Opinion of Mr Advocate General Fennelly delivered on 8 June 2000. - Fábrica de Queijo Eru Portuguesa Ldª v Tribunal Técnico Aduaneiro de Segunda Instância. - Reference for a preliminary ruling: Supremo Tribunal Administrativo - Portugal. - Free movement of goods - Common Customs Tariff - Tariff heading - Cheese or casein - Regulation (EEC) No 3174/88. - Case C-42/99.



European Court reports 2000 Page I-07691



Opinion of the Advocate-General

1. In this case the Supremo Tribunal Administrativo (Supreme Administrative Court), Portugal, has asked the Court for guidance as to the correct classification for customs purposes of a product produced by the addition of rennet to skimmed milk, described on the exporter's invoice as skimmed milk cheese and intended for use in the manufacture of dietetic products. The importer, ERU Portuguesa, argues that the product should be classified under the Combined Nomenclature subheading 3501 10 90 (Casein, caseinates and other casein derivatives; casein glues: - Casein: - Other); the Portuguese customs authorities are of the view that it should be classified under the subheading 0406 90 11 (Cheese and curd: - Other cheese: - For processing).

The legislative framework

2. Within the Community, goods are classified for customs tariff and statistical purposes in accordance with the Combined Nomenclature based on the world-wide Harmonised System. The Combined Nomenclature constitutes Annex I to Council Regulation (EEC) No 2658/87. Each item in the Combined Nomenclature has eight digits, consisting of the Harmonised System heading plus two further digits.

3. Chapter 4 of the Combined Nomenclature is entitled Dairy produce; Birds' eggs; Natural honey; Edible products of animal origin, not elsewhere specified or included. The description against heading 0406 is Cheese and curd. That heading includes:

0406 90 - Other cheese:

0406 90 11 - - For processing.

4. The notes to Chapter 4 provide:

2. Products obtained by the concentration of whey and with the addition of milk or milkfat are to be classified as cheese in heading No 0406 provided that they have the following three characteristics:

(a) a milkfat content, by weight of the dry matter, of 5% or more;

(b) a dry matter content, by weight, of at least 70% but not exceeding 85%; and

(c) they are moulded or capable of being moulded.

5. Chapter 35 of the Combined Nomenclature is entitled Albuminoidal substances; Modified starches; Glues; Enzymes. The description against heading 3501 is Casein, caseinates and other casein derivatives; casein glues. That heading includes:

3501 10 - Casein:

3501 10 90 - - Other.

6. Regulation No 2658/87 provides for the Commission to be assisted by a Committee on Tariff and Statistical Nomenclature; the Commission, acting pursuant to a prescribed procedure involving the Committee, may adopt Explanatory Notes. The Explanatory Notes to the Combined Nomenclature of the European Communities in the version applicable at the material time state as follows:

3501 Casein, caseinates and other casein derivatives; casein glues

3501 10 10

to Casein

3501 10 90

These subheadings cover the caseins referred to in the HS Explanatory Notes to Heading No 3501, (A), (1). These caseins - irrespective of the method of precipitation used to obtain them - are classified in these subheadings when they contain 15% or less by weight of water; otherwise they are classified in Heading No 0406.

7. The Harmonised System Explanatory Notes are issued by the Customs Co-operation Council (now the World Customs Organization) as guides to the interpretation of the Harmonised System. The Explanatory Notes to Heading No 3501, (A), (1), in the edition applicable at the material time, contained no note relevant to the issue before the Court in the present case. The Notes to that heading in the second edition, however, provide:

Casein is the main protein constituent of milk. It is obtained from skimmed milk by precipitation (curdling), generally with acids or rennet. The heading covers various types of casein which differ according to the method of curdling, e.g., acid casein, caseinogen and rennet casein (paracasein).

Casein is usually a yellowish-white granular powder, soluble in alkalis but not in water. It is used mainly in the preparation of glues, paints or distempers, for the coating of papers, and in the manufacture of casein plastics (hardened casein), man-made fibres, dietary or pharmaceutical products.

