C-145/81

LUDWIG WÜNSCHE & Co.,

on the interpretation of Commission Regulations (EEC) Nos 661/72 of 29 March 1972 and 1121/72 of 29 May 1972 determining the expon refunds payable in respect of cereal-based compound feeding-stuffs,

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

composed of: O. Due, President of Chamber, A. Chloros and F. Grévisse, Judges,

Advocate General : P. VerLoren van Themaat Registrar: J. A. Pompe, Deputy Registrar

gives the following

The facts of the case, the course of ground barley (22.7%) and dust from the procedure and the observations the hulling of barley (77.3%) arising submitted under Article 20 of the from the first and second hulling in the Protocol on the Statute of the Court of production of hulled barley. Since, in the Justice of the EEC may be summarized Hauptzollamt's opinion, "dust from the as follows: hulling of barley" was a by-product in the production of hulled barley, it could not be regarded as a cereal product within the meaning of the regulations in I — Facts and p r o c e d u r e question. It therefore refused to consider the mixture of barley flour and dust from the hulling of barley as a homogeneous Ludwig Wünsche & Co. exported to the product. United Kingdom on 27 April and 7 June 1972, that is to say before the accession The Hauptzollamt lodged an appeal with of the United Kingdom to the the Bundesfinanzhof against the decision Communities, two consignments of of the Finanzgericht [Finance Court] compound feeding-stuffs which, accord- Hamburg which had agreed with ing to the declaration which it made at Wünsche's reasoning and accepted that the time, consisted of: dust from the hulling of barley derived from the first and second hulling was to " 6 6 % barley flour, other, be regarded as a homogeneous cereal 20% barley husks, milled, product, in the same way as ground 12% potato-starch, barley, within the meaning of the 1% mixed minerals, aforesaid regulations. 1% molasses." In view of the fact that an interpretation of Community secondary legislation was At the material time both those called for, the Bundesfinanzhof stayed transactions were within the scope of the proceedings and, by order of 12 May Regulations Nos 661/72 and 1121/72 1981, lodged at the Registry of the and Wünsche applied for refunds under Court of Justice on 9 June 1981 referred those regulations. the following four questions to the Court for a preliminary ruling: The Hauptzollamt later discovered that the "barley flour, other" was a mixture " 1 . In determining the proportion of of ground barley and dust from the cereal products contained in hulling of barley and thereupon compound feeding-stuffs within the demanded repayment of DM 89 175.33 meaning of Regulations (EEC) Nos out of a total reimbursement of DM 661/72 and 1121/72 of the 102 895.49 which it had initially granted Commission, is account to be taken to Wünsche by way of refund. The also of products resulting from the Hauptzollamt had found that the "barley polishing or hulling, and not the flour, other" consisted of a mixture of grinding, of cereal grains?

2. Is the proportion of cereal products II — W r i t t e n o b s e r v a t i o n s s u b - contained in compound feeding- m i t t e d u n d e r A r t i c l e 20 of stuffs within the meaning of the the P r o t o c o l on t h e S t a t u t e aforementioned regulations to be of t h e C o u r t of J u s t i c e of determined in relation to the total the EEC ingredients in the compound feeding-stuffs resulting from the 1. Wünsche emphasizes, recalling the working or processing of cereals? factual details of the case, that both practice and expert opinion militate in

weight. 4. If the first question is answered in the affirmative and the third Furthermore, it observes that by question in the negative: must the adopting Regulations Nos 661/72 and aust arising from each polishing or 1121/72, which were applicable at the hulling process in the production of time of exportation, the Commission hulled barley, even split or crushed excluded residues resulting from the (Gerstengraupen), be taken into working of cereals, referred to under account separately in determining heading 23.02 of the Common Customs the proportion of cereal products Tariff as ingredients of compound contained in compound feeding- feeding-stuffs, in respect of which stuffs within the meaning of the said refunds may be granted, although such regulations?" products are also covered by Annex A to Regulation N o 120/68 of the Council

