61980C0160
OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN
DELIVERED ON 21 MAY 1981
My Lords,
This case concerns a consignment of five 100 lb drums of a substance called “Keltről F”, which was manufactured by the Kelco Division of Merck & Co. Inc., an American undertaking, and imported into the Netherlands by Smuling-De Leeuw BV (which I shall call “Smuling”). Keltről F appears to be the trade name for food grade xanthan gum produced by Merck & Co. When the consignment was declared for home use in the Netherlands, the Inspecteur der Invoerrechten en Accijnzen at Rotterdam (whom I shall call the Inspector) classified it under heading 39.06 Β of the Common Customs Tariff (the CCT), which carries a 16% duty. Smuling challenged this decision, claiming that the goods should be classified under heading 13.03 C III or, in the alternative, heading 13.02, neither of which carries an import duty.
The tariff headings in question are as follows:
Heading 39.02
“Shellac, Seed lac, Stick lac and other lacs; natural gums, resins, gum-resins and balsams”.
Heading 13.03
“Vegetable saps and extracts; pectic substances, pectinates and pectates; agar-agar and other mucilages and thickeners, derived from vegetable products”.
Heading 13.03 is divided into three subheadings of which the last is “Agar-Agar and other mucilages and thickeners, derived from vegetable products”. This is itself subdivided into three, “Agar-Agar”, “Mucilages and thickeners extracted from locust beans or locust bean seeds” and, lastly, heading 13.03 C III, “Other”.
Heading 39.06
“Other high polymers, artificial resins and artificial plastic materials, including alginic acid, its salts and esters; linoxyn”.
Heading 39.06 is divided into “A. Alginic acid and its salts and esters” and “B. Other”.
It seems to be common ground that the goods in this case are to be classified either under “natural gums” within the meaning of heading 13.02, the other mucilages and thickeners derived from vegetable products covered by heading 13.03 CIII or the other high polymers falling within heading 39.06 B.
According to the order for reference, xanthan gum is produced in the biochemical industry by placing the bacterium xanthomonas campestris on a culture medium of maize sugar or maize starch supplemented with nitrogen, potassium phosphate and other trace elements, those three substances helping to nurture the micro-organisms. The xanthan gum is created metabolically, through the metabolism of the bacterium. When this process is complete, the product is precipitated with isopropyl alcohol and subsequently dried and milled. No further chemical transformation occurs. Xanthan gum is a hetero-polysaccharide with short side chains, being a natural high polymer in which each repeating molecule block consists of D-mannose, D-glucose and D-glucuronic acid molecules.
On appeal before the Tariefcommissie, it seems to have been agreed between the parties that, in view of its structure, method of production and use, xanthan gum corresponds to mucilages and thickeners, derived from vegetable products, within the meaning of heading 13.03. The Inspector, the respondent in the appeal, seems to have accepted that as regards its chemical and biological classification it corresponded closely to the gums and mucilages falling under both headings 13.02 and 13.03 of the Tariff.
After hearing argument, the Tariefcommissie came to the conclusion that the imported goods corresponded to those covered by headings 13.02 and 13.03 as well as to the high polymers covered by heading 39.06. It therefore decided that it was necessary to apply Article 4 (3) (a) of the Tariefbesluit, 1960, which corresponds to Rule A (3) (a) of the General Rules for the Interpretation of the CCT Nomenclature. That Rule is as follows:
“When for any 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”.
The Tariefcommissie thought that both headings 13.02 and 13.03 provided a more specific description of the product in question than heading 39.06 but, since the Inspector had contended that products, such as the one in dispute, which were not obtained naturally but by biochemical industrial processes, could not fall within Chapter 13, it decided to refer the following question to the Court:
“Does not the systematic classification of goods under the various sections and chapters of the Common Customs Tariff allow a gum, which is used as a thickener and which, as regards its nature and composition, corresponds to the goods described under headings 13.02 and 13,03, to be classified under one of the headings of Chapter 13 of the Common Customs Tariff if the gum is prepared on an industrial scale by the action of the bacterium xanthomonas campestris on a culture medium of maize sugar or maize starch?”
