C-40/88

WEBER v MILCHWERKE PADERBORN-RIMBECK

OPINION OF MR ADVOCATE GENERAL TESAURO delivered on 19 April 1989 *

Mr President, the amount to be repaid and other amounts Members of the Court, due to Weber, leaving, obviously, a balance to be paid by the latter.

1. Paul F. Weber, the plaintiff in the main proceedings (hereinafter referred to as Weber therefore called upon Milchwerke to "Weber'), bought from Milchwerke supply it with a product in respect of which Paderborn-Rimbeck, the defendant in the monetary compensatory amounts and export main proceedings (hereinafter referred to as refunds would be paid. Since that demand 'Milchwerke'), goods described in the was not met, Weber sued Milchwerke for contract as 'German skimmed-milk powder'. damages equal to the monetary That product was exported first to the compensatory amounts and export refunds Netherlands and later, through a British which had to be repaid. intermediary, to Japan. In respect of those transactions, Weber received monetary compensatory amounts and export refunds amounting to DM 716 476.47.

(2) Is it relevant in this connection that the caseinate and powdered whey occasion­ Finally, the powdered whey in the product ally originated from New Zealand, at issue was found to have been imported Canada and Australia and that the from non-Member countries (Australia and mixture, according to the defendant, Canada). exhibited the same analytic values as powdered skimmed milk produced from cow's milk? 3. Let me first consider the point concerning the method of manufacture and its relevance for the purpose of interpreting (3) If the first question is answered in the the provision of the Common Customs negative, does such a product fall Tariff. under subheading 21.07 D II (a) 1 of the Common Customs Tariff in the version in force in 1978, 1979 and 1980?' It should be borne in mind in that regard that according to settled case-law, the decisive criterion for the classification of First and second questions goods for customs purposes is to be sought in their characteristics and objective prop­ erties at the time of importation. That is done both in the interest of legal certainty 2. In the first and second questions, the and for ease (that is to say, also, speed and national court asks the Court of Justice to economical management) of verification by interpret subheading 04.02 A II (b) 1 of the customs. It is sufficient in that regard to the Common Customs Tariff in regard to a refer to the judgments of 23 March 1972 in product which has certain characteristics Case 36/71 Henck v Hauptzollamt Emden concerning its composition, its method of [1972] ECR 187, of 22 November 1973 in manufacture and the geographical origin of Case 128/73 Past v Hauptzollamt Freiburg some of its constituents. [1973] ECR 1277, of 29 May 1974 in Case 185/73 Hauptzollamt Bielefeld v König [1974] ECR 607, of 10 December 1975 in Case 53/75 Belgium v Vandertaelen [1975] With regard to composition, the national ECR 1647, of 18 February 1976 in Joined court states that the product at issue is Cases 98 and 99/75 Carstens v Oberfinanz- composed of 23.4% skimmed-milk powder, direktion Frankfurt am Main [1976] ECR 42.3% protein-enriched powdered whey, 241, of 16 October 1976 in Case 38/76 16.2% lactose, 10.6% sodium caseinate, LUMA v Hauptzollamt Duisburg [1976] 7.1% calcium caseinate and 0.4% other ECR 2027, of 8 December 1977 in Case constituents. 62/77 Carlsen v Oberfinanzdirektion Köln [1977] ECR 2343, of 23 September 1982 in Case 237/81 Almadent v Hauptzollamt With regard to method of manufacture, the Mainz [1982] ECR 2981, of 17 March 1983 product in question is a mixture which is in Case 175/82 Linter v Hauptzollamt not obtained in the traditional manner (that Köln-Deutz [1983] ECR 969 and of 26 is to say, by dehydrating liquid skimmed September 1985 in Case 166/84

