C-60/83

A product which, on importation, therefore, as a single article which may consists of several parts separately be described as a cash register within the packed in one carton, namely a multi­ meaning of subheading 84.52 Β of the purpose electronic desk calculator with Common Customs Tariff. print-out and a 12-figure luminous display screen (which is capable of The articles which together constitute addition, multiplication, subtraction, the product referred to in the first division, calculation of percentages and question must be considered as goods extraction of roots and calculations put up in sets within the meaning of with a constant), a lockable steel-plate General Rule 3 (b) for the Interpretation cash-box with plastic till or drawer in of the Nomenclature of the Common which cash may be kept and accessories Customs Tariff, the tariff classification (electric cable, double-sheeted roll of of which is based on the component paper and dust-cover), cannot be which gives them their essential regarded as a functional unit or, character.

In Case 60/83

R E F E R E N C E to the C o u r t u n d e r Article 177 of the E E C T r e a t y by the Bundesfinanzhof [Federal Finance C o u r t ] for a preliminary ruling in the action p e n d i n g before t h a t c o u r t between

1 — Language of the Case: German

JUDGMENT OF 9. 2. 1984 — CASE 60/83

M E T R O INTERNATIONAL KOMMANDITGESELLSCHAFT, Düsseldorf,

gives the following

JUDGMENT

Facts and issues

The order for reference, the course of I — Facts and p r o c e d u r e the procedure and the observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of ' 1. On 15 April 1981, Metro Inter­ Justice of the EEC may be summarized national Kommanditgesellschaft, here­ as follows: inafter referred to as " M e t r o " , the

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Goods classified under subheading By a decision of 18 December 1981, the 84.52 A were, at that time, liable to an Oberfinanzdirektion dismissed the ob- autonomous duty of 14 % and a jection lodged against the notice of class- conventional duty of 13.5%. ification. Referring to the Customs Cooperation Council's Explanatory Notes, Section XVI, 84.52, (C), it In support of the classification under pointed out that, in general, cash subheading 84.52 A, the Oberfinanz- registers consist of an appliance for direktion referred to General Rule 3 of recording and a till or drawer in which the Rules for the Interpretation of the the cash is kept, the recording appliance Nomenclature of the Common Customs and the till forming a single unit. They Tariff, which reads as follows: can only total the amounts recorded. By

JUDGMENT OF 9. 2. 1984 — CASE 60/83

The plaintiff in the main action considers that the goods in question ought to be Metro then points out that the Oberfi­ classified under subheading 84.52 Β of nanzdirektion relied exclusively on the the Common Customs Tariff. The duties Customs Cooperation Council's Ex­ provided for under that subheading planatory Notes. However, as there are were, at the time, 12% autonomous duty no legally binding provisions relating to and 5.2% conventional duty. tariff classification, the view generally accepted must be decisive. In that regard, the plaintiff relies on an expert opinion It contended in support of the action of the Rationalisierungs-Gemeinschaft which" it brought before the Bundes- des Handels eV [trade rationalization finanzhof against the rejection of its association], Cologne, which was put objection and the official notice of classi­ before the national court, to the effect fication made by the Oberfinanz­ that since the beginning of the 1970s, direktion that the calculator, cash-box electronic cash registers have pro­ and accessories were not goods put up in gressively replaced mechanical ones. sets but rather a functional unit, namely, Electronics have made it possible to a cash register. The different components equip registers with the capacity for are purchased abroad and sold in the subtraction and the calculation of per­ customs territory as a cash register. centages. This has facilitated the regis­ Moreover certain special technical tration of cash receipts, in particular with attachments identify it as a cash register. regard to the return of deposits and the The calculator is manufactured for calculation of discounts, rebates and combination with the cash-box. Unlike value added tax. Since then therefore, ordinary desk calculators, it has a socket cash registers have been able to do far for the cable linking it to the cash-box more than merely record and add. T o and an additional reel for a double- that extent therefore the aforementioned sheeted tally roll. Explanatory Notes are outdated. It may thus be concluded that a machine which both records and calculates is a modern electronic cash register suitable, as such, In economic terms the cash-box has no for use in numerous commercial under­ value unless it is connected to the takings.