Facts

8. In March 1989 the company Fábrica de Queijo ERU Portuguesa Ld.a (hereinafter ERU Portuguesa) imported from Denmark into Portugal 1 863 boxes of an item described on the exporter's invoice as Icelandic skimmed milk cheese under customs subheading 3501 10 90. It appears to be common ground that the product has the following composition: 54% water, 0.9% fat, 5.7% phosphorus, 2% salt, and casein. According to ERU Portuguesa, it is produced by the addition of rennet to skimmed milk; the resulting coagulated casein is compressed into hydrated casein flakes. It is soluble only in an alkaline medium, not in water, and is intended for use in the manufacture of dietetic products. At the hearing it was stated more specifically by ERU Portuguesa that the product was intended to be processed into cheese if it was of a suitable quality.

9. In February 1991, the Tribunal Técnico Aduaneiro de Segunda Instância (Specialised Customs Court of Second Instance) classified the goods under customs subheading 0406 90 11, confirming the classification made by the checker, rechecker and conference of recheckers and the judgment of the Tribunal Técnico Aduaneiro de Primeira Instância (Specialised Customs Court of First Instance). ERU Portuguesa appealed unsuccessfully to the Tribunal Tributário de Segunda Instância (Tax Court of Second Instance) and thence to the Supremo Tribunal Administrativo.

10. The Supremo Tribunal Administrativo considered that there was a conflict between the notes to Chapter 4, which in its view specify a dry matter content ... of at least 70% but not exceeding 85% for classification under heading 0406, and the Explanatory Notes to the Combined Nomenclature, which state that caseins containing by weight more than 15% water are included under heading 0406. Moreover the fat content (1%) of the product at issue is less than the minimum (5%) required for heading 0406 and the dry content (by inference, not exceeding 46%) does not attain the minimum 70% required for heading 0406. It accordingly stayed the proceedings and referred the following questions for a preliminary ruling:

1. Are the Explanatory Notes to the Combined Nomenclature, where they state that caseins containing by weight more than 15% water are included under heading 0406 (cheese and curd), contrary to Commission Regulation (EEC) No 3174/88 according to which (Chapter 4) they are to be classified under heading 0406, as cheese, provided that:

(a) they have a fat content of 5% or more;

(b) they have a dry matter content, by weight, of at least 70% but not exceeding 85%; and

(c) they are moulded or capable of being moulded?

2. Having regard to Commission Regulation (EEC) No 3174/88 are the imported goods (which have the following composition: 54% water, 0.9% fat, 5.7% phosphorus, 2% salt and casein) to be classified under customs heading 3501 10 90 0 00 000 as casein - other - or under customs heading 0406 90 11 0 10 000 as other cheeses?

Observations of the parties

11. Written and oral observations have been submitted by ERU Portuguesa, the Commission and the Portuguese Government.

12. The written observations of ERU Portuguesa and the Commission focus primarily on the apparent inconsistency between the Explanatory Notes relating to subheadings 3501 10 10 to 3501 10 90 and the chapter notes relating to heading 0406. Since the product has a moisture content of 54%, it cannot be classified under subheading 3501 10 90 without conflicting with those Explanatory Notes. Since it has a fat content of 0.9%, however, neither can it be classified under heading 0406 without conflicting with the chapter notes.

13. ERU Portuguesa concludes that the Explanatory Notes cannot be the basis for classification of the product under heading 0406: the chapter notes contain no relevant exception and the Explanatory Notes had not been properly circulated in 1989, since they were not published in any official journal or bulletin. In the alternative, ERU Portuguesa submits that, since the product cannot be classified under heading 0406 since it does not satisfy the three conditions set out in the chapter notes, it should be classified under heading 0410, Edible products of animal origin, not elsewhere specified or included.

14. The Commission for its part concludes that the Explanatory Notes to heading 3501 must be regarded as in effect overridden by the chapter notes to heading 0406, since the latter but not the former are legally binding; the product should accordingly be classified under subheading 3501 10 90.

15. Portugal, however, makes the point that the three conditions set out in the chapter notes to heading 0406 are there expressed to apply only to products obtained by the concentration of whey and with the addition of milk or milkfat. Portugal asserts that the product in question was not so obtained; it does not therefore have to satisfy the three conditions set out in the chapter notes in order to be classified under heading 0406. Since the product contains more than 15% by weight of water, by virtue of the Explanatory Notes to Chapter 35 it should accordingly be classified under heading 0406.

