C-3/81

BUNDESANSTALT FÜR LANDWIRTSCHAFTLICHE MARKTORDNUNG [Federal Office for the Organization of Agricultural Markets], Frankfun am Main,

on the interpretation of the terms "pearled barley" or "pearled grains of barley having an ash content expressed as a percentage of the dry matter of less than 1%" by weight appearing in the Annex to Regulation (EEC) N o 19 of the Council of 4 April 1962 (Journal Officiel N o 30, p. 933), ' Article 5 (1) (d) of Regulation (EEC) No 141/64 of the Council of 21 October 1964 (Journal Officiel N o 169, p. 2666) * and in Regulation (EEC) N o 11/66 of the Commission of 3 February 1966 (Journal Officiel N o 24, p. 393),'

T H E COURT (First Chamber)

composed of: G. Bosco, President of Chamber, A. O'Keeffe and T. Koopmans, Judges,

Advocate General: S. Rozès Registrar: P. Heim

gives the following I — There are no authentic English translation) of these regulations.

I — Facts and procedure The chemists, acting under oath, instructed by the exporter to analyse the goods found that in every case the ash- content, expressed as a percentage of the On 4 March and 9 and 13 April 1966 dry matter, was less than 1% by weight Ludwig Wünsche & Co., Hamburg, and they classified the goods as "pearled (hereinafter referred to as "Wünsche") grains of barley" coming under heading obtained from the defendant in the main 11.02 B III (a) (now heading 11.02 C III) action (which at that time was the of the Common Customs Tariff. Einfuhr- und Vorratsstelle für Getreide und Futtermittel, the predecessor in law of the Bundesanstalt für landwirt- schaftliche Marktordnung) several under- However, the experts of the German takings to grant refunds on exports of governmental authorities came to a pearled barley. different conclusion after performing their analyses. They, too, found that all the samples had an ash-content of less than 1% but they found that the grains The power of a Member State to give of barley were not homogeneous in such undertakings in respect of cereal character. The Bundesforschungsanstalt products was provided for at that time für Getreideverarbeitung [Federal by provisions of Community law, in Research Establishment for Cereals particular by Article 20 (2) of Regu- Processing] of Berlin stated that apart lation No 19 of the Council of 4 April from large grains which were 1962 and Regulation No 141/64 of the undoubtedly to be classified as Council of 21 October 1964. The "pearled", there were other, less worked conditions for the grant of a refund were grains which could be classified as hulled set out in Commission Regulations Nos only and some which could even be 164/64 of 29 October 1964 and 11/66 of regarded as still retaining the whole 3 February 1966. of their husk. The Zolltechnisches Prüfungs- und Lehranstalt [Customs Laboratory and Training College] at Hamburg-Altona found that the grains The German Government used that were predominantly not wholly round power to enact the regulation of and smooth, that the aleurone cells had 24 November 1964 on refunds in respect been removed only in part and that the of cereals and rice, Article 6 of which starch cells were visible in far fewer than made provision for either a cash refund half the cases. on exports to non-member countries, or, in the case of products imported from a non-member country and intended for re-export after processing, consent to On the basis of those last two experts' importation free from levy. In this case reports the intervention agency revoked, the refund was granted by the second in respect of certain exports, the licence method. granted in lieu of a refund (for the

