Judgment of the Court (Second Chamber) of 25 May 1989. - Paul F. Weber (in liquidation) v Milchwerke Paderborn-Rimbeck eG. - Reference for a preliminary ruling: Landgericht Paderborn - Germany. - Common Customs Tariff - Subheadings 04.02 A II (b) 1 and 21.07 D II (a) 1 - Skimmed-milk powder. - Case 40/88.



European Court reports 1989 Page 01395



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

1.Common Customs Tariff - Tariff headings - Classification of goods - Criteria - Characteristics and objective properties - Manufacturing processes and geographical origin of the constituents - Processing of the product - Conditions to be taken into account

2.Common Customs Tariff - Tariff headings - Skimmed-milk powder within the meaning of subheading 04.02 A II ( b ) 1 - Product comprising inter alia 10.6% sodium caseinate - Exclusion - Classification under subheading 21.07 D II ( a ) 1

Summary

1.In the interests of legal certainty and ease of verification, the decisive criterion for the classification of goods for customs purposes is in general to be sought in their characteristics and objective properties as defined in the wording of the relevant heading of the Common Customs Tariff and of the notes to the sections or chapters . Manufacturing processes and the geographical origin of certain of the constituents used in a product are decisive only when the relevant subheading expressly so provides . The classification for customs purposes of a product also cannot be affected by the fact that it has undergone processing if the processed product thereafter contains the essential constituents of the basic product in proportions which do not differ substantially from the content in those constituents which the relevant product exhibits in its natural state . That condition will not be fulfilled if the product contains a substance not found in the product in its natural state in a proportion greater than is necessary to make the product more like the product in its natural state .

2.Subheading 04.02 A II ( b ) 1 of the Common Customs Tariff, dealing with skimmed-milk powder, must be interpreted as not including a product composed of 23.4% skimmed-milk powder, 42.3% powdered whey, 16.2% lactose, 7.1% calcium caseinate, 10.6% sodium caseinate and 0.4% other substances since milk in its natural state does not contain sodium caseinate and the addition of quantities of that substance may be tolerated, if it is necessary in order to promote emulsion and improve the taste of the product, only up to a limit of 3% by weight of the product . Since there is no more specific subheading which may be interpreted as including such a product, it must be placed under subheading 21.07 D II ( a ) 1 of the Common Customs Tariff, a residual subheading dealing with food preparations .

Parties

In Case 40/88

REFERENCE to the Court under Article 177 of the EEC Treaty by the Landgericht ( Regional Court ) Paderborn ( Federal Republic of Germany ) for a preliminary ruling in the proceedings pending before that court between

Paul F . Weber, in liquidation, Hamburg,

and

Milchwerke Paderborn-Rimbeck e.G ., a cooperative society, Paderborn,

on the interpretation of subheadings 04.02 A II ( b ) 1 and 21.07 D II ( a ) 1 of the annex to Regulation No 950/68 of the Council of 28 June 1968 on the Common Customs Tariff ( Official Journal, English Special Edition 1968 ( I ), p . 275 ),

THE COURT ( Second Chamber )

composed of : O . Due, President, acting as President of Chamber, G . F . Mancini and F . A . Schockweiler, Judges,

Advocate General : G . Tesauro

Registrar : D . Louterman, Principal Administrator

after considering the observations submitted on behalf of

Paul F . Weber, the plaintiff in the main proceedings, by Klaus Landry, Rechtsanwalt, Hamburg;

the Commission of the European Communities, by its Legal Adviser, Joern Sack, assisted by Albrecht Stockburger and Hinrich Thieme, Rechtsanwaelte, Frankfurt, and S . Forcheri, expert witness,

having regard to the Report for the Hearing and further to the hearing on 16 February 1989,

after hearing the Opinion of the Advocate General delivered at the sitting on 19 April 1989,

gives the following

Judgment

Grounds

1 Byjudgment of 12 January 1988, which was received at the Court on 4 February 1988, the Landgericht Paderborn referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty three questions on the interpretation of subheadings 04.02 A II ( b ) 1 and 21.07 D II ( a ) 1 of the annex to Regulation No 950/68 of the Council of 28 June 1968 on the Common Customs Tariff ( Official Journal, English Special Edition 1968 ( I ), p . 275, hereinafter referred to as "the Common Customs Tariff ").