Although some criticisms have been made of the form of the question, it seems that it is clearly asking the Court to rule whether a substance which corresponds to goods specified in Chapter 13 is excluded because the goods are prepared “on an industrial scale” by the action described. It seems to me that in essence the question is really whether a substance of the kind described, produced in the way described, is capable of falling within Chapter 13 properly construed.
The answer to that question depends on an interpretation of the wording of the heading relied on in the light of the General Rules for the interpretation of the nomenclature to be found at the beginning of the annex containing the CCT in the Regulation applicable at the time (here Regulation No 2723/76 of 8 November 1976). Rule A of those General Rules declares “Interpretation of the nomenclature of the Common Customs Tariff shall be governed by the following principles. (1) ... for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes ...” Rule A to a large extent reproduces the Rules for the interpretation of the Customs Cooperation Council (or “CCC”) Nomenclature. As the Court has already held, reference may be made to the CCC Explanatory Notes in the absence of any Community Explanatory Notes, though the former cannot of course override what the Court finds to be the real meaning of the Common Customs Tariff.
The first issue is therefore whether a substance produced as described falls under heading 13.02 and in particular whether it is a natural gum. The critical word is “natural”, and, as was pointed out on behalf of the Commission and the French Government, none of the products referred to as natural gum in the CCC Explanatory Notes (to which the Community notes refer) appears to be other than one found naturally. These gums, like the other substances in the second part of the heading, are said to “have the common feature of being vegetable secretions which solidify on contact with air”. Keltről F exists only because it is produced in the way described: it does not come into being “naturally” within the meaning of the heading. Whether xanthan gum found naturally is within the heading it is unnecessary to consider because in my view the product in question here is not a “natural gum”.
So far as heading 13.03 is concerned, “other mucilages and thickeners” must be “derived from vegetable products” in the English text or “dérivés des végétaux” in the French text. I understand that the Dutch text is to the same effect as the English and that the German and Danish texts have words similar to “vegetable substances or matter”, namely “pflanzliche Stoffe” and “vegetabilske stoffer”. The Italian text is “vegetali”. All the texts must be construed to mean the same thing. “Vegetable” is common to all. “Vegetable products” are capable of including a much wider range of items which could not possibly be described as “vegetables”. Unless the word “derived” is to be given an extensive interpretation, which I do not consider that it should, it seems to me that the meaning to be accepted is that indicated in the French text by the word “végétaux”. It does not seem to me that Keltről F produced as described is capable of being said to be “dérivé des végétaux”.
Considerable scientific and technical material has been produced by the company to show that other substances are produced by industrial means which it is said fall within heading 13.03. Despite this, it is to be observed that most of the items in this heading are said to be obtained either naturally (perhaps by incision) or by a process of extraction or solution in e.g. water or alcohol, and are at most “standardized” or “stabilized” by the addition of e.g. sugar or a chemical. Despite the arguments based on the statement in the notes that “mucilaginous substances obtained from carageenin by chemical transformation”, and other thickeners “rendered water-soluble ... by any other process”, are included in the heading, it seems to me that what is intended to be included in this heading is a substance derived from vegetables by a relatively simple process of extraction, solution or, (if the notes are followed) in the case of mucilages derived from carrageenin, by “chemical transformation”. The process of production described in the present case seems to me to go far beyond that and to prevent Keltről F, for this reason also, from being capable of falling within heading 13.03.
I have treated the phrase “on an industrial scale” in the reference as meaning “industrially” since I am not satisfied that, for the purpose of the present heading, there is any quantitative factor to be taken into account as the phrase “on an industrial scale” seems to involve.
Accordingly in my opinion the answer to the question referred should be that gum prepared industrially by the action of the bacterium xanthomonas campestris on a culture medium of maize sugar or maize starch in the way described in the reference is not capable of falling within heading 13.02 or 13.03 of the Common Customs Tariff.