importation of unworked barley free of are invariably present so that it is levy). immaterial whether in addition they fulfil the requirements contained in Wünsche challenged the decision revok- the Explanatory Notes to tariff ing the licence before the Hessisches heading No 11.02 of the Customs Finanzgericht [Finance Court, Hesse] Cooperation Council Nomenclature? which, after hearing a considerable amount of evidence, dismissed the action. The issue was brought before 2. If an ash-content of less than 1% by the Bundesfinanzhof [Federal Finance weight is not sufficient by itself to Court] which in a first preliminary fall within the expression 'pearled decision (Vorbescheid) of 9 January barley' : 1980 arrived at an interpretation un- favourable to Wünsche. It based its (a) Is it sufficient for more than decision on the judgment delivered by 50% of the grains to have the Court of Justice on 15 December practically the whole pericarp 1971 in Case 21/71 Brodersen [1971] removed and to be rounded at ECR 1069. both ends or must almost all the grains of the consignment in However, the Bundesfinanzhof was question have these particular moved by new factual and legal features for tariff purposes? arguments put forward by the applicant to put the following questions to the Court pursuant to Article 177 of the (b) If a proportion of more than EEC Treaty: 50% suffices does the determi- nation of the proportions depend on the percentage by weight or "1. How is the expression 'pearled by number of the grains?" barley' or pearled grains of barley having an ash-content expressed as a percentage of the dry matter of less than 1% by weight appearing in The order for reference was registered at the Annex to Regulation No the Court on 12 January 1981. 19/62/EEC of the Council, Article 5 (1) (d) of Regulation No In accordance with Article 20 of the 141/64/EEC of the Council and in Protocol on the Statute of the Court of Regulation No 11/66/EEC of the Justice of the EEC written observations Commission to be interpreted in were submitted by Wünsche, represented relation to undertakings in March by F. Modest, Rechtsanwalt, Hamburg, 1966 and on 5 and 13 April 1966 by the Bundesanstalt für landwirt- respectively to grant refunds? In schaftliche Marktordnung, represented view of the fact that according to the by A. Stockburger, Rechtsanwalt, last-mentioned regulation pearled Frankfurt am Main, and by the grains of barley may have an ash- Commission of the European content of more than 1 % by weight Communities, represented by J. Sack, a and that the ash-content is deter- member of its Legal Department, acting mined by the extent to which the as Agent. pericarp has been removed and the grains have been rounded at the eno. is it to be assumed that at least Upon hearing the report of the Judge- when the ash-content is less than 1% Rapporteur and the views of the by weight pearled grains of barley Advocate General the Court decided to

(a) The endosperm, that is to say the Wünsche observes first that the facts of floury kernel in the strict sense and the case before the national court are the aleurone layer; different from those before the Court of Justice in Case 21/71 Brodersen, already cited, in which it held that the Member (b) The seed-envelope composed of States could only regard as "pearled several layers, namely, from inside to barley" those products which satisfied at outside, the seed coat, the pericarp least the conditions laid down by the and the husk; Explanatory Notes to heading 11.02 of the Customs Cooperation Council Nomenclature. (c) The germ which is at one end of the grain, attached to the seed coat. It submits that Regulation No 11/66, which was no longer in force at the material time in Case 21/71, is of great There are however differences between importance in this case. the various kinds of cereals. In particular a distinction is made in botany, economics and the Customs Tariff and Moreover, in Case 21/71 the Court the Explanatory Notes thereto between restricted its interpretation of the "naked cereals" and "bracteiferous concept "pearled barley" to cases in cereals". "Naked cereals" are those from which Member States granted the which the husk falls off as soon as they maximum amounts of refunds fixed by are threshed in the field. "Bracteiferous the Commission. When granting refunds cereals", on the other hand, have the for pearled barley, however, the Federal characteristic that the husk is so closely Republic of Germany always kept below attached to the grain that it is not those maximum rates. separated during threshing in the field. Removal of the husk takes place afterwards, by hulling, and very often After making some introductory remarks results in the removal of a small part of designed to demonstrate that the the seed coat or pericarp as well.