2 The questions arose in proceedings between Paul F . Weber ( hereinafter referred to as "Weber ") and Milchwerke Paderborn-Rimbeck ( hereinafter referred to as "Milchwerke ") concerning contracts of sale under which Milchwerke undertook to supply Weber with a product described in the written contracts as "German spray-dried skimmed-milk powder, factory fresh, sound and of merchantable quality ".

3 It appears from the documents before the national court that in 1978, 1979 and 1980 Milchwerke supplied goods so described to Weber, who exported them to the Netherlands and Japan . On that basis, the Hauptzollampt ( Principal Customs Office ) Hamburg-Jonas ( hereinafter referred to as "the Customs Office ") paid Weber, for the period from 7 December 1978 to 4 February 1980, export refunds and monetary compensatory amounts in respect of skimmed-milk powder falling under subheading 04.02 A II ( b ) 1 of the Common Customs Tariff, in accordance with the Community rules then in force .

4 By a decision of 15 July 1982, the Customs Office demanded repayment by Weber of the export allowances granted, amounting to DM 716 476.47 . The Customs Office based its decision on the fact that inquiries carried out by the Hanover Customs Investigation Service had revealed that the product in question was not skimmed-milk powder of subheading 04.02 A II ( b ) 1, but a food preparation within the meaning of subheading 21.07 D II ( a ) 1 of the Common Customs Tariff . According to the Customs Office, the product, which Milchwerke had not itself manufactured but which it had bought from two German companies, was obtained by mixing the various constituents in the following proportions :

skimmed-milk powder : 23.4% by weight

powdered whey : 42.3% by weight

lactose : 16.2% by weight

calcium caseinate : 7.1% by weight

sodium caseinate : 10.6% by weight

other constituents : 0.4% by weight

100% by weight

5 Weber thereupon asked Milchwerke to supply it with skimmed-milk powder in accordance with the contracts concluded between the parties that qualified for export allowances and fixed a time-limit for fulfilment of that obligation, threatening to refuse to accept delivery from Milchwerke after that date .

6 Since Milchwerke did not meet that requirement, Weber brought an action against it before the Landgericht Paderborn claiming damages for breach of contract .

7 Before the national court, Milchwerke admitted that the product delivered to Weber was manufactured from a dry mixture of the various constituents specified by the Customs Office and not by extracting the liquid from cow' s milk and that in order to improve the quality of the product, protein-enriched powered whey from Australia and Canada was added . Nevertheless, in Milchwerke' s view, the product supplied constituted skimmed-milk powder within the meaning of subheading 04.02 A II ( b ) 1 of the Common Customs Tariff, since it had all the analytic characteristics of skimmed-milk powder manufactured in the traditional way from skimmed milk . Milchwerke added that tariff classification did not depend on the method of manufacture, but on the objective characteristics of the product .

8 Weber contested Milchwerke' s claims and argued before the national court that the product in question did not fall under subheading 04.02 A II ( b ) 1 .

9 The Landgericht Paderborn considered that the tariff classification of the product in question was likely to provide information useful in interpreting the contracts concluded between the parties to the main proceedings .

10 Since it considered that the case involved interpretation of the Community regulation at issue, the Landgericht Paderborn decided to stay the proceedings until the Court of Justice had given a preliminary ruling under Article 177 of the EEC Treaty on the following questions :

"( 1 ) Is subheading 04.02 A II ( b ) 1 of the Common Customs Tariff in the version in force in 1978, 1979 and 1980 to be interpreted as including a product made up of 23.4% skimmed-milk powder together with powdered whey ( partly enriched with protein ), lactose, calcium caseinate, sodium caseinate, caseinate ( SVM ), potassium bicarbonate, calcium chloride, calcium carbonate and potash mixed together in dry form?

( 2 ) Is it relevant in this connection that the caseinate and powdered whey occasionally originated from New Zealand, Canada and Australia and that the mixture, according to the defendant, exhibited the same analytic values as powdered skimmed milk produced from cow' s milk?

