 2003 L 236, p. 33) allows the Commission of the European Communities to adopt measures to facilitate the transition of the new Member States to the regime resulting from the application of the common agricultural policy. That provision lays down that those transitional measures 'may be taken during a period of three years following the date of accession and their application shall be limited to that period'. The Commission adopted Regulation No 1972/2003 in reliance inter alia on that provision.
11. As stated in recital 1 in the preamble to Regulation No 1972/2003, that regulation seeks to 'avoid the risk of deflection of trade, affecting the common organisation of agricultural markets due to the accession of 10 new States to the European Union on 1 May 2004'. In view of that risk, recital 3 in the preamble declares that provisions should be made for 'deterrent charges to be levied on surplus stocks in the new Member States'.
12. To that end, Article 4(1) of Regulation No 1972/2003 requires the new Member States to levy charges on holders of surplus stocks at 1 May 2004 of products in free circulation. Article 4(5) lays down that that obligation is to apply, in the case of Estonia, inter alia, to products covered by code 0207 14 10 of the CN.
13. Article 4(2) of that regulation provides:

'In order to determine the surplus stock of each holder, the new Member States shall take into account, in particular:

(a) averages of stocks available in the years preceding accession;

(b) the pattern of trade in the years preceding accession;

(c) the circumstances in which stocks were built up.

The notion surplus stocks applies to products imported into the new Member States or originating from the new Member States. The notion surplus stocks applies also to products intended for the market of the new Member States.

...'

14. In order to ensure that the charge on surplus stocks is correctly applied, Article 4(4) of that regulation lays down that the new Member States are, without delay, to carry out an inventory of stocks available as at 1 May 2004 and to notify the Commission of the quantity of products in surplus stocks by 31 October 2004 at the latest.
15. Pursuant to Article 10 of Regulation No 1972/2003, that regulation applied from 1 May 2004 to 30 April 2007.

Regulation No 853/2004

16. Point 1.14 of Annex I to Regulation (EC) No 853/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific hygiene rules for food of animal origin (OJ 2004 L 139, p. 55 and corrigendum OJ 2004 L 226, p. 22), defines mechanically separated meat ('MSM') in the following terms:

'... the product obtained by removing meat from flesh-bearing bones after boning or from poultry carcases, using mechanical means resulting in the loss or modification of the muscle fibre structure.'

National law

17. On 7 April 2004, the Estonian parliament adopted the Law on the surplus stock charge (à'leliigse laovaru tasu seadus, RT I 2004, 30, 203).
18. By judgment of 5 October 2006, the Riigikohus (Supreme Court) declared Article 6(1) of that law inapplicable as being contrary to Regulation No 1972/2003. The court found that the requirement introduced by that provision to apply a coefficient of 1.2 in calculating the transitional stock did not allow a sufficiently differentiated treatment of each operator.
19. In order to give effect to that judgment, the Estonian Parliament, by a law adopted on 25 January 2007 (RT I 2007, 12, 65), made several amendments to the initial law. That law as amended ('the à'LTS'), entered into force on 16 February 2007, and applies retrospectively to situations that have arisen from 1 May 2004.
20. Under Article 7 of the à'LTS, the surplus stock is equal to the difference between the stock actually held on 1 May 2004 and the transitional stock.
21. Article 6(1) of the à'LTS defines the 'transitional stock' as the annual average stock held during the four years preceding the accession of the Republic of Estonia to the Union (2000 to 2003) multiplied by 1.2. To mitigate the strictness of that rule for operators who did not carry on a relevant activity during those four reference years, Article 6 enacted in addition two special rules. First, an operator whose activity in the relevant market has started after 2003 must show that his stock at 1 May 2004 is equal to 'the stock ... customarily produced, sold, or otherwise transferred or acquired by him for payment or without payment'. Second, pursuant to Article 6(3), for operators who as at 1 May 2004 have carried on business on the relevant market for at least one year, the transitional stock is 'the average stock on 1 May of the last years of operation' or the stock on 1 May 2003, the quantity so determined being multiplied by 1.2.
22. Under Article 10 of the à'LTS, the transitional stock and the surplus stock are calculated by the Ministry of Agriculture on the basis of a declaration by the operator. If the operator makes a reasoned application, the ministry can take account of certain factors which may explain an increase in stocks not caused by speculation, such as the growth of the operator's production, processing or sales volume in the previous year, the maturation period of agricultural products, the fact that the stocks were built up before the third quarter of 2003, the reduction of the export or sales volume for reasons independent of the operator, or other circumstances independent of the latter.
23. Those provisions are supplemented by Article 23 of the à'LTS, which defines a number of circumstances in which the transitional stock may be revised upwards if it is attributable to the development of the economic operator's activity in the period from 1 May 2003 to 1 May 2006.