The ash-content of hulled barley, that is to say barley from which the husk has The Commission followed the German been removed, is about 1.3% on average legislature in this matter, too, and by whilst that of the floury kernel alone, Regulation No 11/66, cited above, without the aleurone layer, is 0.6% at introduced a provision as to ash-content the most. as a criterion for distinguishing pearled barley, reducing the percentage of the maximum refund on "pearled grains of Using ash-content as a criterion of barley having an ash-content expressed assessment and delimitation became in- as a percentage of the dry matter of creasingly common over the yean in the more than 10%" to 79%. cereals and milling industry in Germany and that criterion eventually found its way into legislation. The reason for that The rules introduced by the Commission is that the determination of the ash- thus overlap with the German rules as content of a particular cereal flour makes contained in the regulation of 25 July it possible to assess in an objective and 1966. reliable manner the amount of seed- envelope, germ and aleurone layer still remaining in a cereal flour coming on to Wünsche believes that it is also necessary the market. The legislative requirement to point out that there are different on ash-content, is thus an indication to techniques for hulling cereal grain. The millers of what and how they must mill most important difference consists in the and the types of flour which they may metal rollers or drums used being and must manufacture. arranged either horizontally or vertically.

So after horizontal hulling not only a trade circles and in the public pan of the aleurone layer and seed coat administration. but also some of the pericarp remains along the sides of the grain. The trade circles and the public auth- orities had no knowledge either of the By the use of that technique it is possible Explanatory Notes to the Customs to obtain an ash-content of less than 1% Cooperation Council Nomenclature and to bring about a pronounced which were not applied anywhere at that rounding of the ends of the grains time. without removing the whole pericarp. Regulations Nos 141/64 and 11/66 on refunds moreover demonstrate that the As regards the grading of the grains, Commission itself either did not know of Wünsche observes that this is not those Explanatory Notes or at any rate possible until the grain has been nulled. did not consider them to be of any Before 1962 it was the practice in significance. Germany for mills to grade the hulled barley and on the basis of that practice the legislature varied export refunds The Customs Tariff, for its part, was of according to the different categories of no assistance in interpreting the concept hulled barley determined on the basis of of "pearled grains of barley". the size of the grains and the degree of hulling. That system of refunds abruptly came to an end however with the entry Mills were therefore at first left to their into force of the common organization own devices and took the view that of the market in cereals on 1 August 1962. Since then, German mills have been obliged to adapt their practice to As the proper meaning of the word Community provisions when exporting. "pearled" indicates, the barley had to be hulled to such a degree that the grains were rounded at the ends; The common organization of the market in cereals and the regulations introduced The Tariff contained no requirement as by the Community and the Member to grading and the concept of "pearled States relating to refunds placed the barley" did not imply any specific size or trade circles in all the Member States, diameter; but above all in Germany, in a new situation. For it was necessary on the one hand to work with the concept of Owing to the requirement that the cereal "pearled grains of barley" and on the grains should be rounded at their ends other, since 1964, to come to terms with that concept presupposed a certain the significance of the criterion of ash- degree of hulling at the ends but did not content in the manufacture of a product, indicate the degree to which that was such as hulled barley, derived from the required or whether the grains had to be processing of cereals. hulled elsewhere than at die ends.

