C-479/99

Introduction which are plugged, together with their edge connectors, into the boxes designed for that purpose on the motherboard of automatic data-processing machines (hereinafter 'ADP machines' or 'computers'). These 1. By order of 18 December 1999, the cards convert sounds received as digital Finanzgericht Düsseldorf (Finance Court, data in certain software into analogue Düsseldorf, Federal Republic of Germany) signals and thus make them audible and referred to the Court two questions for a also convert analogue signals into digital preliminary ruling concerning the Com- data and thus make it possible to process bined Nomenclature of the Common Cus- and store such data. toms Tariff (hereinafter the 'CN'). The first question asks whether sound cards for automatic data-processing equipment should be classified under heading 8471, 8473 or 8543 of the CN. The second question asks whether, in the event that sound cards are to be classified under heading 8543 of the CN, Commission Regulations (EC) Nos 1153/97 2 and Legal framework 2086/97 3 (hereinafter 'Regulation No 1 1 5 3 / 9 7 ' and ' R e g u l a t i o n No 2086/97' respectively) which gave effect to that classification are valid. 3. Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Cus- toms Tariff (hereinafter 'Regulation No 2658/87'), 4 established a goods 2. It should be noted at the outset that nomenclature called the 'Combined sound cards are printed circuit boards with Nomenclature' to meet, at one and the active and passive processing components same time, the requirements both of the Common Customs Tariff and the external trade statistics of the Community. The CN 1 — Original language: Italian. is based on the international harmonised 2 — Commission Regulation (EC) No 11 5.1/97 of 24 June 1997 a m e n d i n g A n n e x I to C o u n c i l R e g u l a t i o n (EEC) commodity coding system introduced by No 2658/87 on the tarif and statistical nomenclature and on the Common Customs Tariff (OJ 1997 I. 168, p. 15). the Customs Cooperation Council in the 3 — Commission Regulation (EC) No 2086/97 of 4 November 1997 amending Annex I to Council Regulation (EEC) No 2658/8 7 on the tariff and statistical nomenclature and on the Canninoli Customs Tariff (OJ 1997 I. 312, p. I). 4 — O J 198" L 256. p. 1.

5 — The Harmonised Commodity Description and Coding (b) It is specifically designed as part of System introduced by the International Convention of 14 June 1983, approved for the Community by Council such a system (it must, in particular, Decision of 7 April 1987, 87/369/EEC (OJ 1983 L 198, unless it is a power supply unit, be able p. 1). 6 — Concluded in Singapore on 13 December 1996 under the to accept or deliver data in a form auspices of the WTO, the agreement, to which the European (codes or signals) which can be used by Community is party, accounts in total for some 90% of world trade in information technology products. Under it, the system. all customs duties on such products are to be eliminated as between the parties by 1 January 2001, with progressive reductions in 1997, 1998 and 1999. It covers HS heading 8471 and its relevant subheadings and subheading 8473 30 (parts and accessories of the machines of heading No 8471 ). 7 — Also provided for in Regulation No 2658/87.

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Such units presented separately are also to (b) It is connectable to the central proces- be classified within heading No 8471. sing unit either directly or through one or more other units; and

Heading No 8471 does not cover machines incorporating or working in conjunction with an automatic data-processing machine and performing a specific function. Such (c) It is able to accept or deliver data in a machines are to be classified in the head- form (codes or signals) which can be ings appropriate to their respective func- used by the system. tions or, failing that, in residual headings'.

9. Heading 8473 of the CN contained in Chapter 84 of Annex I to Regulation No 2658/87 covers 'Parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of headings 8469 to 8472.' In that general context the same regulation also provides for subheading 8473 30 00 of the CN covering 'parts and accessories of machines under heading 8471'. Moreover, Regulation No 1153/97, cited above, added the further subheading 8473 30 10 of the CN covering 'electronic assemblies'.