The dispute in the main proceedings and the questions referred for a preliminary ruling

24. RLK is an Estonian undertaking in the food processing sector. In preparing its products, it uses frozen cuts of poultry meat, deboned using mechanical means, called MSM.
25. By decision of 30 March 2007, the Minister for Agriculture fixed the surplus stock of frozen chicken cuts held by RLK at 83 462 kilos. On 30 April 2007, MTA accordingly issued a tax notice for EEK 1 337 237 (approximately EUR 90 000 at the current exchange rate) pursuant to the charge on surplus stocks.
26. In the context of the action which it brought against the tax notice in the national court, RLK claims that the products concerned fall not under subheading 0207 14 10, but under subheading 0207 14 99, so that they could not be subject to that charge. In effect, those products are not frozen chicken cuts, but are presented in the form of stock composed of cuts of meat and soft tissue obtained from the mechanical treatment of chicken bones. In addition, RLK claims that Regulation No 1972/2003 is counter to certain provisions of the à'LTS concerning the calculation of surplus stocks.
27. Having doubts as to the tariff classification of the products concerned in the main proceedings and the interpretation of Regulation No 1972/2000, the Tallinna Halduskohus (the Tallin Administrative Court) decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:

'(1) Must [MSM] (mechanically separated meat was defined for the first time in point 1.14 of Annex I to [Regulation No 853/2004]) be classified as from 1 May 2004 under CN code 0207 14 10 or CN code 0207 14 99 ...?

(2) If the product described in Question [1] must be classified under CN code 0207 14 10 ...:

(a) Does Article 4(1) and (2) of [Regulation No 1972/2003] preclude the ascertainment of the amount of [the] operator's surplus stock by automatically deducting ... (... as transitional stock) the operator's average stock as at 1 May of the four years of activity preceding 1 May 2004, multiplied by 1.2?

(b) If the answer is in the affirmative, would the answer be different if in determining the amount of the transitional stock and [the] surplus stock it were possible also to take into account the growth of the operator's production, processing or sales volume, the maturation period of the agricultural product, the time when the stocks were built up, and other circumstances independent of the operator?

(3) Is it compatible with the objective of [Regulation No 1972/2003] to levy the surplus stock charge where the operator is found to have a surplus stock as at 1 May 2004 but the operator shows that he has not obtained a real advantage in terms of a price difference from marketing the surplus stock after 1 May 2004?