It takes the view, in that regard, that, according- to the consistent In accordance with Article 20 of the case-law of the Court, such processes Protocol on the Statute of the Court of have no bearing on the rate of duty ustice, written observations were lodged Íy Ludwig Wünsche & Co., represented by Modest and Partners, and by the charged on goods or on their classi- fication for tariff purposes. It observes in particular that in Case 80/72 Commission of the European Com- (Koninklijke Lassiefabrieken v Hoofdpro- munities, represented by Jörn Sack and duktschap voor Akkerbouwprodukten Thomas Van Rijn, Members of its Legal [1973] ECR 635) the Court referred to a Department, and assisted by Rolf note in the annex to Regulation No Streckmann, tax adviser. 1052/68 which states that: On hearing the report of the Judge- "Inclusion under this heading [headings Rapporteur and the views of the 11.01 and 11.02] is subject to the Advocate General, the Second Chamber condition that the product in question of the Court decided to open the oral has a starch content exceeding 4 5 % and procedure without any preparatory an ash content not exceeding . . . 3 % for inquiry. products based on barley . . . '

and concluded, in the undertaking's down by tariff headings — which are opinion, that the crucial factor was the already in existence at the time of manu- starch and ash content of the product in facture and are subsequently used and question. It adds that the Explanatory applied at that time as specific Notes to the Brussels Nomenclature lead ingredients of the compound feeding- to the same conclusion. stuff." According to Wünsche, it must be borne On the basis of those observations, in mind that barley flours are generally Wünsche also replies to the third obtained by sifting residues from the question by maintaining that a cereal production of hulled barley, that such product, within the meaning of the said meals are milled products arising from regulations, may also be derived from a hulling and not from grinding and that preparatory mixture of milled barley and consequently the production of barley dust from the hulling of barley, in so far flour by hulling is normal practice.

Furthermore, Wünsche argues that feeding-stuff in question must be it was under no obligation to declare considered together, apart from the separately, broken down by tariff preparatory mixture called "barley flour, headings (Article 2 (1) of Regulation No other". In that connection, it maintains 1913/69), the different ingredients of the that, for the exporter, only those types of preparatory mixture. product which are in existence at the time of manufacture and are added at In the alternative, it replies to the fourth that time may form the subject-matter of question along the same lines, arguing a declaration on the composition of the that if the dust from hulling is added feeding-stuff and that the different types prior to the manufacture of the of product used in its manufacture must compound feeding-stuff, the mixture be declared separately, broken down "by should be classified on the basis of its tariff headings" (Article 2 (1) of Regu- starch and ash content and the right to a lation No 1913/69).

compound feeding-stuff, in the form cereal-based compound feeding-stuffs which it takes after the working or qualifying for refunds were in processing of the cereals, but by conformity with Regulation N o 968/68, reference to the products — broken in particular Article 7 (1) thereof, it is

convinced that the ingredients of headings 11.01 and 11.02 of the compound feeding-stuffs must be Common Customs Tariff which are accorded preferential treatment where contained in composite products. they qualify, in principle, for refunds and Residues derived from the sifting, milling have actually been used in the manu- or other processing of cereal grains, facture of compound feeding-stuffs. It including 'dust from hulling, may be observes that the Commission was not classified under heading 23.02 of the empowered, contrary to the express Common Customs Tariff and therefore terms of Article 7 (1) of Regulation N o fail to qualify for the refunds. 968/68, to restrict that possibility and to withhold refunds in respect of residues In view of the fact that a residue, such as derived from the processing of the dust from hulling, derived from the cereals classified under tariff heading processing of cereals, may vary in quality 23.02 also referred to in Annex A to mainly on the basis of its starch content Regulation N o 120/68. and in order to avoid distortions of competition with flour, the Commission It points out that, most important of all, has adopted certain provisions according the Commission was not entitled to to which the classification of a cereal restrict the scope of Article 7 (1) of product as flour or residue is no longer Regulation N o 968/68 of the Council to be determined by the form it has as a simply through the recitals in the result of the process by which it is manu- preambles to Regulations Nos 1913/69, factured but solely by its starch and ash 661/72 and 1121/72 and that it was no content. Note 2 A to Chapter 11 of the more justified in restricting the concept Common Customs Tariff, the wording of cereal products qualifying for refunds of which has remained unchanged since merely by means of a footnote to Regu- the goods in question were exported in lations Nos 661/72 and 1121/72. 1972, provides that before a cereal product can be classified under headings For all those reasons, the plaintiff 11.01 and 11.02 it is necessary to considers that the products within tariff ascertain whether it has a starch content heading 23.02 must, in so far as they exceeding 4 5 % and an ash content equal

