C-37/88

RHEINKRONE-KRAFTFUTTERWERK v HAUPTZOLLAMT HAMBURG-JONAS

OPINION OF MR ADVOCATE GENERAL VAN GERVEN delivered on 25 May 1989 *

Mr President, trative application of monetary Members of the Court, compensatory amounts.

Introduction

1. The Finanzgericht Hamburg (hereinafter 2. Article 30 of that regulation, on which referred to as 'the national court') has the Court has not yet been requested to give referred the following question to the Court a ruling, must be viewed in the light of the of Justice: general principle that also finds expression in Articles 6 and 9 of the regulation, namely that unless otherwise provided for, the provisions for the application of the Common Customs Tariff and the rules for 'Is Article 30(3) of Regulation (EEC) No its interpretation are also applicable to 1371/81 of 19 May 1981 (Official Journal monetary compensatory amounts because 1981, L 138, p. 1) to be interpreted as they complement the intervention measures meaning that the term "mixture" covers provided for in the context of the common only a product whose components fall under organization of agricultural markets. 1 The Chapters 2, 10 or 11 of the Common first two paragraphs of Article 30 expressly Customs Tariff or does that term also cover provide that Additional Notes to certain products whose components consist of chapters of the Common Customs Tariff are products falling under Chapters 2, 10 or 11 to apply, mutatis mutandis, to monetary and of products falling under other compensatory amounts. One of those is chapters; in particular, are mixtures of Additional Note 3 to Chapter 11 (the wheat flour and wheat bran which relevant chapter in this case), which was according to the General Rules for the inserted by Regulation (EEC) No 3324/80 interpretation of the Common Customs and introduces for 'mixtures' falling within Tariff are to be classified as wheat flour the chapter in question a calculation (of mixtures within the meaning of Article 30(3) duty) which corresponds to the calculation of Regulation No 1371/81?' (for the monetary compensatory amounts to be granted) provided for in Article 30(3). Article 30(3) introduces special provisions in regard to monetary compensatory amounts

(a) in mixtures where one of the components represents at least 90% by 4. The facts are described in paragraphs 2 weight, the rate applicable to that to 6 of the Report for the Hearing. I shall component applies; briefly summarize them here. During the period from August 1981 to August 1984, the applicant in the main proceedings applied for the grant of monetary compensatory amounts for the export from (b) in other mixtures, the rate applicable the Federal Republic of Germany to the shall be that of the component which Netherlands of a product obtained by results in the lowest monetary mixing wheat flour (between 80 and 90% compensatory amount. In cases where by weight) and wheat bran (between 10 and one or more of the components are not 20% by weight). Rheinkrone declared the eligible for monetary compensatory product in question as wheat flour falling amounts, no monetary compensatory under subheading 11.01 A of the Common amount shall be granted for the Customs Tariff. 2 mixtures'.

Note 2 A contains the following rule: products derived from the milling of wheat 3 Initially, that is to say from August 1981 to fall within Chapter 11, that is to say November 1983, that declaration was Headings 11.01 (cereal flours) or 11.02 accepted by the Hauptzollamt. Only (cereal groats) if they have, by weight on subsequently, in a decision of 7 December the dry product, a starch content exceeding 1984, did the Hauptzollamt come to the 45% and an ash content not exceeding conclusion that in accordance with Article 2.5%. Products derived from the milling of 30(3) of Regulation (EEC) No 1371/81 wheat which do not fulfil the above monetary compensatory amounts should conditions are classified under Heading have been granted only at the lower rate 23.02 (bran). applicable to wheat bran falling under subheading 23.02 A II of the Common Customs Tariff. In support of this new conclusion, the Hauptzollamt did not rely upon the analysis of the characteristics of the product carried out by the Zolltech­ nische Prüfungs- und Lehranstalt. Moreover, that analysis was not concerned Note 2 B then contains a rule for with the manner in which the product at classifying the products which according to issue was obtained. According to the foregoing fall under Chapter 11 under Rheinkrone, whose assertion was confirmed Heading 11.01 (cereal flours) or under at the hearing by the Commission's expert, Heading 11.02 (cereal groats). As regards that is a question to which a reply cannot be wheat products, the rule is as follows: if the given ex post facto, that is to say after the percentage passing through a silk gauze or manufacture of the product. man-made textile sieve with an aperture of 315 micrometers is (by weight) equal to or greater than 80%, those products are to be classified under Heading 11.01 (cereal flours) and are wheat flour. If not, they are The only relevant matter of fact on which the Hauptzollamt's new conclusion was 3 — Analogous rules with regard to cereal product; derived from the milling of rye, barley, oats, maize, rice and others 4 — The 'A' indicates wheat products; see the previous are not relevant to these proceedings. footnote.