Preliminary Question

28. RLK argues that Regulations Nos 1789/2003 and 1972/2003 cannot be enforced against it in so far as, at the date of accession of the Republic of Estonia to the Union, they had not been published in Estonian in the Official Journal of the European Union. It relies in that regard on the judgment in Case C-161/06 Skoma'Lux [2007] ECR I-10841.
29. RLK submits that the unenforceability of Regulation No 1972/2003 also prevents application of the à'LTS, for the à'LTS, published officially in its original version on 27 April 2004, contains in particular numerous references to that regulation. It says that the late publication of the à'LTS did not enable economic operators to be informed early enough of the system of surplus stock charges applicable from 1 May 2004.
30. Although the order for reference does not address this question, in order to provide the referring court with guidance, it should be recalled that an act of a Community institution, such as Regulations Nos 1789/2003 and 1972/2003, cannot be enforced against natural and legal persons in a Member State before they have the opportunity to make themselves acquainted with it by its proper publication in the Official Journal (Skoma'Lux, cited above, paragraph 37 and the case'law cited).
31. Article 58 of the Act of Accession, referred to in paragraph 10 above, provides that '[t]he texts of the acts of the institutions, and of the European Central Bank, adopted before accession and drawn up by the Council, the Commission or the European Central Bank in the Czech, Estonian, Hungarian, Latvian, Lithuanian, Maltese, Polish, Slovak and Slovenian languages shall, from the date of accession, be authentic under the same conditions as the texts drawn up in the present 11 languages. They shall be published in the Official Journal of the European Union if the texts in the present languages were so published.'
32. The Court has already held that that provision precludes the obligations contained in Community legislation which has not been published in the Official Journal of the European Union in the language of a new Member State, although that language is an official language of the Union from being imposed on individuals in that Member State, even though those persons could have learned of that legislation by other means. However, the fact that a Community regulation is not enforceable against individuals in a Member State in the language of which it has not been published has no bearing on the fact that, as part of the acquis communautaire, its provisions are binding on the Member State concerned as from its accession (Skoma'Lux, paragraphs 51 and 59).
33. By adopting the original version of the à'LTS on 7 April 2004, the Republic of Estonia implemented the obligations under Regulation No 1972/2003 by introducing a charge on surplus stocks of agricultural products and defining how it was to be calculated. The à'LTS thus creates obligations for individuals in Estonia, notwithstanding the fact that the regulation cannot be enforced against them before they have had an opportunity to learn of it by proper publication in the Official Journal of the European Union in the language of that Member State.
34. In those circumstances, the Court has previously held that the rule stated in Skoma'Lux does not prevent the enforcement against individuals of those of the provisions of Regulation No 1972/2003 which were taken up in the à'LTS. That rule might nevertheless remain of residual application if certain provisions of that regulation which were not implemented by the à'LTS were relied on by the Estonian authorities against individuals before the official publication of the regulation in Estonian. It is for the national court, if necessary, to interpret the à'LTS in order to ascertain whether such circumstances exist (Case C-560/07 Balbiino [2009] ECR I-0000, paragraph 32).
35. Regulation No 1972/2003 determines the products subject to the charge on surplus stocks by reference to the subheadings of the CN under which those products fall. It is, therefore, for the national court to verify whether and to what extent the national law took over the CN applicable to the facts at issue in the main proceedings resulting from Regulation No 1789/2003, before the official publication of that regulation in Estonian, thus permitting individuals to take note of the content and structure of tariff subheading 0207 14, relevant to the case in the main proceedings.

The first question

36. The national court asks whether frozen poultry MSM falls under tariff subheading 0207 14 10 or 0207 14 99.

Observations submitted to the Court

37. RLK argues that frozen poultry MSM is not comparable to boneless cuts of poultry meat falling under 0207 14 10. Having regard to the characteristics of frozen poultry MSM and the definition which is given of it in point 1.14 of Annex I to Regulation No 853/2004, that product must be classified under subheading 0207 14 99.
38. RLK points out that, during the period from 16 February to 1 May 2004, national legislation classified MSM in a subheading 0207 14 99 11. It could not therefore expect that that tariff classification would be called into question subsequently.
39. According to the Estonian Government, that first question must be examined solely in the light of the CN in force on 1 May 2004. The fact that national legislation classifying frozen poultry MSM under a subheading 0207 14 99 11 had been in force from 16 February to 1 May 2004 is irrelevant. None the less, that Government points out that, in 2002, in response to a request for binding tariff information made by RLK, the customs authorities gave a decision in favour of the classification of frozen poultry MSM in subheading 0207 14 10. Pursuant to that decision, the applicant in the main proceedings continued to import that type of product until 1 May 2004, despite the entry into force from 16 February 2004 of the Estonian legislation classifying that product in subheading 0207 14 99 11.
40. The Estonian Government points out, according to the Explanatory Notes of the CN, that subheading 0207 14 99 covers inter alia 'edible offal, in particular hearts, combs and wattles, but excluding livers'. It is not contested in the dispute in the main proceedings that the products concerned do not contain any offal of that type. The tariff classification must be determined according to the essential character of those products, in the present case poultry meat. Consequently, frozen poultry MSM falls under subheading 0207 14 10.
41. The Commission shares that view. Neither the descriptions nor the notes relating to subheadings 0207 14 10 and 0207 14 99 give detailed indications as to the difference between meat and offal. The description of the products concerned provided by the national court do not correspond to the notion of offal, but fall under the category of frozen boneless cuts of fowls corresponding to the subheading 0207 14 10.