The provision contained in the regu- virtually all the pericarp has been lations on refunds (the three German removed and which are also rounded at regulations already cited and Regulation the ends, even if only to a slight extent, No 11/66) which specified the ash- are bound to have an ash-content of less content which pearled barley was than 1%. required to have gave millers an objective criterion and indicated without any ambiguity the degree to which the The fact that the four regulations on barley, besides the rounding of the ends, refunds acknowledged that it is possible had to be hulled. for pearled barley to have an ash-content of more than 1% necessarily means that barley grain must certainly be rounded at Thus the decisive factor was, apart from the extremities but that the whole the rounding of the ends, that the grains pericarp does not necessarily have to be of barley should have been hulled to removed. such an extent that the appropriate ash- content was obtained. On the other hand, the ash-content, as stipulated in the four regulations, is The ash-content specified in the four further evidence that the miller may regulations on refunds had greater obtain an ash-content of less than 1 °/o by implications, however, and affected the hulling and rounding the ends of the technology involved. grain, where the ash-content is concentrated, although parts of the pericarp still continue to adhere to the middle of the grain. The prescribed ash-content made it evident that hulling did not have to be so intensive as to leave only the white, floury kernel, for then the ash-content The Explanatory Notes to tariff heading limit would be around 0.6%. Since 11.02 of the Customs Cooperation barley from which the husk has been Council Nomenclature contain outright removed has an ash-content of 1.3 to errors in point 3 dealing with the hulling 1.4%, more intensive hulling was of cereals, errors which also affect point required to attain an average ash-content 4 dealing with pearled grains. of less than 1%: It was not necessary however for large parts of the pericarp, the seed-coat, the germ and the aleurone As regards bracteiferous varieties of layer to be hulled; the miller could cereals those notes provide in effect that therefore decide which parts he wished it is sufficient for hulling purposes for to leave and which he wished to hull. the husks of the grains to have been removed and add that "generally the floury kernel is then visible". It was assumed in all four regulations that it was possible for pearled barley to have an ash-content equal to or more However, between the pericarp and the than 1%. floury kernel — whether with or without an aleurone layer — there is always the seed coat. In the case of bracteiferous However, owing to their botanical cereals, from which only the husk has composition, barley grains from which been removed, only the pericarp is

Point 3 of the Explanatory Notes of Nor can the Explanatory Notes to the Customs Cooperation Council the Customs Cooperation Council Nomenclature on tariff heading 11.02 Nomenclature concerning the expression cannot therefore be used because it is "pearled grains of barley" be applied in wrong. That error affects point 4 of the practice. Explanatory Notes on "pearled grains", which is based on the incorrect notes It is not in fact technically possible to under point 3. hull barley grains, which by nature are not homogeneous, so as completely to The explanations under point 4 are remove just the pericarp from nearly all wrong and inapplicable for yet another the worked grains. reason. In order to round the cereal grains at The Customs Tariff contains no their ends during the hulling process provision as to grading and does not mills would always have to grind away prescribe any technology as to the some of the seed coat, aleurone layer manner of hulling, or as to a specific and even some of the white floury kernel degree of hulling. It simply provides that at the ends but, on the other hand, they the barley must be "pearled", that is to would have to leave some of the pericarp say, that the grains must be hulled in varying in amount from grain to grain. such a way that the ends are peeled and They could achieve toul removal of the thus rounded. pericarp only by completely peeling away the parts of the grain surrounding the floury kernel. That, however, is not what But by going on to say that the cereal is meant by pearling and, in any event, is grains must in addition have virtually all certainly not required by the Tariff. their pericarp removed, the Explanatory Notes to the Customs Cooperation The criterion of ash-content, on the Council impose an additional require- other hand, offers a practicable solution ment which is not contained in the by the use of objective and reliable Tariff. Above all they prescribe a specific methods. manufacturing technology, namely vertical milling, which is to be used by The Explanatory Notes to tariff heading the millers and which is not required by 11.02 of the Customs Cooperation the Tariff, since it is immaterial, as Council Nomenclature and the pro- regards the pearled nature of a cereal visions as to ash-content contained in grain, whether parts of the pericarp or Regulation No 11/66 are partly contra- other parts around the floury kernel, or dictory and partly overlap; at any rate both, have been removed in order to they are not wholly the same. obtain the pearled shape. For the purposes of Regulation No Even if specific legal rules on ash- 11/66 it was sufficient, in order to content did no: exist, it would thus be attract the maximum rate of refund, for impossible to place reliance on the the barley grains to be very rounded at Explanatory Notes to the Customs the ends and have an ash-content of less Cooperation Council Nomenclature for than 1%. In order to achieve that result the purpose of interpreting the it is not necessary to remove the pericarp expression "pearled grains of barley" for from the grains completely, but it is the simple reason that they are wrong sufficient to take away part of the