'Any reference in a heading to a material or substance shall be taken to include a 7. The question for the national court is reference to mixtures or combinations of whether this new conclusion on the part of that material or substance with other the Hauptzollamt is justified. Initially the materials or substances. ... The classifi­ national court referred to the Court an cation of goods consisting of more than one additional question relating to 'legitimate material or substance shall be according to expectations' in connection with the Haupt- the principles of Rule 3' (see below). zollamťs change in attitude, but this question was subsequently withdrawn. The only remaining question is thus the one which logically precedes it, whether a finished product obtained by mixing wheat For its part, the national court attaches flour (subheading 11.01 A) and wheat bran some importance to General Rule A 3 (b) (subheading 23.02 A II) which, on the basis of the Common Customs Tariff, 5 which of the rules of the Common Customs Tariff, contains a provision intended to facilitate applied in this case after an analysis of the classification of 'composite products' samples, is wheat flour within the meaning under one heading or another. Under the of subheading 11.01 A of the Common terms of General Rule A 1, these two Customs Tariff must be regarded as a general rules govern the classification of 'mixture' of those two products within the products under tariff headings only meaning of Article 30(3) of the regulation 'provided such headings or Notes do not on the application of monetary otherwise require'. 6 compensatory amounts. 5 — '3. When, for any reason, goods are, prima facie, classi­ fiable under two or more headings, classification shall be effected as follows:

In its written observations, Rheinkrone, which was not aware of this point of view of the Commission, put forward not a 8. In the first place, the question arises as to parallel but an opposite line of reasoning. At the interpretation of the expression the hearing, however, it did plead that 'mixtures falling within Chapter 2, 10 or 11 Article 30(3) is not applicable since the of the Common Customs Tariff'. Whether product in question is a mixture of wheat the word 'en' in the Dutch version, which flour (Chapter 11) and wheat bran corresponds to the word 'und' in the (Chapter 23) and pointed out that German version in fact conveys less Chapter 23 is not mentioned in the accurately the intention of the legislature exhaustive enumeration. The applicant put than the word 'ou' in the French version is forward that line of argument only in the not directly relevant to the solution of the alternative to its main argument that the dispute, which has no connection with product in question is not a mixture at all. Chapters 2 and 10. The question, however, Thus in the applicant's view the first, is whether the enumeration of those three preliminary, question is whether the product chapters is exhaustive. The wording of the in issue is a 'mixture'. I think this question provision suggests such a conclusion, and in must indeed be examined first. It is only if it their observations Rheinkrone and the appears that the product in question is a Commission are agreed on that point. The 'mixture' within the meaning of Article conclusions which Rheinkrone and the 30(3) that it becomes necessary to determine Commission draw from this observation are whether mixtures falling within Chapters 2, not identical as regards the reply to be given 10 and 11 of the Common Customs Tariff to the second part of the question. are the only ones covered by that article.

Let me begin by recounting the first compensatory amounts constitute a means argument. The Commission proceeds on the of regulating intra-Community trade, basis that the term was not defined in Regu­ whereas customs duties and levies, in the lation (EEC) No 1371/81 or in the General context of the organization of agricultural Rules for the interpretation of the nomen­ markets, are intended to protect the clature of the Common Customs Tariff. It Community market against the outside does, however, refer to General Rule world and are based partly on international A 2 (b) (cited in point 7, above), according agreements, and secondly the fact that to which 'any reference in a heading to a customs duties and levies are only charged, material or substance shall be taken to whereas monetary compensatory amounts include a reference to mixtures or combi­ may also be granted, that is to say they may nations of that material or substance with not only be negative but also positive. The other materials or substances'. In the Commission concludes from the foregoing Commission's view, this provision refers to that stricter conditions were laid down for normal linguistic usage whereby any homo­ monetary compensatory amounts than for geneous product obtained from different duties and levies. Those stricter conditions materials constitutes a mixture. It infers are, it says, intended in particular to make it therefrom that a product obtained from more difficult to obtain products by mixing wheat and bran is a mixture, whether the which do not correspond to market bran mixed with the wheat comes from requirements in order to export them to stocks or was separated from the flour another Member State, receiving produced from the same batch of grain, considerable monetary compensatory wheat and bran constitute two different amounts, and then separate them into their substances which together form a homo­ components and re-import the low-value geneous mixture comparable to flour. component subject only to the payment of low monetary compensatory amounts. The Commission adds that there is nothing to indicate that the applicant in the main proceedings engaged in so-called 'carousel' transactions, but it is the risk of such trans­ actions that justifies the existence of the provisions of Article 30(3) and the manner in which the Commission interprets those provisions.

