C-160/80

REFERENCE to the Court under Article 177 of the EEC Treaty by the Tariefcommissie [administrative court of last instance in revenue matters] of the Netherlands for a preliminary ruling in the action pending before that court between

SMULING-DE LEEUW BV, Rotterdam,

and

INSPECTEUR DER INVOERRECHTEN EN ACCIJNZEN [Inspector of Customs and Excise], ROTTERDAM,

1 — Language of the Case: Dutch.

JUDGMENT OF 2. 7. 1981 — CASE 160/80

Facts and Issues

The facts of the case, the course of campestris on a culture medium of maize the procedure and the observations sugar or maize starch and adding to it submitted under Article 20 of the nitrogen, potassium phosphate and Protocol on the Statute of the Court of certain trace elements which three latter Justice of the EEC may be summarized substances help to nurture micro­ as follows: organisms.

I — Facts and procedure The xanthan gum is created metabol- ically, in other words from the interaction of the bacteria. When this process is complete the product is placed On 25 May 1977 Smuling-De Leeuw BV in isopropyl alcohol and then dried and made an import declaration concerning milled. There is no further chemical "keltről, a high polymer product". change. Xanthan gum is a hetero- According to the Tariefcommissie, polysaccharide with short side-chains, keltről is the commercial name of a that is to say a natural high polymer in vegetable product, xanthan gum, manu­ which each fraction of the molecular factured by the biochemical industry by group consists of D-mannose, D-glucose placing the bacterium xanthomonas and D-glucuronic acid molecules.

SMULING-DE LEEUW ν INSPECTEUR DER INVOERRECHTEN EN ACCIJNZEN

According to the Tariefcommissie it is pectates; agar-agar and other common ground between the parties that mucilages and thickeners, de­ that gum corresponds in respect of its rived from vegetable products : structure and the way it is produced and used to the mucilages and thickeners C. Agar-agar and other muc­ derived from the vegetable products ilages and thickeners, de­ referred to in heading 13.03 of the rived from vegetable Common Customs Tariff under which no customs duty is payable on import­ products : ation. III. Other"

The appellant in the main action lodged The appellant in the main action argued an appeal with the Tariefcommissie before the Tariefcommissie that having against that rejection of its objection regard to the terms of the heading and requesting that the decision of the of the notes to Chapter 13 the product is inspector should be set aside and that specifically described in heading 13.03 so xanthan gum should be classified in that pursuant to Article 4, Point 3 (a) of subheading 13.03 C III of the Common the Tariefbesluit [Tariff Decree] of 1960 Customs Tariff or in the alternative in it must be classified in that heading and heading 13.02 which likewise does not that the condition laid down by the give rise to customs duty on importation. inspector to the effect that the products must be obtained directly from vegetable products cannot be inferred from the wording of the heading or from the The description of the three tariff explanatory note to it. These two headings referred to is as follows: passages merely state that the product must be derived: xanthan meets that condition. With regard to the argument "13.02 Shellac, seed lac, stick lac and of the inspector that the Common other lacs; natural gums, resins, Customs Tariff has a particular structure gum-resins and balsams : of its own which entails the classification of goods in the tariff nomenclature in accordance with the specific rules B. Other" applying thereto the appellant in the main action considers that it indeed follows a particular discipline that it is "13.03 Vegetable saps and extracts; bound up with other such disciplines (in pectic substances, pectinates and this case the disciplines of chemistry) and