16. Portugal attaches to its observations the letter of 27 April 1989 in which ERU Portuguesa contested the original classification of the product. It is stated in that letter that the product was made from skimmed milk to which rennet was added. Since the raw material from which the product was made appears to be crucial in determining its correct classification, the Court put a written question to ERU Portuguesa and Portugal, requesting them to confirm whether that was correct. Both parties confirmed that the product was indeed made from skimmed milk.

17. At the hearing the submissions of Portugal were to the same effect as its written observations; both ERU Portuguesa and the Commission however presented a different argument from that adduced in their written observations.

18. The Commission accepted that the notes to Chapter 4 could be disregarded. It put forward an entirely new argument to the effect that, since the phosphorus content of the product was, at 5.7%, too high for cheese, the product should not in any event be classified under heading 0406. Nor was it a casein, since with a water content of 54% it exceeded the maximum moisture content for casein of 10% set by Directive 83/417. In the Commission's view, the product should be classified under subheading 2106 90 99, Food preparations not elsewhere specified or included - Other - Other. The residual heading suggested in the alternative by ERU Portuguesa in its written observations is, according to the Commission, inappropriate, as it is intended to encompass turtle eggs and other such products.

19. ERU Portuguesa also accepted at the hearing that the notes to Chapter 4 were irrelevant since the product was not obtained by the concentration of whey and appeared to accept the Commission's new argument that the phosphorus content of the product was too high for it to be classified as cheese. It added that no laboratory analysis had been produced to corroborate the composition of the product and concluded that, since in its view the known composition of the product was not sufficient to identify the nature of the product, it was not possible to establish its correct classification in the Combined Nomenclature, in which case the importer's classification under heading 3501 should be retained.

Analysis

20. In the light of the replies to the Court's question, an answer to the referring court's first question must be regarded as no longer necessary for the resolution of the main proceedings. I shall accordingly turn to the second question referred, namely the correct classification for customs purposes of the product at issue: in short, should it be classified as casein or as cheese for processing?

21. The Combined Nomenclature and the Harmonised System are prefaced by six general rules for their interpretation, the first of which provides that ... 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, none of which appears relevant to the resolution of this case.

22. The Court has, furthermore, consistently held that, in the interests of legal certainty and ease of verification, the decisive criterion for the customs classification of goods is in general to be sought in their objective characteristics and properties, as defined in the relevant Combined Nomenclature headings and section or chapter notes. Likewise, for the purpose of interpreting the Combined Nomenclature, both the chapter notes and the Explanatory Notes are important means for ensuring the uniform application of the tariff and as such may be regarded as useful aids to its interpretation. Those Explanatory Notes include both the notes drawn up, as regards the Combined Nomenclature, by the European Commission and, as regards the Harmonised System, by the Customs Co-operation Council. Although an important aid to the interpretation of the scope of the various tariff headings, the Explanatory Notes do not have legally binding force, so that it is necessary, where appropriate, to examine whether their content is in accordance with the actual provisions of the Common Customs Tariff and whether they alter the meaning of those provisions. The Court has also held that the Explanatory Notes drawn up by the Customs Co-operation Council are, in the absence of specific provisions of Community law, an authentic source for interpreting the headings to the Common Customs Tariff. That principle is reflected in the Foreword to the Explanatory Notes at issue in this case, which states:

The Explanatory Notes to the Combined Nomenclature of the European Communities contain many references to [the Harmonised System] Explanatory Notes and thus do not take the place of those Explanatory Notes but should be looked upon rather as being complementary to them. The two publications must therefore often be used in conjunction with one another.

23. In this case, the terms of the headings do not provide any relevant information and there are no relevant section or chapter notes. There is however an Explanatory Note to Chapter 35 which expressly states that caseins containing more than 15% of water are to be classified under heading 0406. The issue therefore is whether there is any reason not to apply that note.

24. It is clear from the case-law of the Court that the note may not apply if the content of that note is not in accordance with the actual provisions of the Combined Nomenclature or if it alters the meaning of those provisions. It is accordingly necessary to consider the scope of, on the one hand, casein in heading 3501 and, on the other hand, cheese in heading 0406.

25. The fact that those terms are not defined by the Combined Nomenclature leads to the supposition that the products are regarded as sufficiently characterised by their very descriptions and in particular their objective characteristics and properties.