pericarp, the seed coat and the aleurone In any event the definitions contained in layer. In such cases, the floury kernel is Regulation No 11/66 superseded points always at least partly visible. 3 and 4 of the Explanatory Notes to tariff heading No 11.02 of the Customs Cooperation Council Nomenclature That hulling method, therefore, comes which are not rules of law and, nearest to the (clearly mistaken) view moreover, are wrong in essential aspects. derived from the definitions contained in the Explanatory Notes to the Customs Cooperation Council Nomenclature that in the case of hulled barley the (white) Wünsche then goes on to examine the floury kernel must be visible in some way six experts' repons or groups of repons or other. procured by the panies during the main proceedings and challenges the results arrived at by the experts instructed by Regulation (EEC) No 11/66 thus defines the defendant. pearled barley differently from the Explanatory Notes to the Customs Cooperation Council Nomenclature and In its view, in considering whether the to that extent they stand in contradiction commodity which they were analysing to each other. was pearled barley, those experts had regard to criteria which are not provided for by Community rules. In Wünsche's view the question whether the Commission was empowered to define the concept of "pearled barley" in Regulation No 11/66 may be left open. Thus, the criteria applied by the Bun- desforschungsanstalt für Getreideverar- beitung were whether grains had been By adopting the provision on ash-content graded, the classifications commonly the Commission provided that definition adopted in Germany before the entry which, by virtue of the principle of the into force of the common organization protection of legitimate expectation, of the market in cereals, and the must be treated as valid, even in the customary quality of pearled barley. The event of its being void on the ground Zolltechnische Prüfungs- und Lehranstalt that the Commission did not have the at Hamburg based its view on the fact power to adopt it. Moreover it follows that the grains were not rounded all from the principle of legal certainty that over, the aleurone cells had been it is the task and duty of public removed only in pan and the starch cells administration to provide clear were less than 50% visible. A second definitions by which those affected by report of the Bundesforschungsanstalt the relevant legal provisions may direct reached a negative judgment because in themselves. In the present case, the order to calculate the proportion of Commission did that by adopting the grains from which practically the whole provision on ash content. pericarp had been removed the percentage in weight was taken and not the percentage of the number of grains If the Commission did not wish to create which Wünsche believes is the only a definition it could have referred to the proper criterion. However, all the reports Explanatory Notes to the Customs found that the ash-content was less than Cooperation Council Nomenclature. 1% and that all the grains were rounded That it did not do so is its responsibility. at the ends.

In view of the foregoing considerations The position would be different, in Wünsche proposes that the reply to the regard to the removal of the pericarp, if first question should be that in order for it were necessary to refer to the Ex- a barley grain to be considered to be planatory Notes to the Customs pearled at the time when Regulation No Cooperation Council Nomenclature. 11/66 was in force it was sufficient that: Since cereal grains vary in size and (1) The barley grain be rounded at both diameter it is technically impossible to ends by hulling; and hull them so that the pericarp is removed from all or nearly all of the grains. (2) The layers above the floury kernel be ground away to the extent necessary to attain on average the percentage Such a requirement could be met only by of ash-content required for the rate grading the grains to some extent. But a of refund. requirement as to sorting is contained neither in the Customs Tariff itself nor in the Explanatory Notes to the Customs Cooperation Council Nomenclature. If As to the second question, Wünsche sorting were required by the Explanatory submits that since an ash-content of less Notes that requirement would not be than 1 % necessarily supposes the ends of covered by the Tariff. the grain to have been rounded the conditions for a barley grain to be regarded as pearled are fulfilled auto- Since it is possible to determine whether matically whenever the ash-content is virtually the whole pericarp has been less than 1%. Therefore the second removed from a grain of barley only by question does not require to be visual inspection and by estimation, it answered. would be sufficient, if need be, to verify that the pericarp has been virtually For what it is worth, however, it entirely removed from about 50% of the examines the two sub-questions of the hulled grains. second question. That must be the case a fortiori if the As far as the first sub-question is Member State is not paying the concerned, it observes that the effect of maximum rates of refund. any appreciable degree of hulling is to round the tips or ends of all the grains. As regards the second sub-question Wünsche takes the view that the Apart from "fragments", which are percentage of the number of grains bound to occur during the hulling of should be the deciding criterion. cereals, and which are themselves somewhat rounded owing to the grinding process, nearly all the grains are It observes that the decisive factor rounded at both ends after hulling. determining the weight of barley grains is the proportion of starch contained in the kernel. The parts of the seed- Thus it would be possible to require envelope around the cereal grain on the without more ado that, in the case of other hand are extremely light. pearled barley, and apart from fragments, not just 50% of the grains but practically all of them should be But the issue in the present case is not rounded at the ends. one of appraising the floury kernel but