any deviations therefrom are expressly chapters of the Common Customs Tariff provided for: there is no such provision not allow a gum, which is used as a in this case. thickener and which, as regards its. nature and composition, corresponds to the goods described in headings 13.02 The inspector, having first recalled the and 13.03, to be classified under one of "great similarity of xanthan with gums the headings of Chapter 13 of the and mucilages from the point of view of Common Customs Tariff if the gum is biology and chemistry", maintains that prepared on an industrial scale by the the nomenclature of the Customs action of the bacterium xanthomonas Cooperation Council (CCC) has a campestris on a culture medium of maize structure of its own which differs from sugar and maize starch?" other disciplines; the authors of the tariff envisaged as coming under Chapter 13 only products which occur naturally and The judgment making the reference which are not obtained industrially; con- was recorded in the Court Registry on sequently only classification in heading 10 July 1980. 39.06 is possible. On hearing the report of the Judge- The Tariefcommissie declares that " . . . Rapporteur and the views of the as regards its nature and composition, Advocate General, the Court decided to the product corresponds to the goods open the oral procedure without any described in headings 13.02 and 13.03 preparatory inquiry. and that at the same time it belongs to the high polymers to which heading By an order of 3 December 1980 the 39.06 relates" and that it must be Court, pursuant to Article 95 (1) of the classified in accordance with the General Rules of Procedure, decided to assign Rules for the interpretation of the the case to the Second Chamber. nomenclature of the Common Customs Tariff, in particular of Rule 3 (a) which states that "the heading which provides the most specific description shall be 11 — Observations, lodged under preferred to headings providing a more Article 20 of the Protocol general description". Since the de- on the Statute of the Court scription "natural gums" or "mucilages of Justice and thickeners derived from vegetable products" is more specific than that of "other high polymers" headings 13.02 or 13.03 are applicable "if the imported A — Observations of the appellant in the product can be brought within the main action description of the three headings mentioned". However in view of the contention of the inspector concerning The appellant in the main action recalls the general structure of the tariff the first of all that only the basic regulations Tariefcommissie stayed the proceedings of the Council, the regulations on and, before giving a ruling, referred the classification of the Commission and the case to the Court of Justice in order to case-law of the Court of Justice have obtain a reply to the following question: binding force whilst the explanatory notes and the opinions on classification provided for under the Brussels "Does the systematic classification of Convention constitute valuable aids to goods under the various sections and interpretation of the tariff headings.

Then it recalls in addition that the — According to that rule "for legal parties are agreed that xanthan gum is a purposes, classification shall be thickener obtained from vegetable sub- determined according to the terms of tances and that it constitutes a natural the headings and any relative section gum. It nevertheless emphasizes the fact or chapter notes and, provided such that, in its view, the description of that headings or notes do not otherwise gum by the Tariefcommissie is " t o o require, according to the following weak" in that, it states that the gum in provisions". Consequently it is not question "corresponds as regards its permissible to depart from the terms nature and composition . . . to the goods of the headings as it is in particular described in headings 13.02 and 13.03" through the literal interpretation of as the gum not only corresponds to such the wording of the provisions that products but "is one of the products uniformity is to be attained in the 80 mentioned in those tariff headings". The or so countries which apply the difference in the points of view of the nomenclature of the Customs parties only appears with the argument Cooperation Council. In particular as of the inspector that "although the there is no doubt that xanthan gum is wording of the headings in fact indicates either " a thickener, derived from that headings 13.03 or 13.02 apply, the vegetable products" of " a natural general plan of the tariff militates against gum" it must be classified in one or it"; that argument is based not on a other of the two headings 13.03 or source of law having binding force but 13.02. on the general plan of the Common Customs Tariff. According to the appellant in the main action the question submitted by the Tariefcommissie amounts to asking the Court whether — In view of the fact that it is stated as that view of the inspector is valid, which a basis of the general rule of interpre­ entails a reply to the following three tation cited above that "the titles or questions. sections, chapters or subchapters are provided for ease of reference only" a general plan of the nomenclature which is founded on the titles of sections and chapters cannot be a (a) In applying the wording of the tariff decisive factor in the classification of headings, which is in itself clear, is it goods. nevertheless permissible to proceed on the basis of what is claimed to be the general plan of the nomenclature of the Common Customs Tariff? — Finally, the principle of legal cer­ tainty requires that the nomenclature of the tariff be interpreted in an identical manner in all the States which are parties to the Convention. The appellant considers that the reply to If it were accepted that the class­ that question should be in the negative ification might be determined on the basis of the General Rules for the according to "the general plan of the interpretation of the nomenclature of the tariff' that would involve a different Common Customs Tariff and more application of the nomenclature and particularly on the general rule indeed a deviation from the express mentioned in A (1). wording of the provisions.