13. In July 1997, CBA Computer Handels- 16. By decision of 20 May 1998, the und Beteiligungs GmbH, now VOBIS Hauptzollamt Aachen not only rejected Microcomputer AG (hereinafter 'CBA the objection, but decided that CBA Com- Computer'), imported sound cards from puter should pay a further customs duty of Taiwan for release for free circulation in DEM 111.29 because, in its view, Regula- the Community. tion No 2086/97, which had entered into force in the intervening period, classified sound cards under subheading 8543 89 90 of the CN and, as such, a customs duty of 5% was applicable. According to the Hauptzollamt, although the above regula- 14. In the declaration made at the time of tion had only entered into force on 1 Jan- importation CBA Computer stated that uary 1998, and therefore after the events in those sound cards should be classified the present proceedings had occurred, that under subheading 8543 of the CN, namely regulation was also applicable to goods as 'Electrical machines and apparatus hav- imported before that date in so far as it did ing individual functions, not specified or not amend Regulation No 2658/87, but included elsewhere in this chapter'. Accord- merely clarified the wording of subheading ingly, it calculated customs duty at the rate 8543 of the CN. of 3.8% and paid a total sum of DEM 352.49. The import duties calculated by CBA Computer were entered into the accounts by the Hauptzollamt (Principal Customs Office) Aachen on 11 August 1997. 17. On 4 June 1998, CBA Computer appealed against that decision to the Finanzgericht Düsseldorf where it claimed, in particular, that in the intervening period the Court of Justice had given a ruling on Techex Computer 9according to which, in 15. On 31 July 1997, CBA Computer the opinion of CBA Computer, the sound lodged an objection against its own cards it had imported should have been declaration arguing that the sound cards it classified under subheading 8471 80 90 of had imported should have been classified under subheading 8473 30 10 of the CN at a customs duty rate of 2.5%. In addition to 9 — CaseC-382/95Techex Computer [1997] ECR I-7363.

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processing), the Court reasoned that they for converting data into images and the cannot be regarded as having a 'specific latter for converting data into sounds. function' within the meaning of Note 5(B) Accordingly, sound cards should also be to Chapter 84 of the Combined Nomen- classified under heading 8471 of the CN. clature and therefore should be classified under heading 8471 of the CN. The same principles were outlined and clarified in Peacock in which the judgment was deliv- ered between the close of the written procedure and the hearing in the present case.

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Commission considers that they should be still be a computer, but it could not be classified under subheading 8543 89 of the considered as such if it had no images or CN ('other'), that is to say as parts of screen. automatic data-processing machines having a special function.

26. As regards the debate in the WCO, the Commission has recognised the change of 24. However, at the hearing, while insisting direction at international level concerning that those arguments were valid, the Com- the classification of sound cards. Indeed, it mission accepted that in the last few cited a WTO statistic from July 1999 to months, since the close of the written prove that up until that date only three procedure, certain developments have countries — Australia, New Zealand and taken place with regard to the matter in the Philippines — classified sound cards question which place the argument put under subheading 8471 80 of the CN, forward by CBA Computer in a more while the majority of other countries clas- favourable light. It refers, first, to the sified them under subheading 8543 89 of judgment in Peacock, cited above, and, the CN. It was only in November 2000 that second, to the debate held in the frame- it emerged, as a result of the debates and work of the WCC1 and its committee on the votes held during the 26th session of the HS harmonised system. committee, that there was a clear majority in favour of classifying sound cards under subheading 8471 80 of the CN.

30. To complete the classification of the cards in question, the Court queried, in the same judgment, whether they should be regarded as 'units' of automatic data-pro- cessing machines, coming under heading 8471 of the CN, or as 'parts' or 'acces- sories' of those machines, thus coming under heading 8473 of the CN. To this end, the Court explained that the 'units' referred to in Note 5(B) to Chapter 84 of the Combined Nomenclature meet the requirements established therein 'since they 29. That is particularly true as regards can be connected to the central unit and are network cards. Such cards, in fact, in so specifically designed as parts of an auto- far as 'they are designed solely for auto- matic data-processing system'; 15 the word matic information processing machines, ... 'part', on the other hand, implies a 'whole' are directly connected to those machines for the operation of which the part is and their function is to supply and accept essential. 16 Since network cards, which data in a form which those machines can come in the form of slot-in cards, may also use', 13 are comparable to any other means take other forms, in particular that of a whereby an ADP machine accepts or deli- standalone unit, the Court concluded that vers data. Hence, they do not perform a they, like video cards, must be classified as 'specific function' which they would be able to exercise independently without the assistance of such machines. It was pre- 14 — In Techex (paragraphs 20 and 21), the Court also held that the 'Vista' noarti ... 'is a unit intended to he incorporated cisely on that basis that the Court con- into an automatic data-processing machine', providing the cluded in Peacock that Note 5(B) to function 'to convert external analogue signals to make them available in a form enabling that machine to process Chapter 84 of the Combined Nomenclature them and to provide an on-screen representation or the result of the operations carried out by the machine'. Such function comes within the concept of 'data processing' and is not to be regarded as the performance of a 'specific function' for the purposes of nie last paragraph of Note 11 — Sec, m particular, Case C-11/9.Ï Siemens NixDorf 119941 5(B) to Chapter 84 of the Combined Nomenclature. 'Vista' F.CR I-1945, paragraph 11, Teebex, cited above, para- boards should therefore be regarded as units of an graph 11 and Peacock already cited, paragraph 9. automatic data-processing machine. 12 — See Peacock, cited above, paragraph 15. 1 5 — Peacock cited above, paragraph 20. 1 3— Ibid., paragraph 16. 16 — Ibid., paragraph 2 1 .