solely of determining if and to what question in Case 21/71 and in the period extent the different parts of the seed- under consideration in the present case. envelope have been removed from the individual grains. Moreover the argument that the Court might perhaps have erred in Case 21/71 The structure of the product from the in its construction of Regulation No point of view of the degree of the hulling 11/66 has no foundation. In truth the process therefore depends not on the Court was not unaware of the existence weight of the grains but, since the weight of that regulation. That is proved by the of the parts of the seed-envelope is fact that in that part of the judgment impossible to determine, on the number stating the facts and issues the Court set of grains which are sufficiently hulled out exhaustively the observations of the and meet the various requirements laid Commission, which emphatically denied down. that the inference that hulled barley having an ash-content expressed as a Furthermore, barley grains are not ratio of the dry matter of less than l°/o homogeneous. Consequently a flour-mill by weight is necessarily "pearled" barley can only operate economically by regu- could be drawn from the provisions of lating the intensity of hulling so that on Regulation No 11 /66. average grains are to a certain degree freed from pieces of the seed-envelope. If the flour-mill were to hull so as to Whether or not a grain is pearled is not remove the seed-envelope from the determined by its ash-content alone; it is largest grains, the small or medium-sized pearled if, amongst other things, it is barley grains would not only lose their almost round in shape, something which whole shell but a large part of the floury may be ascertained only by visual kernel as well. It is thus in keeping with inspection. the nature of hulled barley for more parts of the seed-envelope to adhere to the large grains of higher specific weight In view of the wording and scheme of than to the medium-sized and smaller Regulation No 11 /66 the first question ones. put by the Bundesfinanzhof thus requires a clear-cut answer, namely to the effect that a pearl-shaped form has always been If the extent to which parts of the seed- regarded as an independent identifying envelope have been removed is to be the feature apart from ash-content and can identifying factor then it is necessary to on no account be replaced by ash- concentrate on the number of grains content. which have been husked to the required extent. Contrary to Wünsche's argument before the Bundesfinanzhof, Regulation No The Bundesanstaltfiirlandwirtschaftliche 11/66 is not incompatible with the Marktordnung states that there is nothing Explanatory Notes to the Customs to justify the contention that the in- Cooperation Council Nomenclature. terpretation af the term "pearled barley" Since in reality ash-content varies given by the Court in Case 21/71 is not appreciably according to the conditions valid in the present case. of cultivation, the nature of the soil and the fertilizers used, as well as the strains The Community provisions in force were and varieties of cereals, it is quite exactly the same both in the period in possible for a grain of barley from which •WÜNSCHE v BALM

Pearled grains of barley are in fact a In addition, a number of general legal bulk commodity which can be handled considerations miliute against the view only by weight and are consequently taken by Wünsche. imported or exported in that way, too.