Answer of the Court

42. It is settled case-law that, in the interests of legal certainty and for ease of verification, the decisive criterion for the classification of goods for customs purposes is in general to be sought in their objective characteristics and properties as defined in the wording of the relevant heading of the CN and the notes to the sections or chapters (see, in particular, Case C-183/06 RUMA [2007] ECR I-1559, paragraph 27 and Joined Cases C-208/06 and C-209/06 Medion and Canon Deutschland [2007] ECR I-7963, paragraph 34).
43. The Court has already held that the Explanatory Notes to the CN and those to the HS are, for their part, an important aid for interpreting the scope of the various tariff headings but do not have legally binding force. The wording of those notes must therefore be consistent with the provisions of the CN and cannot alter their scope (see Case C-495/03 Intermodal Transports [2005] ECR I-8151, paragraph 48; Case C-445/04 Possehl Erzkontor [2005] ECR I-10721, paragraph 20; and Case C-500/04 Proxxon [2006] ECR I-1545, paragraph 22).
44. As the wording of subheading 0207 14 99 includes only the term 'Other', it is necessary to refer to heading 0207 as a whole. It follows from the wording of that heading that 'Meat and edible offal, of the poultry of heading 0105, fresh, chilled or frozen', that it concerns meat and offal from poultry capable of being used for human consumption.
45. With regard to frozen meat cuts and offal falling under subheading 0207 14, which alone is relevant in the present case, the CN makes a distinction between, first, 'cuts' of meat and, second, 'offal', the latter being, in turn, classified in two subcategories, one of which is specifically reserved for livers (0207 14 91) and the other of which is residual, including all other types of offal (0207 14 99).
46. Because subheading 0207 14 does not provide for any category other than meat cuts and offal, any product covered by that subheading which does not fall within one of those categories can only be classified in the other. It should be pointed out that that structure of subheading 0207 14 conforms to the normal meaning of the word 'offal', designating the edible parts other than the meat of animals for human consumption.
47. It is therefore necessary to examine whether products such as those concerned in the main proceedings fall, as RLK claims, under the categories of offal other than livers, covered by subheading 0207 14 99.
48. The explanatory notes of the CN specify that that subheading includes edible offal such as hearts, combs and wattles along with includes the feet of fowls.
49. In the present case, it follows both from the order for reference and the observations submitted to the Court that the products concerned in the main proceedings are, before freezing, in the form of stock composed of leftovers of meat and tissue obtained after a mechanical pulverisation of flesh-covered bones in accordance with the definition of MSM appearing in point 1.14 of Annex I to Regulation No 853/2004.
50. It follows that products such as those at issue in the main proceedings cannot be classified in subheading 0207 14 99, since they do not have the objective characteristics and properties of offal to which that subheading refers.
51. Accordingly, those products fall under subheading 0207 14 10.
52. Lastly, the circumstance that, before the accession of the Republic of Estonia, the Estonian customs authorities classified, pursuant to the national legislation, that type of product in another individual subheading has no impact on the interpretation of the Community legislation applicable in that Member State from 1 May 2004.
53. In the light of those consideration, the answer to the first question is that Regulation No 2658/87 as amended by Regulation No 1789/2003 must be interpreted as meaning that products such as those at issue in the main proceedings constituted of frozen MSM, obtained after the mechanical deboning of fowls and destined for human consumption must be classified in subheading 0207 14 10 of the CN.

