Opinion of Mr Advocate General Fennelly delivered on 16 July 1998. - Georg Bruner v Hauptzollamt Hamburg-Jonas. - Reference for a preliminary ruling: Bundesfinanzhof - Germany. - Export refunds - Nomenclature of agricultural products. - Case C-290/97.



European Court reports 1998 Page I-08333



Opinion of the Advocate-General

1 The present case concerns the customs classification of frozen hind cuts of chicken, for the purposes of the payment of export refunds.

I - Facts and procedural background

2 The applicant in the main proceedings (hereinafter `the applicant') exported three consignments of frozen poultry cuts to Equatorial Guinea in June 1988 and on 13 and 16 January 1989. The cuts consisted of the hindquarters of chicken separated at the bone but held together naturally by the skin of the back. They were originally classified by the Principal Customs Office in Hamburg (hereinafter `the defendants') as `halves or (/and) quarters (with the bone in)', corresponding to product code 0207 41 11 000, and the applicant was granted export refunds accordingly. On 18 July 1990, the defendants withdrew the decisions granting export refunds, and demanded repayment of a total amount of DM 53 884.02. The Finanzgericht (Finance Court) rejected the applicant's challenge to the validity of the decisions withdrawing the export refunds.

3 On 29 April 1997, in proceedings brought by the applicant against a decision of the Netherlands Produktschap voor Pluimvee en Eieren (Poultry and Eggs Board) ordering him to repay export refunds granted in respect of the export in February 1988 of three consignments of chicken cuts similar to those at issue in the German proceedings, the College van Beroep voor het Bedrijfsleven (Administrative Court for Trade and Industry) found in favour of the applicant, and classified the cuts under product code 0207 41 11 000.

4 On appeal from the judgment of the Finanzgericht, the Bundesfinanzhof (Federal Finance Court, hereinafter `the national court'), though inclined to favour the approach adopted by the customs authorities and the lower court, decided on 26 July 1997, in view of the contrary decision of the College van Beroep voor het Bedrijfsleven, to refer the following question to the Court for a preliminary ruling:

`Is subheading "ex 0207 41 11" in part 8 of the Annex to Commission Regulation No 3846/87 of 17 December 1987 establishing an agricultural product nomenclature for export refunds (OJ 1987 L 366, p. 1), valid for the period from 21 June 1988 to 16 January 1989, to be interpreted as meaning that the term "quarters" (of chicken) also includes cuts of poultry not yet wholly separated from each other ("posteriori") as described more precisely in the grounds of this order?'

5 Written and oral observations were submitted by the Commission; the applicant submitted oral observations.

II - Relevant Community legislative provisions

6 The seventh recital in the preamble to Council Regulation (EEC) No 2777/75 of 29 October 1975 on the common organisation of the market in poultrymeat (hereinafter `Regulation No 2777/75') (1) declares that `provision for a refund on exports to third countries equal to the difference between prices within the Community and on the world market would serve to safeguard Community participation in international trade in poultrymeat'. Article 9(1) provides that, `[to] the extent necessary to enable the products specified ... to be exported on the basis of prices for those products on the world market, the differences between those prices and prices within the Community may be covered by an export refund'. Article 9(2) charges the Council with adopting the necessary general rules. Article 11(1) stipulates that `[the] general rules for the interpretation of the Common Customs Tariff and the special rules for its application shall apply to the tariff classification of products covered by this Regulation; the tariff nomenclature resulting from the application of this Regulation shall form part of the Common Customs Tariff'.

7 On the basis of Article 9(2) of Regulation No 2777/75, the Council adopted Regulation (EEC) No 2779/75 of 29 October 1975 laying down general rules for granting export refunds on poultrymeat and criteria for fixing the amount of such refunds. (2) This identifies the elements to be taken into account for the determination of the Community price and the price on the world market, and lays down rules for the fixing and granting of the refund.

8 The combined nomenclature of general application was established by Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (hereinafter `Regulation No 2658/87'). (3)

9 Commission Regulation (EEC) No 3846/87 of 17 December 1987 establishing an agricultural product nomenclature for export refunds (hereinafter `Regulation No 3846/87'), (4) though based on the combined nomenclature, sought to take account of the specificity of the export refund system, and in particular the need to make subdivisions in the combined nomenclature for such products. The relevant sections of the nomenclature for the poultrymeat sector, in the version established by this Regulation, were as follows:

`0207 Meat and edible offal, of the poultry of heading No 0105, fresh, chilled or frozen:

(...) - Poultry cuts and offal other than livers, frozen

ex 0207 41 - - Of fowls of the species Gallus domesticus:

- - - Cuts: 0207 41 10 - - - - Boneless ... - - - - With bone in: 0207 41 11 - - - - - - Halves or quarters

0207 41 21 - - - - - - Whole wings, with or without tips

0207 41 41 - - - - - - Breasts and cuts thereof 0207 41 51 - - - - - - Legs and cuts thereof 0207 41 71 - - - - - - Other (0207 41 71 100) - Halves or quarters, without rumps (0207 41 71 900) - Other.'