First of all the distinction between hulled It may be noted in addition that pearled barley and pearled barley would be barley grains may also be created by the largely devoid of meaning if very high polishing of grain fragments. Grain quality standards were not required of fragments would also have to be counted pearled barley. The particularly high rate as grains if the relevant criterion were of refund on pearled barley is only the percentage of the number of grains. justified by the fact that a costly method Such a method would open the door to of processing is necessary. all sons ot manipulation. For example, it would not be difficult to obtain more than 50% of pearled barley grains by A further factor is the transposition into mixing polished grain fragments with Community law without modification of

JUDGMENT OF 17. 6. 1982 — CASE 3/81

^PÜNSCHE v BALM

On the basis of those considerations the The percentage by weight should be Commission reaches the conclusion that taken and not the percentage of the since the first question submitted to the number of grains since it is weight which Court is based on purely theoretical determines the character of the factors it has no real importance for the commodity and also how the rate of decision to be given in the main action. refund is calculated. Moreover, grain On the other hand, the answer to the fragments rounded by milling might also second question is decisive. be found in the commodity in which case, if the percentage of the number of grains were taken as a basis, the fragmentation of grains would make it For the purposes of the answer to that easy to obtain a higher percentage which question the Commission believes that would meet those requirements, although

JUDGMENT OF 17. 6. 1982 — CASE 3/81

: The order was made in proceedings before the Bundesfinanzhof between Ludwig Wünsche & Co., Hamburg (hereinafter referred to as "Wünsche"),

1 — There art no authentic English translation! of tritst regulations.

«ONSCHE v BALM

a German importer and exporter of cereals, and the German agricultural intervention agency, the Bundesanstalt für landwirtschaftliche Marktordnung [Federal Office for the Organization of Agricultural Markets], Frankfurt am Main (hereinafter referred to as "the Federal Office")· Having granted Wünsche the maximum entitlement to expon refunds, consisting in this case in authority to impon, free of levy, 220 kg of basic product (unprocessed barley) for 100 kg of processed product (pearled grains of barley), the Federal Office decided, after the processed product had been examined by technical expens, to withhold authorization for the levy-free impon and, in both cases, to withdraw the impon authorizations already granted. Wünsche lodged an objection and was allowed a refund only at the reduced rate of 160 kg of basic product for 100 kg of processed product; it then applied to the Finanzgericht [Finance Coun] for a declaration : (a) that the intervention agency was under an obligation to grant it authority to impon free of levy a funher quantity equal to 60% of the exponed goods; (b) that, in so far as the decisions revoked authorizations previously granted, those decisions were void. Wünsche's application was dismissed and it appealed on a point of law to the Bundesfinanzhof, which, considering that any declaration as to the lawfulness of the contested decisions depended on the interpretation to be given, under Community law, to the concept of pearled grains of barley, submitted the following questions to the Coun:

First question

3 The first question seeks essentially to determine whether the concept of "pearled grains of barley" may be defined according to the sole criterion of ash-content where such content is less than 1% or whether, on the contrary, other factors and in particular the conditions set out in the Explanatory Notes to the Customs Cooperation Council Nomenclature must be taken into consideration.

4 It is important to emphasize in the first place that Regulation No 19 of the Council and Regulations Nos 141/64 and 11/66 of the Commission provide no definition whatsoever of "pearled grains of barley". The two first- mentioned regulations refer only to "pearled" grains of cereals; the third regulation does not refer to "grains of pearled barley having an ash-content expressed as a percentage of the dry matter of less than 1%" but limits the export refund granted in respect of "grains of pearled barley having an ash- content expressed as a percentage of the dry matter exceeding 1%" to an amount equal to 70% of the refund available pursuant to Regulation No 164/64 of the Commission of 29 October 1964 (Journal Officiel 1964, p. 2743); neither does it contain a definition of the concept of "pearled grains of barley".

s In so far as no definition of "pearled grains of barley" can be obtained either from the above-mentioned regulations or from heading 11.02 of the Common Customs Tariff, to which the Annex to Regulation No 19 expressly refers, or from the Explanatory Notes to the Common Customs Tariff, it is appropriate, in view of the fact that heading 11.02 of the Common Customs Tariff has exactly the same wording as a heading in the Customs Cooperation Council Nomenclature, to refer to the Explanatory Notes to that Nomenclature (hereinafter referred to as "the Explanatory Notes").