On the other hand, the way in which the goods are manufactured generally has no effect on classification, as is also the case in Consequently, the method of manufacture is regard to other factors such as the use to decisive only where the subheading which they are to be put, the presentation expressly so provides (as, for example, in and the commercial value. Heading 39.07, as the Court pointed out in its judgment of 8 December 1987 in Case 42/86 Directeur général des douanes et droits indirects v Artimport [1987] ECR 4817). There is abundant and consistent case-law on this subject. I note, in particular, paragraph 10 of the judgment in Henck, which states that 'the classification of a product ... cannot be affected by the fact 4. In this case, subheading 04.02 A II that it has undergone processing if the makes no reference to the method of manu­ processed product thereafter contains the facture as a criterion for classification. essential constituents of the basic product in Moreover, there seems to be no doubt that proportions which do not substantially the particular way in which the product in differ from the content in those constituents question is manufactured is not, as such, of which the relevant product exhibits in its such a nature as to affect the analytical natural state'. Let me also quote from the values thereof by altering its composition. Opinion of Mr Advocate General Roemer, As the Commission pointed out at the who stated that 'generally the objective hearing, whether the skimmed-milk powder characteristics of products must be above all is obtained by dehydrating cow's milk or by taken into consideration for the purposes of mixing various ingredients in dehydrated classifying them in the Common Customs form has no effect on the issue. Tariff. This can be explained particularly for administrative reasons as it is often extremely difficult to establish that a particular manufacturing process was applied and to check that this was in fact I therefore think it can be said that the the case. In addition it must be admitted method of manufacture used in this case has that the converse could only apply if the no effect on the scope of the abovemen- words used to describe the products tioned subheading of the Common Customs contained in a tariff heading indicate that Tariff. the manufacturing process is adopted as the criterion'. Paragraph 7 of the judgment in LUMA is in the same vein: 'Whilst the Customs Tariff does indeed in certain cases contain references to manufacturing 5. A similar conclusion will be reached after processes and to the use for which goods considering the other point raised by the are intended it is generally preferred, in the national court, which is the subject of the interests of legal certainty and ease of verifi­ second question, that is to say, the cation, to employ criteria for classification geographical origin of certain constituents based on the objective characteristics and of the Droduct at issue.

6. Let me now turn to the last point, which The Customs Cooperation Council's Expla­ concerns the composition of the product at natory Notes state that the factor which issue. determines essential character will vary as between different kinds of goods. It may, for example be determined by the nature of the material or component, its bulk, In view of the uncertainties which have quantity, weight or value, or by the role of arisen in that regard, I think it would be a constituent material in relation to the use useful to set out what is already established. of the goods (see paragraph (VIII) of the explanatory notes on Rule 3(b)).

First of all, it is common ground that the product at issue is a mixture of the various Obviously, Rule 3 in general can only take constituents to which I have already effect provided the terms of headings or referred. Of those constituents, the section or chapter notes do not otherwise skimmed-milk powder, powdered whey and lactose, that is to say, a little more than 1 — In fact, the Commission's agent claimed, both in the written observations and at the hearing, that sodium 80% of the total weight, are, as the c se a e s a in t i naturally present in amounts fess than 3% in Commission's expert confirmed at the the dried matter of milk. That statement was later rectified on the basis of information supplied by the expert.

WEBER v MILCHWERKE PADERBORN-RIMBECK

However, as has been pointed out, that rule 2 — It should be noted that the Commission did not see any applies on condition that the relevant difficulty in the presence of 7.1% of calcium casemate.

OPINION OF TESAURO —CASE 40/88

In other words, that amounts to saying that the experts' opinion on that matter. in a case such as the present one, Rule 3(b) However, no document was produced on cannot apply because Heading 04.02 that precise point and it is not disputed that formally excludes skimmed-milk powders to the experts' opinion was not the subject of which have been added a quantity of any formal measure on the part of the sodium caseinate representing more than committee. 3 % of the total weight.

A classification slip of 1971, which includes The Commission puts forward the following under Heading 04.02 a product obtained by arguments in support of that view. mixing butter and skimmed milk with very small quantities of sodium caseinate, also accords with that view.

WEBER v MILCHWERKE PADERBORN-RIMBECK

Products of this kind may contain certain subheading or the Explanatory Notes to the other added substances such as starch in Common Customs Tariff which prevents the proportions not exceeding 10% by weight application of Rule 3(b). or anti-oxidants, emulsifiers, vitamins or small quantities of acids (including lemon juice).'

11. I would like to make the following observations in regard to the study, It thus seems to me, on the one hand, that mentioned above, undertaken by the the addition of certain substances, such as Committee on Common Customs Tariff emulsifiers, to milk has been expressly Nomenclature at the initiative of the accepted and, on the other, that there are German delegation. no quantitative limits for such substances, with the exception of starch (which must not exceed 10%) and acids (which may be present in 'small quantities').

OPINION OF TESAURO — CASE 40/88

subheading 04.02 A II (b) 1, notwith­ certainty and simplicity of customs controls. standing the presence of 10.7% sodium Effect is given to that criterion by an inter­ caseinate, because it is still the characteristic pretation of Heading 04.02 which leads to constituents of skimmed-milk powder (that difficulty in practice and thereby to results is to say, more than 80% of the total) which which are, to say the least, uncertain in so give the product its essential character. far as they are based on factors which are difficult, if not wholly impossible, to verify in an objective manner.