the question which arises is whether the Nos 661/72 and 1121/72 lacks validity notes to the Common Customs Tariff in so far as it is an obstacle to the grant may be used for the purpose of of refunds. classifying goods by groups under the regulations on refunds and whether Note 2. As regards the first question, the 2 A to Chapter 11 is applicable only to Commission contends that the decisive flours derived from cereals or also to criterion should be exclusively the other products obtained by polishing or objective characteristics and properties of hulling and not by grinding.

HAUPT20UAMT HAMBURG-JONAS v WÜNSCHE

Tariff, the rules adopted for the interpret- by Article 2 of Regulation No 1913/69, ation of the Common Customs Tariff helps to prevent any possibility of fraud must also be relied upon for the in- or abuse and facilitates control without terpretation of the provisions relating to there being any risk that products may refunds. Moreover, it emphasizes that be taken into account which cannot in Article 18 of the basic regulation, Regu- fact qualify for a refund. T h e same lation No 120/67/EEC of the Council, considerations also apply in the case of provided that the general rules for the "preparatory mixtures". If the exporter interpretation of the Common Customs were entitled to declare the products Tariff and the special rules for its obtained by the working or processing of application were applicable to the classi- cereals in the aggregate, it would be fication for tariff purposes of products perfectly possible for him to have covered by the regulation. products taken into account which should be excluded.

JUDGMENT OF I. 7. 1982 — CASE 145/81

regarded as cereal products within the which involves a separate production meaning of the two aforesaid regu- technique. lations are determined in accordance with the Common Customs Tariff I l l — Oral procedure rules to which those regulations refer. At the sitting on 28 January 1982, oral 2. The proportion of cereal products argument was presented by Ludwig contained in compound feeding-stuffs Wünsche & Co., represented by Mr within the meaning of the regulations Landry of Modest and Partners, referred to in the answer to the first Rechtsanwälte, and by the Commission question must be determined, in of the European Communities, rep- accordance with Article 2 of Regu- resented by Jörn Sack and Thomas Van lation (EEC) No 1913/69 of the Rijn, members of its Legal Department, Commission, on the basis of every assisted by Rolf Streckmann, tax adviser. ingredient of the compound feeding- stuff derived from the working or The Advocate General delivered his processing of cereals by a process opinion at the sitting on 11 March 1982.

Decision

1 By order of 12 May 1981, which was received at the Court Registry on 9 June 1981, the Bundesfinanzhof [Federal Finance Court] referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty four questions on the interpretation of Commission Regulations (EEC) Nos 661/72 of 29 March 1972 and 1121/72 of 29 May 1972 determining the expon refunds payable in respect of cereal-based compound feeding-stuffs (Journal Officiel 1972, L 79, p. 35, and L 126, p. 33, respectively).