10 With effect from 21 March 1988, Commission Regulation (EEC) No 717/88 of 18 March 1988 fixing the export refunds on poultrymeat (hereinafter `Regulation No 717/88') (5) provided that an export refund of ECU 43/100 kg was payable for exports to Equatorial Guinea for chicken cuts with the product codes 0207 41 11 000 (halves or quarters) and 0207 41 71 100 (halves or quarters without rumps), but none for cuts with the product code 0207 41 71 900 (other cuts, frozen, of fowls of the species Gallus domesticus, with bone in). Annex II to this Regulation amended part 8 (`Poultrymeat') of the agricultural products nomenclature established by Regulation No 3846/87, though not in any respect which is material to the present proceedings.

11 With effect from 20 October 1988, Commission Regulation (EEC) No 3216/88 of 19 October 1988 fixing the export refunds on poultrymeat (hereinafter `Regulation No 3216/88') (6) provided for the payment of an export refund of ECU 37/100 kg in respect of exports to Equatorial Guinea of chicken cuts with product codes 0207 41 11 000, 0207 41 71 100 and the new product code 0207 41 71 200 (`cuts consisting of whole leg or part of a leg and part of the back, where the weight of part of the back does not exceed 25% of the total weight'), (7) but none for cuts with the product code 0207 41 71 900.

12 Annex II to Commission Regulation (EEC) No 96/89 of 17 January 1989 fixing the export refunds on poultrymeat (hereinafter `Regulation No 96/89'), (8) which came into force on 18 January 1989, amended part 8 of the agricultural products nomenclature, as regards code 0207 41 71, to read as follows:

`0207 41 71 - - - - - Other: 0207 41 71 100 - - Halves or quarters without the rump

0207 41 71 200 - Cuts consisting of whole leg or part of a leg and part of the back, where the weight of the part of the back does not exceed 25% of the total weight

0207 41 71 300 - Cuts consisting of both unseparated hindquarters, with or without the rump

0207 41 71 900 - Other.'

III - Arguments of the parties

13 The arguments of the applicant before it were summarised thus by the national court: `the plaintiff submits essentially that the product is a typically Italian product which should be considered, in accordance with opinion in the trade, as separated quarters. Regulation No 96/89 also makes that assumption. The same follows from the General Rules of the customs tariff and the case-law of the Court of Justice ... . (9) He submits that a Netherlands court has also ruled to that effect in his - the plaintiff's - favour (judgment of the College van Beroep voor het Bedrijfsleven of 29 April 1997)'.

14 At the hearing, the applicant stressed that in the poultrymeat industry chickens are invariably cut transversely, i.e., perpendicular to the spine, and argued that the Commission's definition would not correspond with the products which are found on the market. He also relied on the General Rules for the Interpretation of the Combined Nomenclature, and in particular Rules A 2(a) and A 3(b).

15 The Commission notes that tariff position 0207 41 11 (`halves or quarters') is not defined in the regulation concerning export refunds, and that it is therefore necessary to refer to the customs rules which provide some indications in this regard. It quotes Explanatory Notes to the Harmonised System issued by the German Federal Finance Ministry which define a `half-chicken' as `the right half and the left half separated by a longitudinal cut along the spine'; as the exported products result from a cut perpendicular to the spine, they do not constitute `halves' within the meaning of the customs nomenclature. As a `quarter' is defined as half of a half, and comprises either the drumstick, the leg, the rear part of the back and the rump (hindquarter) or half the breast and the wing (front quarter), the exported cuts cannot be classified as quarters within product code 0207 41 11.

16 The Commission denies that commercial practice is relevant to the customs classification of the products in question. Furthermore, in its view the Court in Voogd (10) held that national courts were only obliged to take account of commercial practice whenever the Community legislator had implicitly referred to the customs of each country, which was not the case here. Nor is General Rule A 2(a) pertinent either, in accordance with Hauptzollamt Mannheim v Boehringer (11) and because the product is not in any case `unfinished'. General Rule A 3 is inapplicable because the chicken cuts could not be classified under two or more different positions. Regulation No 96/89 is inapplicable, as it was not in force at the time of the exportations. The Commission therefore concludes that the exported chicken cuts should be classified in the residual product code 0207 41 71, more particularly code 0207 41 71 900.