26. The principal definition of cheese in the New Shorter Oxford English Dictionary is the curds of milk (coagulated by rennet) separated from the whey and pressed into a solid mass. It has been made by the coagulation of milk since ancient times: Homer's Odyssey recounts how the Cyclops Polyphemus sat down to milk his ewes and bleating goats, which he did methodically, putting her young to each mother as he finished. He then curdled half the white milk, gathered it all up, and stored it in wicker baskets ... in his cave where Ulysses and his men found it. We do not know what coagulating agent Polyphemus used; the use of rennet in Roman times is however recorded by Columella in Rei Rusticae (On Rustic Matters, c. AD 65), who wrote that milk

should be curdled with rennet obtained from a lamb or kid, although it can also be done with the flower of the wild thistle or the seeds of the safflower, and equally well with the liquid which flows from a fig-tree if you make an incision in the bark while it is still green.

27. Casein is defined in the New Shorter Oxford English Dictionary as the chief protein of milk; exp. this in coagulated form, as in cheese.

28. Thus it is immediately clear that the product at issue in this case cannot be classified as casein solely by virtue of the fact that it was produced by the coagulation of skimmed milk with rennet. If rennet is added to milk, the casein fraction of the proteins coagulates and shrinks, trapping the fat globules and forcing out the whey. ... Once the curd has formed it is worked in one way or another to produce the characteristic texture of the particular type of cheese. If, as ERU Portuguesa argues, the product should be classified as casein solely because it is the result of such a process, there would appear to be little scope for heading 0406; certainly the vast majority of the cheeses individually listed under that heading are produced in this way.

29. There must therefore be further objective characteristics and properties of casein beyond the mere fact that it is the result of coagulating milk.

30. The Harmonised System Explanatory Notes set out above confirm the method of production of casein and state that it is usually in the form of a granular powder not soluble in water. ERU Portuguesa indicated in its initial letter to the Portuguese customs authorities that the product at issue takes the form of flakes, apparently because it has been compressed rather than dehydrated; it also states that the product is not soluble in water. As Portugal pointed out at the hearing, however, it is common ground that this product is 54% water. In any event, the mere fact - if it be the case - that the product is not soluble in water cannot in my view mean that it cannot be cheese, since most cheese is also not soluble in water.

31. The Council has recognised that the characteristics of casein and caseinates and those of cheese show similarities in the context of the voluminous Community legislation regulating the granting of aid for the processing of skimmed milk into casein and caseinates. The basic regulation in force at the material time defines casein as the product washed and dried, insoluble in water, obtained from skimmed milk by coagulation (e.g. by means of acids or rennet) or obtained from raw casein. Regulation No 756/70, the regulation implementing the basic regulation applicable at the time of import of the product in question, imposes certain requirements as to the composition of casein for those purposes including for example a maximum humidity content of 12% for rennet casein. The effect of that legislation was at issue in Meggle; describing the background to an action for damages brought by a producer of casein and caseinates against the Council, Advocate General VerLoren van Themaat stated: Casein is obtained from skimmed milk by coagulation in an acidic environment or in the presence of rennet. The product which is left is insoluble and is then washed and dried.

32. There is also, as mentioned by the Commission at the hearing, a directive issued by the Council under Article 100 of the EC Treaty (now Article 94 EC) on the approximation of the laws relating to caseins and caseinates. That directive seeks to determine, at Community level, the rules which must be observed as regards the composition and labelling of these products. Article 1(2) defines caseins as the principal protein constituent of milk, washed and dried, insoluble in water and obtained from skimmed milk by precipitation by a number of methods including the use of rennet. Section III of Annex I prescribes the standards applicable to edible rennet casein. Those standards include under the heading (A) Essential factors of composition a maximum moisture content of 10%.

33. A final source of information as to the objective characteristics and properties of casein is the Codex Alimentarius drawn up by the Food and Agriculture Organisation and the World Health Organisation. The Court has used the Codex in determining the characteristic features of yoghurt in a case on the labelling of foodstuffs and in deciding whether a food additive presents a risk to public health or meets a real need, especially a technological one. The standard for edible casein products in the current version of the Codex (Codex stan A-18-1995) defines edible rennet casein as the product obtained after washing and drying the coagulum remaining after separating the whey from skimmed milk which has been coagulated by rennet or by other coagulating enzymes and in the composition table sets a maximum moisture of 12%.