4 In these circumstances, the Bundesfinanzhof referred to the Court the following questions for a preliminary ruling: " 1 . In determining the proportion of cereal products contained in compound feeding-stuffs within the meaning of Regulations (EEC) Nos 661/72 and 1121/72 of the Commission, is account to be taken also of products resulting from the polishing or hulling, and not the grinding, of cereal grains? 2. Is the proportion of cereal products contained in compound feeding- stuffs within the meaning of the aforementioned regulations to be determined in relation to the total ingredients in the compound feeding- stuffs resulting from the working or processing of cereals? 3. If the second question is answered in the negative: can the term 'cereal products' within the meaning of the said regulations include a preparatory mixture of ground barley and so-called 'dust from the hulling of barley'? 4. In the first question is answered in the affirmative and the third question in the negative: must the dust arising from each polishing or hulling process in the production of hulled barley, even split or crushed (Gerstengraupen), be taken into account separately in determining the proportion of cereal products contained in compound feeding-stuffs within the meaning of the said regulations?"

s Wünsche contends that the method by which the cereal is worked and processed has no bearing on the determination and classification of the product, a view which is moreover supported by the consistent decisions of the Court. In its opinion, it is the cereal products composing the goods which are relevant for the purposes of classification and the right to a refund should be assessed in the light of that composition.

? It is clear from footnote 2 to the annex to Regulations Nos 661/72 and 1121/72 that the products covered by Chapter 10 and by headings 11.01 and 11.02 of the Common Customs Tariff are to be regarded as cereal products.

ic According to Explanatory Note 2 A to Chapter 11 of the Common Customs Tariff, "products from the milling of cereals .. . fall within this chapter if they have, by weight on the dry product: (a) a starch content (determined by the modified Ewers polarimetrie method) exceeding [45%]; and (b) an ash content (after deduction of any added minerals) not exceeding [3%]". It is stated in the same note that products which fail to satisfy those conditions are to be classified in heading 23.02 of the Common Customs Tariff.

n It follows that the manufacturing process must be disregarded as far as the products in question are concerned. They must therefore be classified directly in the specific heading whose criteria for classification they satisfy.

HAUPTZOLIAMT HAMBURG-JONAS v WÜNSCHE

12 In that regard it should be emphasized that according to the consistent case-law of the Court, the decisive criterion for the classification of goods for customs purposes must in general be sought in their objective charac- teristics and properties as defined by the wording of the relevant heading of the Common Customs Tariff and the notes relating to the relevant sections or chapters thereof.

1 3 Accordingly, the answer to the first question must be that for the purpose of determining the proportion of cereal products contained in cereal-based compound feeding-stuffs within the meaning of Regulations Nos 661/72 and 1121/72 of the Commission, account must be taken only of the qualitative criteria laid down by the Common Customs Tariff, and reference need not be made to the manufacturing process.

JUDGMENT OF 1. 7. 1982 — CASE 145/81

is Similarly, Anicie 2 of that regulation provides that "the exporter shall declare to the competent agencies the full composition of the cereal-based compound feeding-stuffs, giving the percentages of each kind of product entering therein broken down by tariff headings". That observation implies that the exporter's declaration must specify all the different ingredients of the product in question and indicate the exact proportion of the product which each of those ingredients represents as well as the tariff heading to which it belongs.

i9 In the light of all the aforesaid provisions, the dust arising from each polishing or hulling process, as described in the fourth question of the court making the reference, must be regarded as a separate product.

20 Accordingly, the answer to the remaining questions must be that the pro- portion of cereal products contained in compound feeding-stuffs within the meaning of the regulations mentioned in the reply to the first question must be determined by taking account of each of the ingredients of the compound feeding-stuffs, since each of those ingredients may itself be derived from the working or processing of cereals by a process involving a separate production technique.

Costs

2i 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 proceedings pending before the national court, the decision on costs is a matter for that court.

2. The proportion of cereal products contained in compound feeding- stuffs within the meaning of the regulations mentioned in the reply to the first question must be determined by taking account of each of the ingredients of the compound feeding-stuffs, since each of those ingredients may itself be derived from the working or processing of cereals by a process involving a separate production technique.

Due Chloros Grévisse

Delivered in open court in L u x e m b o u r g o n 1 July 1982.

P. Heim O. Due Registrar President of the Second Chamber

OPINION OF MR ADVOCATE GENERAL VERLOREN VAN THEMAAT DELrVERED ON 11 MARCH 1982 '