IV - Analysis

17 In essence, the Court is being asked to interpret product code 0207 41 11 000 (halves or quarters, frozen, of fowls of the species Gallus domesticus with bone in), with a view to assisting the national court in the classification, for the purposes of the granting of export refunds, of the hindquarters of chicken separated at the bone but held together naturally by the skin of the back.

18 As noted above, Article 11(1) of Regulation No 2777/75 applies the general rules for the interpretation of the Common Customs Tariff and the special rules for its application to the classification of products in the agricultural product nomenclature for the purposes of export refunds. Article 1(1) of Regulation No 2658/87 established, with effect from 1 January 1988, the combined nomenclature `to meet, at one and the same time, the requirements both of the Common Customs Tariff and of the external trade statistics of the Community'. (12) The General Rules for the Interpretation of the Combined Nomenclature were set out in Annex I to this latter Regulation. Rule 1 provides as follows:

`[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, providing such headings or notes do not otherwise require, according to the following provisions.'

Rule 6 contains an equivalent rule for the classification of goods in the subheadings of a heading. For classification purposes, therefore, account must be taken first of the terms of the headings, and then of section or chapter notes, before the remaining general rules can come into play.

19 In the present case, no heading or subheading refers expressly to `hind cuts of chicken separated at the bone and held together naturally by the skin of the back'. Nor does any section or chapter note of the Harmonised System deal with the classification of chicken cuts; indeed, while the Harmonised System in the version in force at the material time had separate subheadings for frozen cuts and offal, excluding liver, of chickens (0207.41), turkey (0207.42), and ducks, geese or guinea fowl (0207.43), it did not distinguish between the various cuts of chicken, (13) which, presumably, explains the necessity for more specific Community classification provisions.

20 Before moving to consider the possible application of the remaining general rules, it would, in my view, be appropriate to consider whether the Explanatory Notes to the Harmonised System and/or the Explanatory Notes to the Combined Nomenclature shed any light on the subject. As the Court has held on a number of occasions, `although the Explanatory Notes to the Common Customs Tariff cannot modify the text of that tariff, they nevertheless constitute an important factor in its interpretation enabling the scope of the various tariff headings or subheadings to be defined or clarified'. (14)

21 These notes seek to provide guidance as the meaning to be attributed to the terms of the headings and subheadings, whereas the remaining general rules seek to regulate situations which cannot be resolved on the basis of the headings, subheadings, section notes or chapter notes, even when interpreted in the light of the Explanatory Notes, such as incomplete, unfinished, unassembled or mixed articles, or those which are prima facie classifiable under two headings. It appears to me, therefore, to be more in keeping with Rule 1 to base the interpretation of a product code, where possible, on the relevant Explanatory Notes, before resorting to the remaining rules. Such an approach is not in any way inconsistent with that of the Court in Voogd, (15) where the Court relied on General Rule A 3(b). In Voogd, the Court was faced with two products which did not, prima facie, fall into any single product code which could be interpreted in the light of an Explanatory Note, being, respectively, chicken legs with (part of) the back attached but without the rump, and the front portions of the back with wings. The Court then referred to the Explanatory Notes in order to interpret the individual product codes at issue.

22 A general prefatory observation, not described as a chapter note, to chapter 2 [`Meat and edible meat offal'] of the Explanatory Notes to the Harmonised System published by the Customs Cooperation Council (hereinafter `CCC') (16) states that `[this] Chapter applies to meat in carcasses (i.e. the body of an animal with or without the head), half-carcasses (resulting from the lengthwise splitting of a carcass), quarters, pieces etc. ... suitable for human consumption'. While useful as an indication of the interpretation of the term `half' in this context, it does not provide any guidance to the meaning of `quarter', which, at least in the common parlance, could be said to result from the splitting of a carcass both longitudinally and transversely. In any case, the Explanatory Notes to the Harmonised System do not in any way restrict the notion of `quarter' in the manner contended by the Commission and the national court.

23 The Explanatory Notes to the Combined Nomenclature of the European Communities published by the Commission are somewhat more helpful. In the version in force at the material time, the Note which applied to code 0207 41 11 000 read as follows:

`Halves or quarters

This subheading includes:

1. fowl halves produced by the symmetrical division of the carcase into right and left halves;

2. hindquarters consisting of the drumstick, leg, rear part of the back and rump, as well as forequarters consisting essentially of one half of the breast with the wing attached.'