In the light of the technical developments It cannot be concluded, however, from which have taken place in electronics the terms of heading 84.52 of the and which also affect cash registers, the Common Customs Tariff that composite national court doubts whether the Ex­ goods made up of an electronic planatory Note invoked by the Oberfi­ calculator, cash-box and accessories may nanzdirektion (Section XVI, 84.52, (C)) be classified as a cash register nor can it is still an authentic interpretation of the be concluded that a cash register within meaning of the concept for tariff the meaning of that heading exists only purposes. when the recording device and the cash-box form a unit, as the Oberfinanz­ direktion believes. On the other hand, it accepts that if the description as a functional unit is rejected, the individual parts may be The Bundesfinanzhof points out that the considered as composite goods made up distinction from the point of view of the of different components or goods put up tariff between electronic calculators and in sets. Pursuant to General Rule 3 (b) of cash registers does not mean that an the Common Customs Tariff, they are to electronic calculator used as a cash be classified in both cases as if they register with a flexible connection with a consisted of the component which gives cash-box must not be considered as a them their essential character, which in functional unit to be classified under this case is the electronic calculator. subheading 84.52 B. It refers in this connection to the Customs Cooperation Council's Explanatory Notes which, according to the established case-law of 3. The Bundesfinanzhof, by an order the Court, are an authoritative source for of the Seventh Senate dated 1 March the purposes of the interpretation of the 1983, decided, pursuant to Article 177 of headings of the Common Customs the EEC Treaty, to suspend proceedings Tariff. According to the Explanatory until the Court of Justice had delivered a Notes, a machine or appliance consisting preliminary ruling on the following of separate components which are questions: designed to contribute together to a single clearly defined function are to be classified in the heading appropriate to " 1 . Is the term 'cash register' within the that function even if the components meaning of subheading 84.52 Β of remain separate and are merely the Common Customs Tariff to be interconnected by electric cables (Section interpreted as including an article

described as an 'electronic cash By order of 21 September 1983, the register', which on importation Court, pursuant to Article 95 (1) and (2) consists of several parts separately of the Rules of Procedure, assigned the packed in one carton, namely a case to the First Chamber. multipurpose electronic desk calculator with print-out and a 12-figure luminous display screen In accordance with Article 20 of the (which is capable of addition, multi­ Protocol on the Statute of the Court of plication, subtraction, division, calcu­ Justice of the EEC, written observations lation of percentages and extraction were submitted by the Commission of of roots and calculations with a the European Communities, represented constant), a lockable steel-plate by Christoph Bail, a member of its Legal cash-box with plastic till or drawer Department, acting as Agent. in which cash may be kept and accessories (electric cable, double- Upon hearing the report of the Judge- sheeted roll of paper and dust- Rapporteur and the views of the cover)? May such parts taken as a Advocate General, the Court decided to whole be regarded as a functional open the oral procedure without any unit and therefore as a single article preparatory inquiry. which may be described as a cash register within the meaning of sub­ heading 84.52 Β of the Common Customs Tariff, in view of the fact that, before it can be used as a II — Written observations sub­ cash register, the electronic desk mitted to the C o u r t calculator must be placed on top of the cash-box and joined to it not by any permanent connection but by The Commission considers that goods means of the accompanying such as those in question in the main attachments (electric cable with a action, which, in addition to the calcu­ plug attached to the cash-box, corres­ lations normally carried out by cash ponding socket in the calculator, registers (addition, multiplication, sub­ matching rubber pads on both traction), can also carry out more parts)? complex operations (extraction of roots for example), cannot be regarded as a functional unit or, consequently, as a 2. If the answer to Question 1 is in the single product which may be described as negative : a cash register within the meaning of subheading 84.52 Β of the Common May such articles consisting of Customs Tariff. several parts be regarded as 'goods put up in sets' or 'goods . . . made up of different components' within the It points out that it is the objective meaning of General Rule 3 (b) of capacity of goods to perform certain the Rules for the Interpretation of functions rather than the functions the Nomenclature of the Common actually performed which is decisive in Customs Tariff?" deciding whether or not goods composed of several elements constitute a func­ tional unit within the meaning of a given tariff heading. In order to avoid frauds The order for reference was lodged at based on rates of duty, classification the Court Registry on 11 April 1983. cannot be based on the intended use of

the goods in question but purely on their function. In those conditions a classi- objective characteristics. fication carried out on the basis of the concept of a functional unit would be contrary to the mandatory provisions of General Rules 1 and 3 for the Interpret- The Customs Cooperation Council's ation of the Common Customs Tariff. Explanatory Notes to which the national court refers, gives a very narrow definition of the concept of a functional unit: the machine or appliance must perform a single clearly defined function The Commission also points out that all described by one of the tariff headings the Customs Cooperation Council's (Section XVI, General, (VI), relating to Explanatory Notes arc regularly brought Note 3 to Section XIV of the Common into line with technical developments. Customs Tariff, ninth paragraph). The The part dealing with heading 84.52 was narrowness of that definition is due to last amended in June 1979.