13. There is one last matter which must be A direct and sufficiently simple customs considered in limine. check of compliance with the 3 % sodium caseinate limit is thus impossible. The questions submitted to the Court of Justice by the national court are exclusively concerned with the classification for The only check which can be carried out is customs purposes of the product at issue. an administrative one, that is to say, at the Another problem is to determine whether time of production. However, such a that classification can have consequences in procedure can only be envisaged, and even regard to the application of Community then only with difficulty, in regard to goods agricultural rules and, in particular, the produced in the Community for export but provisions concerning export refunds. not when the problem is to clear through customs as quickly as possible goods coming from non-Member countries. As the Court will be aware, in the context of the legislation governing the common organization of agricultural markets, the definition of the products subject to the It thus seems to me that the Commission is common organization and which may, in an proposing a criterion for classification appropriate case, give rise to certain (based on compliance with the 3 % tolerance advantages is generally determined by limit) which, in addition to the fact that it reference to the relevant subheadings of the finds no support in the Common Customs Common Customs Tariff. That is the case, Tariff, is also clearly in contradiction with for example, in the milk and milk products the fundamental need to ensure the sector.

The reason why the problem arises in rules. That is therefore an aspect of the practice is clear. A producer has a very wide matter which goes beyond the scope of range of possibilities in regard to the manu­ these proceedings. facture of mixtures which, although different from each other by virtue of the proportions in which the various consti­ tuents are present, are in fact substantially None the less, and in order to make clear similar from the point of view of that considerations inherent in the func­ appearance, nature, effects and use. tioning of the agricultural market organiz­ ations should not have an effect on the interpretation of the rule laid down in the Common Customs Tariff, I consider it That variety could naturally entail diffi­ appropriate to make clear that the classifi­ culties in regard to classification, although cation for customs purposes of the product the tariff system is very detailed and well at issue under Heading 04.02 does not constructed. It is precisely in those cases prejudice the application of the rule for that the 'essential character' rule, which classification laid down by the national allows products objectively similar and authorities for other purposes and in other which, therefore, also, compete with each legislative contexts. other on the market, to be classified under the same subheading, within the limits indicated above. It is true that, in principle, those rules must be interpreted in a uniform manner, inde­ pendently of the legislative context in which However, in cases in which classification is they arise. That principle was laid down in carried out not for purely customs purposes the judgment of 4 July 1978 in Case 5/78 but to determine, for example, the Milchfiuter v Hauptzollamt Gronau [1978] applicable levy or refund, traders have an ECR 1597, in which the Court observed obvious interest in manipulating the compo­ that 'in the absence of any express sition of the mixture. Thus in regard to provision, it would be inappropriate for the imports, there is a tendency to 'depreciate' headings of the Common Customs Tariff to the product (by increasing, for example, the be applied in different ways to the same proportion of constituents which could product depending on whether they are cause it to be regarded as 'residual') so as to used for the classification thereof in avoid payment of a levy, or at least reduce connection with the levying of customs the amount thereof. On the other hand, in duties, the application of the system of the regard to exports, there is a tendency to act common organizations of the market or the in the opposite direction, namely to increase application of the system of monetary the value of the goods so as to obtain the compensatory amounts' (paragraph 12). highest possible refund, even if the quality That formulation was also used in of the product remains inferior but just paragraph 18 of the judgment of 28 March sufficient to give rise to entitlement to a 1979 in Case 158/78 Biegi v Hauptzollamt refund. Bochum [1979] ECR 1103.

Ultimately, it seems to me that the principle of the uniform interpretation of tariff headings independently of the area in which There is perhaps an even clearer statement they arise, which fulfils obvious in the judgment of 26 April 1972 in Case requirements of legal certainty, should be 92/71 Interfood v Hauptzollamt Hamhurg- limited in practice by the special Ericus [1972] ECR 231, in which, requirements of the specific rules relating to addressing the argument of the plaintiff in those headings. It is then for the national the main proceedings that it was 'inad­ authorities to take account of those missible that within the same tariff and the requirements when applying the relevant same chapter a classification provision may Community rules in each case. be interpreted differently according as it relates to the classification of the product for the purpose of imposing the levy or for the purpose of customs duties', the Court stated that 'such an argument fails to Let me emphasize, however, that although observe the independent nature of the the scope of a tariff heading, when applied provisions of the common organization of together with an agricultural rule, can the agricultural markets. Although, in sometimes be completely different from its accordance with Article 9(2) of Regulation scope in the customs context, the contrary is No 865/68 ... the implementing provisions not true, in the sense that considerations of the Common Customs Tariff apply to the related to the market organization rules classification of products coming under the should not and cannot, also for reasons of common organization of the agricultural legal certainty, determine the interpretation