24 It is clear from the order for reference of the national court and the observations of the parties that the chicken cuts at issue correspond to the definition of `hindquarters' provided in the Explanatory Notes to the Combined Nomenclature, subject to the important proviso that the two hindquarters are not completely separated, as the legs are held together naturally by the skin. While the use of the singular throughout the description of the term `hindquarter' would indicate that the Explanatory Notes envisaged primarily separated quarters, there is, in my view, nothing either in the text of the Note or in the Regulations the application of which the Note was intended to facilitate, to exclude unseparated hindquarters from the scope of product code 0207 41 11 000. In particular, no convincing explanation has been advanced as to why a single such cut should be treated any differently from two hindquarters of which the skin has been cut; it has not been argued that there is any material difference, such as in weight or value, between these two cuts.

25 In favouring the exclusion of the cuts at issue from product code 0207 41 11 000, the national court was influenced, inter alia, by the fact that Regulation No 96/89 did not classify such cuts under `Halves or quarters', but under residual subheading 0207 41 71 (`Other'). Such ex post facto reasoning does not, however, appear to be compatible with the Court's judgment in Voogd, (17) where the Court expressly excluded reliance on a subsequent regulation in the interpretation of a pre-existing customs situation.

26 Furthermore, if any conclusions from the adoption of Regulation No 96/89 could, in the exceptional circumstances of the present case, (18) be admitted, it is significant that the Commission's Explanatory Note to product code 0207 41 11 000 was subsequently amended from `[this] subheading includes ...' to `[this] subheading covers ...'. (19) This modification of the terms of the Note is, in my opinion, perfectly consistent with the view that the definition of `quarters' which applied prior to the adoption of Regulation No 96/89 was sufficiently wide to include chicken cuts such as those at issue, but was subsequently tightened to take account of the creation of a more specific product code for these cuts. In any case, the classification of these cuts under subheading 0207 41 71 rather than 0207 41 11 000 is, in my view, adequately explained by the restriction of the former to cuts which include the rump, while the new product code 0207 41 71 300 covers unseparated hindquarters `with or without the rump'. I might add, the Commission did not argue that Regulation No 96/89 sought to modify the entitlement to export refunds of any particular category of poultry products, as distinct from fixing the rate of such refunds, nor would the text of the Regulation provide any support for that view.

27 The interpretation proposed by the applicant is also, in my view, consistent with the scheme, purpose and wording of the relevant provisions of Regulations Nos 2777/75 and 3846/87. In particular, the applicant has plausibly suggested, without being contradicted on this point by the Commission, that product code 0207 41 71 900 is residual in character, and is mainly intended to cover, for the sake of completeness, (20) waste products the export of which the Community is not minded to promote. Thus, at the material time refunds were available under Regulations Nos 717/88 and 3216/88 in respect of the export of all the other cuts of frozen chicken with bone in, with the exception of products under product code 0207 41 71 900. It has not been contended at any stage that the cuts at issue in the present proceedings are waste products of the chicken processing industry; it would therefore seem to be wholly anomalous to treat them as such for the purposes of the export refund regime, as the Commission is suggesting.

28 I am of the opinion that product code 0207 41 11 000 should be interpreted as including, at the material time, the hindquarters of chicken separated at the bone but held together naturally by the skin of the back. It follows that I do not consider reliance on the remaining General Rules to be necessary in order for the Court to answer the question referred. However, should the Court either not adopt my approach to the relevance of the Explanatory Notes, or disagree with the conclusions I have reached on the basis of the Note to product code 0207 41 11 000, it may be useful briefly to examine the application of General Rules A 2(a) and A 3(b).

29 General Rule A 2(a) refers to `incomplete or unfinished' articles; while the applicant has argued that the cuts he exported have the `essential character' of separated hindquarters, he has not shown in what way these products are either incomplete or unfinished so as to justify the application of this rule in the first place. Furthermore, as the Commission has pointed out, in Hauptzollamt Mannheim v Boehringer (21) the Court recognised that this rule does not normally apply to products in Chapters 1 to 38 of the combined nomenclature; the applicant has not shown the existence of any exceptional circumstances which would require its application in the present case. It follows that, in my view, Rule A 2(a) does not apply.