According to the appellant in the main action that question entails verifying whether the wording of the headings implies that products manufactured on an industrial scale cannot be classified under those headings. It considers that if The grammatical interpretation of that were so it would be necessary to matters relating to the Common add to the wording of those headings: Customs Tariff is required to be much "provided that such products are not stricter than in other fields of law. The produced on an industrial scale". Such general plan of the Common Customs an addition would not only be contrary Tariff in fact constitutes an interpret­ to the rules set out in (a) and (b) but ation of the intention of the legislature would also be at variance with the and that intention may not in any case principle of legal certainty which entails result in an interpretation which is at that the classification of goods in the variance with the very terms of the Common Customs Tariff must in headings. Since the terms of headings principle be effected on the basis of their 13.03 and 13.02 "are completely clear" objective characteristics. It follows from and the explanatory notes to these the foregoing that "the objective headings provide a complete list of characteristics and properties of the various products of the kinds in question products supply the decisive criterion for — certain specific products are indeed their classification under the said tariff not classified in the headings where that heading" as the Court stated inter alia in kind of product is usually classified but its judgment of 23 March 1972 (Henck ν that is purely and simply because "they Hauptzollamt Emden, Case 36/71 [1972] are expressly referred to in other ECR 187, at p. 198). Since xanthan gum headings" — all the other products not corresponds to the properties and cha­ referred to elsewhere must remain racteristics of the products classified in classified in headings 13.02 and 13.03. headings 13.02 and 13.03 it must be Accordingly all thickeners not mentioned classified in those headings. Finally the elsewhere which are derived in any way appellant in the main action, relying on whatever from vegetable products and all the report of Professor Vliegenthart, natural gums must, regardless of the emphasizes that in the wording of the methods and places of their production, headings reference is made to certain be classified in headings 13.02 and 13.03. products manufactured by industrial methods and in accordance with a more complex procedure than that which is necessary for the manufacture of xanthan gum.

— First xanthan gum does not fall within heading 13.02. Xantham gum is thus excluded.

In fact it cannot be treated as equivalent With regard to subheading Β dealing to lac since that can only be obtained with pectic substances the explanatory from certain tropical trees. Furthermore notes state that they are polysaccharides with regard to the other materials commercially extracted from natural referred to in that heading the ex­ products. In relation to the chapter as a planatory notes of the Customs whole the inclusion of commercially- Cooperation Council describe them as a extracted products appears to constitute "group of natural products" which have an exception and it must accordingly be not been artificially processed or which interpreted narrowly. Furthermore the have only been processed to a very small French Government considers that the extent. Thus the principle governing that "extraction" here referred to constitutes subheading covers only non-processed a simpler operation than that producing products and thereby excludes xanthan xanthan gum which appears furthermore

JUDGMENT OF 2. 7. 1981 — CASE 160/80

to be produced through a "manu­ 1. Xanthan gum is not a high polymer facture". produced industrially through biochemical action.

Accordingly it does not suffice that Consequently the French Government xanthan gum has properties considers that xanthan gum which is comparable with the other products manufactured by means of a complex referred to in subheading 13.03. biochemical process and which cannot be classified anywhere else "must be placed" in the heading covering "other high polymers" (heading 39.06). 4. In fact neither the properties of the product nor its manufacture or otherwise on an industrial scale are decisive for its classification in headings 13.02 and 13.03 but rather the fact that xanthan gum, being neither an extract nor derived from vegetable products by relatively simple C — Observations of the Commission means, is the product of an industrial process in which the basic substance, which furthermore is not a vegetable, The Commission maintains that xanthan undergoes fundamental structural gum cannot be classified in subheading modifications by means of a complex 39.06 Β on the grounds that: synthesizing procedure.

SMULING-DE LEEUW ν INSPECTEUR DER INVOERRECHTEN EN ACCIJNZEN

1 By a judgment of 27 June 1980, which was received at the Court Registry on 10 July 1980, the Tariefcommissie of the Netherlands referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question concerning the interpretation of headings 13.02, 13.03 and subheading 39.06 B of the Common Customs Tariff.