34. All the above sources except the Harmonised System Explanatory Notes coincide in requiring that casein be dried with a maximum moisture content of 12% or less. That consensus leads me to conclude that the requirement in the Commission's Explanatory Note to the Combined Nomenclature subheadings 3501 10 10 to 3501 10 90 that caseins are to be classified in those subheadings only when they contain 15% or less by weight of water is in accordance with and does not alter the meaning of casein in the Combined Nomenclature. Moreover, it is not actually inconsistent with the Harmonised System Explanatory Notes. There is in my view accordingly no reason in the present case to disregard that note, with the result that the product at issue, made by the addition of rennet to skimmed milk, described as skimmed milk cheese on the exporter's invoice and intended for further processing into dietetic cheese, is to be classified under subheading 0406 90 11 as (unspecified) cheese for processing.

35. Before concluding this Opinion, I would like to make two points about specific submissions made at the hearing by, on the one hand, the Commission and, on the other hand, ERU Portuguesa.

36. As indicated above, the Commission at the hearing presented an argument wholly different from that which it had put forward in its written observations; on the basis of that argument, its suggested answer by the Court to the question referred was wholly different from that which it had originally suggested. The Commission's second argument was based on the level of phosphorus in the imported product, which at 5.7% was asserted to be in excess of accepted levels in cheese. I do not consider that I can properly take the Commission's argument into account, for two reasons.

37. First, the Commission was unable to point to any source of relevance to the Combined Nomenclature for its assertion as to acceptable phosphorus levels in cheese. Although the Commission mentioned the Codex Alimentarius, which as I have indicated may indeed be of some interpretative value, the provision to which the Commission referred was the standard for melted cheese (with a maximum of 0.9% for phosphorus compounds); I do not see that that very specific provision is relevant without more in a different, and also specific, context. It may be noted that the Codex Alimentarius general standard for cheese (Codex stan A-6-1978, Rev.1-1999) makes no explicit mention of phosphorus levels.

38. Secondly, and of more general importance, I do not consider that the Court should properly take account of an entirely novel argument which was adduced for the first time at the hearing with no prior notice to the Court or the other parties, who as a result were clearly (and understandably) unprepared to debate the merits of the Commission's assertion. I would very much hope that neither the Commission nor any other party will make a practice of such tactics. If it becomes necessary for the Commission to alter its stance in such a manner, the appropriate course in my view would be to write in simple terms to the Court and the other parties giving notice of the fact.

39. ERU Portuguesa for its part submitted at the hearing that there was insufficient information as to the composition of the imported product for a decision as to classification to be taken, in default of which the importer's initial declaration should be followed. I cannot accept that argument. The information as to composition which is available to the Court has been provided by ERU Portuguesa in its written observations and, according to the order for reference, was an agreed fact for the purposes of the main proceedings: it is not acceptable for a party to dispute the content of its own written observations at the hearing. Moreover it was clearly open to ERU Portuguesa to obtain further analyses to support its case and to submit them to the Court in due time. In the absence of such analyses it is to my mind entirely proper for the Court to rely on information agreed before the national court and submitted to this Court by ERU Portuguesa in its written observations.

40. More specifically, ERU Portuguesa asserted at the hearing that the composition at issue showed a casein content of less than 2%, including salt, and that the percentages given in the composition did not total 100. That assertion appears disingenuous to say the least, given that ERU Portuguesa stated in its letter of 27 April 1989 contesting classification of the product as cheese that the product was hydrated casein and that its principal submission in its written observations before this Court was that the product was casein. ERU Portuguesa also denied at the hearing that it had stated that the product was intended for use in dietetic products; again, however, that party stated clearly in its abovementioned letter that the product was intended for the manufacture of dietetic products. I would note that it is not helpful to the Court or to the party concerned for a party so to contradict or deny its own assertions. The Court must act on the information supplied by the national court in its order for reference. It is only the latter which would have any competence to consider new factual arguments advanced by a party.

Conclusion

41. I accordingly conclude that the questions referred by the Supremo Tribunal Administrativo, Portugal, should be answered as follows:

A product produced by the addition of rennet to skimmed milk, composed as to 54% water, 0.9% fat, 5.7% phosphorus, 2% salt, and as to the remainder casein, and intended for use in the manufacture of dietetic products, is to be classified under subheading 0406 90 11 of the Combined Nomenclature as Other cheese: - For processing.