( 3 ) If the first question is answered in the negative, does such a product fall under subheading 21.07 D II ( a ) 1 of the Common Customs Tariff in the version in force in 1978, 1979 and 1980?"

11 Reference is made to the Report for the Hearing for a fuller account of the facts of the main proceedings, the course of the procedure and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .

First and second questions

12 Inthe first two questions, the national court is asking, essentially, whether subheading 04.02 A II ( b ) 1 of the Common Customs Tariff is to be interpreted as including a product made up of 23.4% skimmed-milk powder, 42.3% powdered whey, 16.2% lactose, 7.1% calcium caseinate, 10.6% sodium caseinate and 0.4% other constituents . The national court also wishes to know whether the way in which that product is manufactured and the origin of some of its constituents have an effect on the tariff classification of the product .

13 In order to reply to those questions it should be pointed out, first, that according to settled case-law ( see, for example, the judgments of 23 March 1972 in Case 36/71 Henck v Hauptzollamt Emden (( 1972 )) ECR 187, paragraph 4, and of 26 September 1985 in Case 166/84 Thomasduenger v Oberfinanzdirection Frankfurt am Main (( 1985 )) ECR 3001, paragraph 13 ), in the interests of legal certainty and ease of verification, the decisive criterion for the classification of goods for customs purposes is in general to be sought in their characteristics and objective properties as defined in the wording of the relevant heading of the Common Customs Tariff and of the notes to the sections or chapters .

14 With regard to the question whether the method of manufacture of the product has an effect on classification for customs purposes, the Court has already decided ( see the judgment of 16 December 1976 in Case 38/76 Industriemetall LUMA v Hauptzollamt Duisburg (( 1976 )) ECR 2027, paragraph 7 ) that whilst the Customs Tariff does indeed in certain cases contain references to manufacturing processes it is generally preferred to employ criteria for classification based on the objective characteristics and properties of products which can be ascertained when customs clearance is obtained .

15 Consequently, manufacturing processes are decisive only when the subheading so provides ( see, for example, the judgment of 8 December 1987 in Case 42/86 Directeur général des douanes et droits indirects v Artimport ( 1987 ) ECR 4817 ).

16 In this case, subheading 04.02 A II ( b ) 1 of the Common Customs Tariff makes no reference to the manufacturing process as a criterion for classification, from which it must be concluded that the process whereby the product at issue in the main proceedings was manufactured has no effect on its classification for customs purposes .

17 The same conclusion must be drawn, for the same reasons, in regard to the geographical origin of some of the constituents used in the product at issue . The classification of a product for customs purposes must be made solely on the basis of its objective characteristics, independently of the origin of the constituents used in it which is not provided for in the Common Customs Tariff .

18 With regard to the classification under the Common Customs Tariff of the product at issue in the main proceedings, it should be noted, first, that the terms of subheading 04.02 A II ( b ) 1 of the Common Customs Tariff and of the notes to Chapter 4 of the Annex to Regulation No 950/68 do not exclude from that subheading a product made up in the same way as the product in this case .

19 Since the product at issue in the main proceedings is a mixture of different constituents, it should be pointed out that, according to the case-law of the Court ( see the judgment of 23 March 1972, cited above, paragraph 10 ), the classification for customs purposes of a product cannot be affected by the fact that it has undergone processing if the processed product thereafter contains the essential constituents of the basic product in proportions which do not differ substantially from the content in those constituents which the relevant product exhibits in its natural state .

20 Consequently, in order to determine whether the product at issue in the main proceedings is to be classified in subheading 04.02 A II ( b ) 1 of the Common Customs Tariff, it must be ascertained whether the product contains the essential constituents of the basic product, namely skimmed and dried milk prepared from cow' s milk, and whether the proportions in the composition of that product differ fundamentally from those of the basic product .