the Court based itself on Note 2 A to Rheinkrone then points out that although Chapter 11 of the Common Customs Tariff the product in question was obtained in this (quoted above at point 5), a provision which case by mixing wheat flour with wheat bran, classifies products derived from the milling it is not only, as the Commission stated, of cereals under Chapters 11 or 23 of the 'comparable to' wheat flour, but is in fact Common Customs Tariff. The Court drew wheat flour. In support of that point of the following conclusions: view, the applicant alleges that wheat bran is a form of wheat flour, the only difference between wheat bran and lighter wheat flour being a difference in the starch and ash content. In other words, wheat bran and wheat flour form a continuum, and the only possible objective criterion for distinguishing between them is a combination of limits for 'It follows that the manufacturing process the ash and starch content, that is to say the must be disregarded as far as the products criterion which is in fact used in Note 2 to in question are concerned. They must Chapter 11 of the Common Customs Tariff, therefore be classified directly in the specific quoted above at point 5. It follows from the heading whose criteria for classification they foregoing that when wheat flour within the satisfy (paragraph 11). meaning of the Common Customs Tariff is mixed with wheat bran, the bran loses its identity when the starch content of the finished product exceeds 45 % by weight and the ash content falls below 2 . 5 % by weight. The converse is equally true: if one of these two conditions was not satisfied, or 'In that regard it should be emphasized that neither of them was, the finished product according to the consistent case-law of the would have to be regarded as 'bran' and the Court, the decisive criterion for the classifi­ identity of the 'flour' used would disappear. cation of goods for customs purposes must At the hearing the Commission's expert in general be sought in their objective endorsed the applicant's arguments on this characteristics and properties as defined by point. the wording of the relevant heading of the Common Customs Tariff and the notes relating to the relevant sections or chapters thereof (paragraph 12).

The first method is to produce the wheat in formulating my own assessment. I should, flour by a series of milling operations using however, state that I have some sympathy whole grains of wheat, in which case there for the positions defended by both parties is no question of 'mixing' or of 'mixtures'. and that it is not without some hesitation The second method — the one which was that I have reached a conclusion. To explain used in this case — consists of two series of my point of view let me set out two possible

Moreover, although according to Rheinkrone it is 'by definition' more expensive to conduct two operations, again according to Rheinkrone's assertions, which have not been contradicted, it is nevertheless more reasonable from a business point of view to proceed in two stages because the two intermediate products which are manufactured during the The reasoning which leads to the initial phase are in great demand, whereas acceptance of Rheinkrone's position is as there is little demand for the final product. follows. In view of the Court's case-law it is In the exceptional event that there is a undeniable that the interpretation of the demand for the final product in question, it Common Customs Tariff and its headings is is not worthwhile to alter the technical in principle applicable to market organiz manufacturing process; it is simpler to mix ations, including monetary compensatory the two products which are in great demand amounts, 'in the absence of any express and are therefore in continuous production. provision' (as the Court expressly held in its According to the applicant, a producer who judgment of 14 July 1978 in Case 5/78 is guided by such principles of business Milch/utter v Hauptzollamt Gronau [1978] management cannot be regarded as having ECR 1597, paragraph 12). Moreover, the enriched himself in an unlawful manner. As Court has frequently and consistently held I understand the applicant's argument, the that, in the classification of products under manufacturing process used and chosen headings of the Common Customs Tariff, purely on grounds of business management objective, independently verifiable criteria cannot have any influence on the must play a decisive role, that is to say in application of the Common Customs Tariff general the manufacturing processes of the or the provisions relating to monetary composition and the purpose for which the compensatory amounts. products are intended (see inter alia the judgments of 16 December 1976 in Case 38/76 Luma vHauptzollamt Duisburg [1976] Assessment ECR 2027, paragraph 7, first subparagraph, and in Wünsche, cited by the applicant in the main proceedings and mentioned above