7 Wünsche maintains that paragraph (3) of that note is vitiated by a gross error, by reason of the fact that, having stated that hulling consists, in the case of bracteiferous varieties of barley, of removal of the husks or hulls, it goes on to say that "generally the floury kernel is then visible". Such a statement is incorrect since, in the case of a bracteiferous variety of cereal, removal of the bracts always leaves the pericarp intact, which prevents the floury kernel from being visible. That mistake, which renders paragraph (3) of the Explanatory Notes on heading 11.02 inapplicable, has the same consequences with regard to paragraph (4), in which the definition of "pearled" grains relies upon the concept of "hulled" grains.

8 That argument is untenable. In fact, the statement that the floury kernel is visible after hulling, contained in the above-mentioned Explanatory Notes refers to all cereals in general, the great majority of which are naked cereals. That does not mean, as is acknowledged in the Explanatory Note itself, that bracteiferous varieties of barley may not constitute a special case which is an exception to the general rule. In fact, that rule itself provides for the possibility of exceptions, by using the word "generally". The statement

JUDGMENT OF 17. 6. 1982 — CASE 3/81

challenged by Wünsche is not therefor of such a nature as to render the Explanatory Notes inapplicable to bracteiferous varieties of barley.

9 Wünsche also states that, in this case, the Explanatory Notes are incompatible with Regulation No 11/66. The incombustible minerals which give rise to the ash-content of the cereal grains are in fact concentrated at the extremities of the grain, whilst the ash-content of the floury kernel never exceeds 0.6% of the grain by weight. Consequently, if the only method of obtaining pearled barley consists, as appears from the Explanatory Notes, in removing practically the whole of the pericarp from the grain, the ash- content of pearled barley could never exceed 1% by weight.

characteristics of pearled barley, it is important to establish the minimum percentage of pearled grains displaying such characteristics which must be comprised in a consignment of barley to enable it to be regarded as a consignment of pearled barley, and whether that percentage must be calculated by reference to the weight or to the number of grains.

M The answer must take into account the objectives pursued by the Community provisions in question which grant in respect of exports of pearled barley much higher refunds than those available for hulled barley, in order to preclude a situation in which a product which has undergone less processing, and therefore has a lower cost price, could, if accorded the same refund as the more costly product, be sold in non-member countries at a price lower than that applied on the world market.

1 5 In view of that fact, the number of grains cannot be taken as a reference basis. If in fact it were, the greater refunds available for pearled barley, which has undergone an additional operation after hulling of the grains, might, in view of the varying widths and weight of the grains, be granted for a product not displaying the characteristics of pearled barley.

i6 Moreover, the criterion of percentage by weight could likewise not be regarded as satisfactory if it led to the grant of the maximum refund for a consignment of barley in which the weight of the pearled grains hardly exceeded that of the merely hulled grains. Such a result would not in fact be in harmony with the objectives of the regulations determining the expon refunds. The only way to safeguard those objectives is to treat a consignment of barley as a consignment of pearled barley only if the proportion of pearled grains considerably exceeds 50% by weight.

in reply to the questions submitted to it by the Bundesfinanzhof by order of 18 November 1980, hereby rules:

1. "Pearled grains of barley", within the meaning of the Annex to Regu- lation No 19, Article 5 (1) (d) of Regulation No 141/64 and Regu- lation No 11/66, must be taken to mean grains of barley which satisfy, as a minimum, the conditions laid down in the Explanatory Notes to the Customs Cooperation Council Nomenclature concerning heading 11.02.

2. In March and April 1966, pursuant to Community law as then in force regarding the export to non-member countries of cereal-based processed products, Member States were permitted to treat as consignments of pearled barley only consignments of barley in which the proportion of pearled grains considerably exceeded 50% by weight of the dry matter.

Bosco 0'K.eeffe Koopmans

Delivered in open court in Luxembourg on 17 June 1982.

P. Heim G. Bosco Registrar President of the First Chamber