21 The Commission argues in that regard that subheading 04.02 A II ( b ) 1 cannot include mixtures containing more than 3% by weight of sodium caseinate . In support of that argument, the Commission stated that, according to a 1971 classification slip, a product whose appearance and chemical composition has the essential characteristics of powdered milk may be classified under subheading 04.02 A II ( b ) 1, even if very small quantities of sodium caseinate have been added . The Commission also stated that the effect of a proportion of more than 3% of sodium caseinate in skimmed milk would be to make the product at issue artificial and, furthermore, if that product was described in the same way as ordinary skimmed-milk powder there would be a risk of abuse through the undue payment of production refunds . The 3% sodium caseinate limit referred to by the Commission was agreed to in 1982 by the Ad hoc Group on Chemistry of the Committee on Nomenclature, which later took note of the experts' opinion on that point .

22 At the hearing, the Commission' s expert stated that the addition of up to 1% of total weight of sodium caseinate as an emulsifier to skimmed-milk powder was acceptable and that up to 3% could be tolerated in order to improve the flavour of the preparation by making it more like that of milk in its natural state .

23 In that regard, it should be pointed out that according to the Explanatory Notes to Heading 04.02 of the Common Customs Tariff, "products of this kind may contain certain other added substances such as starch in proportions not exceeding 10% by weight or anti-oxidants, emulsifiers, vitamins or small quantities of acids ( including lemon juice )".

24 Since the notes authorize the addition of certain substances to the products in question, they must be based on the premise that such additions do not deprive the product of its essential basic characteristics and that the proportions of the various constituents in the product are not substantially different from those of the basic product .

25 That condition will not be fulfilled if the product contains a substance not found in the product in its natural state, in a proportion greater than is necessary to make the product more like the product in its natural state .

26 With regard to the product at issue in the main proceedings, it should be noted that cow' s milk does not contain sodium caseinate .

27 However, the addition of small quantities of sodium caseinate to skimmed-milk powder may be tolerated if it is necessary to give the processed product the characteristics of the basic product, in particular, to promote emulsion and improve the taste of the product .

28 With regard to the maximum proportion of sodium caseinate which must be added to skimmed-milk powder in order to obtain those effects, reference should be made to the conclusion arrived at by the Ad hoc Group on Chemistry of the Committee on Nomenclature that the acceptable limit for that substance should not exceed 3% by weight of the product involved .

29 However, the product at issue in the main proceedings contains 10.6% sodium caseinate, that is to say, more than three times the acceptable amount . Consequently, the product cannot be classified under subheading 04.02 A II ( b ) 1 of the Common Customs Tariff .

30 It follows from the foregoing considerations that the reply to the first two questions put by the national court must be that subheading 04.02 A II ( b ) 1 of the Common Customs Tariff must be interpreted as not including a product composed of 23.4% skimmed-milk powder, 42.3% powdered whey, 16.2% lactose, 7.1% calcium caseinate, 10.6% sodium caseinate and 0.4% other substances . The method by which the product was manufactured and the origin of some of its constituents do not affect the tariff classification of the product .

Third question

31 Inthis question, the national court is asking essentially whether subheading 21.07 D II ( a ) 1 of the Common Customs Tariff is to be interpreted as including a product with the composition of the product forming the subject-matter of the main proceedings .

32 In order to reply to that question it is sufficient to note that there is no more specific subheading which may be interpreted as including the product at issue in the main proceedings, with the result that subheading 21.07 D II ( a ) 1 of the Common Customs Tariff, a residual subheading, includes a product such as the one in this case .

33 Thus the reply to the third question put by the national court must be that subheading 21.07 D II ( a ) 1 of the Common Customs Tariff must be interpreted as including a product with the composition of the product forming the subject-matter of the main proceedings .

Decision on costs

Costs

34 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable . As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court .

Operative part

On those grounds,

THE COURT ( Second Chamber ),

in answer to the questions submitted to it by the Landgericht Paderborn, by order of 12 January 1988, hereby rules :

( 1 ) Subheading 04.02 A II ( b ) 1 of the Common Customs Tariff must be interpreted as not including a product composed of 23.4% skimmed-milk powder, 42.3% powdered whey, 16.2% lactose, 7.1% calcium caseinate, 10.6% sodium caseinate and 0.4% other substances . The method by which the product was manufactured and the origin of some of its constituents do not affect the tariff classification of the product .

( 2 ) Subheading 21.07 D II ( a ) 1 of the Common Customs Tariff must be interpreted as including a product with the composition of the product forming the subject-matter of the main proceedings .