The first part of the second question

54. The national court asks whether Article 4(1) and (2) of Regulation No 1972/2003 precludes the method adopted by the à'LTS for calculating the surplus stock of an operator consisting in applying to transitional stock a coefficient of 1.2.

Observations submitted to the Court

55. RLK argues that Article 4 of Regulation No 1972/2003 precludes the method of calculating transitional stock adopted by Article 6 of the à'LTS inasmuch as it provides for the application of a coefficient of 1.2, for that method does not allow that stock to be determined with precision and proportionality of the charge on surplus stocks to be ensured.
56. The Estonian Government is, on the other hand, of the view that the use of that coefficient is consistent with the objectives pursued by Regulation No 1972/2003. It maintains that that regulation does not restrict or exclude the use of such a coefficient, and leaves the Member States free to choose the method of calculation suited to local circumstances. The coefficient allows the transitional stocks of all operators to be increased so as to take account of economic growth during the years preceding accession of the Republic of Estonia to the Union.
57. Despite supporting RLK's position in its written pleadings, at the hearing the Commission adopted the position of the Estonian Government.

Answer of the Court

58. The Court has already held that Article 4(2) of Regulation No 1972/2003 does not contain any provision requiring the Member States to apply, or prohibiting them from applying, a coefficient uniformly to operators' transitional stocks for the purpose of calculating the surplus stock (Balbiino, cited above, paragraph 47).
59. That provision provides that, to determine each holder's surplus stock, the new Member States are to take into account in particular the 'averages of stocks available in the years preceding accession'. In the absence of more precise rules as to the relevant period or the method of calculating the averages of stocks available, such a formulation gives the Member States a discretion in defining the criteria on the basis of which those elements are implemented, in compliance with the objectives pursued by the regulation and the general principles of Community law (Balbiino, cited above, paragraph 37).
60. Thus, Article 4(2) of Regulation No 1972/2003 sets out a non'exhaustive list of certain criteria for the calculation of operators' surplus stocks, while leaving the Member States the option of supplementing them as they think fit in accordance with the discretion on their part (see, to that effect, Balbiino, cited above, paragraph 47).
61. Applying a coefficient of 1.2 to the transitional stock is prima facie favourable to operators, since it tends to reduce the surplus stock. According to the Estonian Government, the coefficient was fixed on the basis of the rate of growth of Estonian agricultural production observed during the period from 2000 to 2004. The coefficient thus makes it possible to update the average stock on 1 May of the years 2000 to 2003 in the light of that rate of growth and to determine a transitional stock and hence a surplus stock which reflects proportionately the development of growth observed across the whole agricultural sector in Estonia from 1 May 2000 to 1 May 2004. It thus helps to establish a basis of comparison between the stock on 1 May 2004 and the average stock on 1 May of the previous four years (see, to that effect, Balbiino, cited above, paragraph 48).
62. Having regard to those characteristics, the choice of such a coefficient does not undermine the objectives pursued by Regulation No 1972/2003 and does not infringe the principles of proportionality and equal treatment (see, to that effect, Balbiino, cited above, paragraph 49).
63. Thus, Article 4(2) of Regulation No 1972/2003 does not preclude the application of a coefficient such as that provided for in Article 6(1) of the à'LTS for the purpose of calculating the transitional stock (see, to that effect, Balbiino, cited above, paragraph 50).
64. In those circumstances, the answer to the first part of Question 2 is that Article 4(2) of Regulation No 1972/2003 does not preclude a national measure, such as Article 6 of the à'LTS, under which an operator's surplus stock is determined by deducting from the stock actually held on 1 May 2004 the transitional stock, which is defined as the average stock on 1 May of the previous four years of activity multiplied by a coefficient of 1.2 corresponding to the growth of agricultural production observed in the Member State in question during that four'year period.

The second part of the second question

65. In view of the answer to the first part of the second question, it is unnecessary to answer the second part of that question.

The third question

66. The national court asks whether Regulation No 1972/2003 precludes the levying of a charge on an operator's surplus stock where he is able to prove that he obtained no advantage from the marketing of that stock after 1 May 2004.