RHEINKRONE-KRAFTFUTTERWERK v HAUPTZOLLAMT HAMBURG-JONAS

product in issue is a product: (1) which may amounts and does not become a mixture be placed on a sliding continuous scale within the meaning of Article 30(3). That ranging from (very coarse) bran to (very article relates solely to objectively ident­ light) wheat flour, (2) which may be manu­ ifiable mixtures of two different varieties of factured in two different ways, either in a grain or their derivatives whose hetero­ way which does not include any real mixing geneous composition and method of operation, by means of one series of milling production by mixing is detectable a operations from whole grains of wheat, or posteriori (by means of technical aids). in a manner which does include a mixing operation, that is to say by separate milling of kernels and husks into fine flour and bran respectively, followed by the mixing of them both in order to obtain less light flour, and (3) in respect of which it can subsequently, on customs clearance, no longer be established in what way it was produced.

OPINION OF MR VAN GERVEN —CASE 37/88

concept of mixture in Additional Note 3 to However that may be, it must be Chapter 11 of the Common Customs Tariff, acknowledged that the concept of 'mixture' to which Article 30(2) expressly refers. Since to which Article 30(3) refers is no different that note does not contain any definition, in from the same concept as it appears in the order to determine the meaning of the term Common Customs Tariff, inter alia (but not 'mixture' as used in that note and in other only) in Additional Note 3 to Chapter 11 notes (whether ordinary or additional (to which Article 30(2) refers) and that notes), it is necessary to refer to General there it is described, if only incidentally, in Rules A 2 (b) and A 3 (b) of the Common General Rules A 2 (b) and A 3 (b) in a Customs Tariff. It appears therefrom that broad sense as a substance mixed or the concept is to be construed broadly and combined with other substances or as a covers 'combinations of [a] material or product composed of different materials or substance with other materials or made up of different components. It appears substances' or mixtures 'consisting of to me that bran and flour, even if they do different materials' or 'made up of different constitute a 'continuum' in relation to each components'. The Common Customs Tariff other, are, as regards their composition and treats wheat flour and wheat bran, although the use to which they are intended to be they lie on a single 'continuum', as two put, different materials the assembly or different articles, so that a combination of mingling of which amounts to a mixture. those products constitutes a mixture.

RHEINKRONE-KRAFTFUTTERWERK v HAUPTZOLUMT HAMBURG-JONAS

In view of since a definition (albeit incidental) of the good faith of the applicant in the main 'mixture' appears in the General Rules of proceedings, the long delay and the change the Common Customs Tariff, this definition in attitude of the Hauptzollamt as to the is indeed applicable but not in the way application of the rules on monetary contended for by the applicant in the main compensatory amounts and the difficulties proceedings. There remains Rheinkrone's of interpretation caused by Article 30(3) of second argument based on the reference to Regulation (EEC) No 1371/81, the reply to two different manufacturing processes, one that second preliminary question would not of which consists of mixing and the other have presented me with many difficulties.

Now that I have arrived at the However, for reasons of legal certainty, the conclusion that Rheinkrone's product is a Commission ought to make clear provision 'mixture' within the meaning of Article for that by the adoption of rules. 30(3), even though that product constitutes wheat flour falling within subheading 11.01 A of the Common Customs Tariff, I must briefly go into the second part of the question, that is to say whether mixtures of products certain components of which fall under chapters of the Common Customs Tariff other than Chapters 2, 10 and/or 11 are also covered by the term 'mixture' in

However, both cases concern separate products which have been mixed (cither flour and bran from stocks ground that it is a 'mixture' of wheat flour or flour and bran from the same consignment of cereals) (subheading 11.01 A) and wheat bran and not a product derived from a single milling operation (as described at point 10 of this Opinion). (subheading 23.01 A II)? Here again I am