2 This question arose in the course of proceedings concerning the tariff classi­ fication of "Keltről F " , or "xanthan" gum imported into the Netherlands by Smuling-De Leeuw BV, Rotterdam, which was classified by the Inspecteur der Invoerrechten en Accijnzen [Inspector of Customs and Excise] (herein­ after referred to as "the inspector"), Rotterdam, under subheading 39.06 B

JUDGMENT OF 2. 7. 1981 — CASE 160/80

of the Common Customs Tariff. This classification resulted in the imposition of customs duty on importation of 16 °/o.

3 The importer, having been unsuccessful in its objection to this classification, lodged an appeal with the Tariefcommissie against the rejection of its objection requesting that the decision of the inspector should be set aside and that the product should be classified in subheading 13.03 CIII of the Common Customs Tariff or in the alternative in heading 13.02 to both of which a nil rate of duty applies.

4 The description of the three tariff headings referred to is as follows :

SMULING-DE LEEUW ν INSPECTEUR DER INVOERRECHTEN EN ACCIJNZEN

and that at the same time it belongs to the high polymers to which heading 39.06 relates" and considers that General Rule A 3 (a) for the interpretation of the nomenclature of the Common Customs Tariff which states that "the heading which provides the most specific description shall be preferred to headings providing a more general description" must be applied. In the result the Tariefcommissie considers that headings 13.02 or 13.03 are applicable. However, in view of the contention of the inspector concerning the general plan of the tariff that products manufactured by biochemical processes, as in the case of the product in question, may not be classified, whatever the resemblance between industrial products and natural products, in Chapter 13 the headings of which relate to products obtained by means of simple, craft methods, the Tariefcommissie considered that a question of interpretation of the Common Customs Tariff was involved and that it was therefore bound to refer the case to the Court of Justice for a decision on that question of interpretation.

6 The Tariefcommissie therefore stayed the proceedings and referred to the Court of Justice the following question :

"Does the systematic classification of goods under the various sections and chapters of the Common Customs Tariff not allow a gum, which is used as a thickener and which, as regards its nature and composition, corresponds to the goods described in 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 and maize starch?"

9 The classification of the gum in question in heading 13.03 or 13.02 of the Common Customs Tariff conflicts, not only with the wording of the headings themselves, but also with the internal logic of Chapter 13 which covered, at the time of the events at issue, on the one hand "primary vegetable products for dyeing or tanning", on the other hand "gums, resins and other vegetable saps and extracts". Whatever linguistic versions of the tariff there may be, the chief feature of interest in this case is the nature of "vegetable extracts" of the products in question, in other words the fact that they are the result of processing a vegetable constituent or a natural vegetable product. This being established, the classification in that chapter by way of exception of products obtained by processing vegetable substances may only be justified by an express statement appearing in the description of the goods falling within that chapter.

10 This is not so in the case of xanthan gum. Moreover, it is to be expected that Chapter 13 should contain no special description for this product, since it does not correspond, as regards its nature, to a vegetable extract. It is in fact a very complex product obtained by an industrial chemical process in which the bacterium xanthomonas campestris is placed on a culture medium of maize sugar or maize starch to which are added nitrogen, potassium phosphate and certain trace elements, these substances helping to nurture micro-organisms; the xanthomonas campestris metabolically turns the constituents of the medium on which it is placed into xanthan gum. The product so obtained is then placed in isopropyl alcohol and dried and finally milled. It may be concluded from this process that, even if vegetable extracts

OPINION OF SIR GORDON SLYNN — CASE 160/80

On those grounds,

T H E C O U R T (Second Chamber)

in answer to the question referred to it by the Tariefcommissie, by a judgment of 27 June 1980, hereby rules:

The systematic classification of goods in the various sections and chapters of the Common Customs Tariff does not allow a gum which is used as a thickener, even if as regards its nature and composition it corresponds to the goods described in headings 13.02 and 13.03, to be classified in one of the headings of Chapter 13 of the Common Customs Tariff since the gum is prepared on an industrial scale by the action of the bacterium xanthomonas campestris on a culture medium of maize sugar and maize starch.

Pescatore Touffait Due