Observations submitted to the Court

67. RLK argues that Regulation No 1972/2003 seeks to combat speculation. However, in the case in the main proceedings, any speculation is ruled out. First, the nature of the products concerned in the main proceedings precludes any price jobbing of a speculative nature. The price of frozen poultry MSM was not affected by the accession of the Republic of Estonia. In the Community, those products do not give rise to any form of export refund nor to any other support mechanism implying a difference in price between the Community market and the world market. Second, all the quantities purchased by RLK were destined for its own needs and corresponded to normal stocks in view of the production.
68. RLK claims that the establishment of a charge on surplus stocks must conform to the principle of proportionality and the general principles of Community law, and refers, to that effect, to the order in Case C-30/00 William Hinton & Sons [2001] ECR I-7511. However, in the absence of any advantage obtained from the surplus stock concerned in the main proceedings, RLK is of the view that the charge claimed from it is disproportionate. If Regulation No 1972/2003 were to lead to the establishment of a charge in the circumstances such as those in the case in the main proceedings, that regulation must be invalid in view of the principle of proportionality. It is no longer a question of a system of deterrent charges, but a system of penalties intended to penalise the holding of certain goods.
69. The Estonian Government and the Commission contend that the levy of a charge on an operator which has not obtained an advantage from the sale of its surplus stock is consistent with the purpose of Regulation No 1972/2003.
70. According to the Commission, the aim of that regulation is not to penalise the conduct of operators but to preserve the proper functioning of the common organisation of markets, in the general interest of the Community.

Answer of the Court

71. It is apparent from recitals 1 and 3 of Regulation No 1972/2003 that its objective was to preserve the common organisation of markets by avoiding, by means of a system of deterrent charges on surplus stocks in the new Member States, certain agricultural products being moved artificially to those States with a view to enlargement. The aim was thus to prevent abnormal patterns of trade from disrupting the common organisation of markets (Balbiino, cited above, paragraph 57).
72. That regulation was not intended to penalise speculative conduct on the part of operators but, first, to prevent, by a system of deterrent charges, stocks from being built up for speculative purposes and, second, to neutralise the economic advantages anticipated by those holding them (Balbiino, cited above, paragraph 69).
73. Consequently, the surplus stock charge established by Regulation No 1972/2003, intended to protect the common organisation of agricultural markets, is applicable to all surplus stocks within the meaning of the regulation, regardless of whether the holders of the stocks have actually derived an advantage from marketing them (see, to that effect, Balbiino, cited above, paragraph 71).
74. The answer to the third question is therefore that Regulation No 1972/2003 does not preclude the levying of a charge on an operator's surplus stock even if he is able to prove that he obtained no advantage when marketing that stock after 1 May 2004.

Costs

75. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Third Chamber) hereby rules:

1. Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, as amended by Commission Regulation (EC) No 1789/2003 of 11 September 2003, must be interpreted as meaning that products such as those at issue in the main proceedings constituted of frozen mechanically separated meat obtained after the mechanical deboning of fowls and destined for human consumption must be classified in subheading 0207 14 10 of the Combined Nomenclature.

2. Article 4(2) of Commission Regulation (EC) No 1972/2003 of 10 November 2003 on transitional measures to be adopted in respect of trade in agricultural products on account of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia, as amended by Commission Regulation (EC) No 230/2004 of 10 February 2004, does not preclude national legislation such as Article 6(1) of the Law on the surplus stock charge (à'leliigse laovaru tasu seadus), as amended by the Law of 25 January 2007, under which an operator's surplus stock is determined by deducting from the stock actually held on 1 May 2004 the transitional stock defined as the average stock on 1 May of the previous four years of activity multiplied by a coefficient of 1.2 corresponding to the growth of agricultural production observed in the Member State in question during that four'year period.

3. Regulation No 1972/2003 does not preclude the levying of a charge on an operator's surplus stock even if he is able to prove that he obtained no advantage when marketing that stock after 1 May 2004.

[Signatures]

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* Language of the case: Estonian.