consideration. In such a case, the classi- cash register" in question cannot be fication should be made on the basis of considered to be goods made up of General Rule 3. different components within the meaning of General Rule 3 for the Interpretation of the Common Customs Tariff. Accord- ing to paragraph VIII of the Customs Cooperation Council's Explanatory Moreover, it is necessary to inquire Notes relating to Rule 3 (b), composite whether the goods which constitute a goods made up of different components functional unit perform the precise are to be taken to be not only those in function referred to in the tariff heading which the components are attached to in question and whether that function is each other so as to form a practically the only one which they perform. In this inseparable whole but also those with case the multipurpose electronic desk separable components, provided that calculator could, by itself or with the those components are adapted one to the other pieces of equipment, perform the other and are mutually complementary function of a calculating machine within and that together they form a whole the meaning of subheading 84.52 A. The which it would be difficult to sell in object described as an "electronic cash separate parts. The goods in question are register" is therefore capable of per- indeed composed of separable forming functions other than those components, adapted to one another and described in the Explanatory Note mutually complementary but the second relating to the concept of cash register, condition requiring that they should be and particularly functions referred to in difficult to sell in separate parts is not several tariff headings or subheadings. met as regards the office calculator, Consequently, it does not meet the which is in fact a multipurpose electronic aforementioned criterion of a single calculator and could be sold separately.

Decision

1 By o r d e r of 1 M a r c h 1983, received at the C o u r t on 11 April 1983, the Bundesfinanzhof [Federal Finance C o u r t ] referred to the C o u r t for a p r e - liminary ruling u n d e r Article 177 of the E E C T r e a t y t w o questions concerning the interpretation of the C o m m o n Customs Tariff.

METRO ν OBERFINANZDIREKTION MÜNCHEN

2 Those questions arose in the course of the proceedings concerning the tariff classification of a product which had been described as an "electronic cash register" by the importing firm but which, according to the binding customs tariff ruling ("verbindliche Zolltarifauskunft") of the competent customs office, should be considered to be an electronic calculating machine falling under subheading 84.52 A of the Common Customs Tariff.

3 Heading 84.52 of the Common Customs Tariff reads as follows:

"84.52 Calculating machines; accounting machines, cash registers, postage- franking machines, ticket-issuing machines and similar machines, incorporating a calculating device :

6 Note 3 to Section XVI of the tariff, of which Chapter 84 is part, provides that composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.

7 According to the Customs Cooperation Council's Explanatory Notes, Note 3 to Section XVI does not apply when a machine or appliance consists of separate components which are designed to contribute together to a single clearly-defined function described by one of the headings in Chapter 84. The Explanatory Notes add that the whole falls to be classified in the heading appropriate to that function even if, as a matter of convenience, for example, the various components remain separate and are merely interconnected by devices used to transmit power or by electric cables.

8 The national court asks if the cash-box and the electronic calculator which are simply placed one on top of the other and joined to each other by means of an electric cable, may be regarded as a functional unit of the kind described in those Explanatory Notes. If such is the case, all the components of the product would be intended to contribute together to a single clearly- defined function, namely, that of a cash register within the meaning of sub­ heading 84.52 Β of the Common Customs Tariff. The fact that the electronic calculator, one component of the unit, may also be used separately does not necessarily exclude such a possibility.

12 The order for reference points out that if the product in question is to be considered as "goods put up in sets" or "goods . . . made up of different components" within the meaning of the said General Rule 3 (b), the essential character of the goods is rather determined by the calculator, in view of its greater value in comparison to the other components and the use which may be made of the composite article, namely, the performance of more complicated arithmetical operations in addition to recording by calculation and addition of numbers.

13 As regards General Rule 3 (b), the Customs Cooperation Council's Ex­ planatory Notes state that the expression "goods put up in sets" is to be taken to mean goods which consist of products or articles having

JUDGMENT OF 9. 2. 1984 — CASE 60/83

independent or complementary uses, grouped together for meeting a need or carrying out a specific activity, and are put up in retail packings.

1 4 The Court considers that the product described by the national court corresponds to those criteria and thus falls under General Rule 3 (b). In those conditions, its classification for tariff purposes must be determined, as the national court has rightly held, by the component which gives it its essential character.

15 The reply to the second question should therefore be that the articles which together constitute the product referred to in the first question must be regarded as goods put up in sets within the meaning of General Rule 3 (b) for the interpretation of the Common Customs Tariff, the tariff classification of which is based on the component which gives them their essential character.

METRO ν OBERFINANZDIREKTION MÜNCHEN

calculator with print-out and a 12-figure luminous display screen (which is capable of addition, multiplication, subtraction, division, calculation of percentages and extraction of roots and calculations with a constant), a Iockable steel-plate cash-box with plastic till or drawer in which cash may be kept and accessories (electric cable, double-sheeted roll of paper and dust-cover), cannot be regarded as a functional unit or, therefore, as a single article which may be described as a cash register within the meaning of subheading 84.52 Β of the Common Customs Tariff.

2. The articles which together constitute the product referred to in the first question must be regarded as goods put up in sets within the meaning of General Rule 3 (b) for the Interpretation of the Nomenclature of the Common Customs Tariff, the tariff classification of which is based on the component which gives them their essential character.

Koopmans Mackenzie Stuart Bosco

Delivered in open court in Luxembourg on 9 February 1984.

The Registrar by order H. A. Rühl T. Koopmans Principal Administrator President of the First Chamber