30 Rule A 3 lays down a number of provisions for the classification of `goods which are prima facie classifiable under two or more headings', such as mixed or composite goods. Unlike the situation in Voogd, where the two products at issue each comprised attached parts of the chicken subject to different customs treatment, in the present case the products fall either into one classification or the other, but cannot, in my view, be considered as `classifiable under two or more headings'. Rule A 3 applies where, because of its composite nature, the same product could, arguably, be classified under two or more headings at the same time, corresponding to the different respective components of the article; it does not, on the other hand, resolve the question of which of two classifications apply to an article which is composed of a single component. I am therefore of the view that Rule A 3 does not apply either.

31 This leaves General Rule A 4, which provides:

`Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.'

The Explanatory Notes to the Harmonised System regarding the interpretation of this Rule provide that `it is necessary to compare the presented goods with similar goods to determine the goods with which the presented goods are most akin ... Kinship can, of course, depend on many factors, such as description, character or purpose.'

32 While neither the parties nor the national court have taken a view on the application in the circumstances of the present case of what is essentially a fall-back common-sense criterion, I have no doubt that the products with which the cuts at issue are most akin are separated hindquarters under product code 0207 41 11 000. In practical terms, the only difference is a cut in the skin attaching the legs of the two portions of the hindquarters. That these two products may be considered `most akin' is demonstrated by the fact that the customs authorities in both Germany and the Netherlands originally took the view that the cuts at issue should be classified under product code 0207 41 11 000, and only changed their opinion in one case two, in the other more than four, years later. Should General Rule A 4 apply, I am of the view that the cuts at issue should still be classified under product code 0207 41 11 000.

V - Conclusion

33 In the light of the foregoing, I recommend that the Court answer the question referred by the Bundesfinanzhof on 26 July 1997 as follows:

Product code 0207 41 11 000 in part 8 of the Annex to Commission Regulation (EEC) No 3846/87 of 17 December 1987 establishing an agricultural product nomenclature for export refunds, as amended successively by Commission Regulation (EEC) No 717/88 of 18 March 1988 fixing the export refunds on poultrymeat and Commission Regulation (EEC) No 3216/88 of 19 October 1988 fixing the export refunds on poultrymeat, should be interpreted as including, at the time of the facts giving rise to the main proceedings, the hindquarters of chicken separated at the bone but held together naturally by the skin of the back.

(1) - OJ 1975 L 282, p. 77.

(2) - OJ 1975 L 282, p. 90.

(3) - OJ 1987 L 256, p. 1.

(4) - OJ 1987 L 366, p. 1.

(5) - OJ 1988 L 74, p. 37.

(6) - OJ 1988 L 286, p. 17.

(7) - This was added to the agricultural products nomenclature by Commission Regulation (EEC) No 2882/88 of 19 September 1988 fixing the export refunds on poultrymeat, OJ 1988 L 260, p. 37; it has no bearing on this case.

(8) - OJ 1989 L 14, p. 7.

(9) - Case C-151/93 Voogd Vleesimport en -export [1994] ECR I-4915 (hereinafter `Voogd').

(10) - Ibid.

(11) - Case C-318/90 Hauptzollamt Mannheim v Boehringer [1992] ECR I-3495, paragraph 17.

(12) - Cited in footnote 3 above.

(13) - These three appear on the unofficial list of code numbers deleted from the Harmonised System nomenclature, with effect from 1 January 1996; code number 0207.14 now covers `cuts and offal, frozen [of fowls of the species Gallus domesticus]'.

(14) - Case 54/79 Hako-Schuh v Hauptzollamt Frankfurt am Main-Ost [1980] ECR 311, paragraph 6.

(15) - Case C-151/93, cited in footnote 9 above.

(16) - I am somewhat surprised that the Commission should, in its written observations, cite an `unofficial version of the Explanatory Notes to the Harmonised System' published by the German Federal Finance Ministry, in preference to the official version published by the CCC, particularly as the two texts appear to be at variance.

(17) - Case C-151/93, cited in footnote 9 above.

(18) - The addition of the new product code 0207 41 71 300 could be interpreted as being designed expressly to clarify the legal situation of Community exporters of cuts such as those at issue.

(19) - The import of the modification is clearer in certain other language versions, whereby the word or phrase italicised was deleted, for example, the German (`[hierher] gehören z.B.'), French (`[la] présente sous-position comprend essentiellement ...'), Italian (`[la] presente sottovoce comprende sopratutto ...') and Dutch (`[deze] onderverdeling omvat in hoofdzaak ...') versions.

(20) - The fifth recital in the preamble to Regulation No 3846/87 explains that `it is necessary, in order to maintain a coherent nomenclature for refunds and permit computer programming, also to mention the part of the subheading ... in respect of which no refund has been set'.

(21) - Case C-318/90, cited in footnote 11 above.