33. As CBA Computer points out, there 17 — According to Techex, cited above, paragraph 16, the three components 'do nothing else than process data' (in that are three fundamental components of a case, processing images).

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are no differences between the two types of 37. In light of the considerations which I cards as far as their use and function is have set out above, I consider that from a concerned. functional point of view a sound card cannot be compared to a CD reader. The former is a means by which an automatic data-processing machine accepts or delivers data, but outside the machine a sound card has no functions which it could perform 35. It can therefore be concluded, on that independently. Moreover, as CBA Compu- point, that sound cards, that is to say ter noted at the hearing, there is no electronic assemblies which enable ADP comparison with sound recording or sound machines and units thereof to process audio reproduction equipment because, unlike signals, do not perform a 'specific function' sound recording or sound reproduction within the meaning of Note 5(B) to Chap- cards, sound cards cannot store a sound ter 84 of the Combined Nomenclature, 18 for recording or reproduction, but they can but rather a data-processing function. process data consisting of sounds. It must therefore be concluded that, unlike CD readers, sound cards cannot perform an independent function outside the machine.

They should therefore be regarded as 'units' of automatic data-processing machines and thus be classified under heading 8471 of the CN.

it is not based on the technical character- modify the scope of the customs headings istics of the product in question and takes established therein, which it has in fact no account of the extremely rapid develop- done by the incorrect classification of the ments which have occurred in recent years sound cards referred to. As the case-law of in the information technology sector. the Court has also confirmed, 19 while the Commission has considerable latitude, for the purposes of Article 9(1) of Regulation No 2658/87, in defining the scope of the customs headings established on the basis of the HS, it is not authorised to alter their subject-matter. 39. In light of the above, I therefore conclude that electronic assemblies which enable automatic data-processing machines and units thereof to process audio signals (sound cards), in so far as they do not perform a specific function within the meaning of Note 5(B) to Chapter 84 of 41. According to CBA Computer, as is to the Combined Nomenclature, must be be expected, the doubts expressed by the classified as 'units' of automatic data- national court are well founded: Regula- processing machines under heading 8471 tions Nos 1153/97 and 2086/97 should be of the CN. regarded as invalid in relation to the classification of sound cards on the ground that they provide an incorrect interpreta- tion of headings 8471 and 8543 of the HS.

The second question 42. For its part, the Commission supports the opposite argument, albeit with the changes I referred to at length above. In

particular, during the hearing it claimed strated, as I believe I have done in the that, on the one hand, Regulation preceding paragraphs, that the interpreta- No 1153/97 is not invalid in so far as the tion proposed by the Commission is with- HS does not provide for the classification out foundation. of sound cards under a subheading distinct from 8543 89 and, on the other hand, that Regulation No 2086/97 is inapplicable to the facts of the case as the imports referred to in the proceedings before the national court had occurred in July 1997, whereas the regulation only entered into force on 45. On the other hand, in Regulation 1 January 1998. According to the Commis- No 2086/97 the Commission specifically sion, that means that the question of classified 'independent' sound cards under validity is irrelevant for the purposes of subheading 8543 89 79 of the CN. The the proceedings pending before the national validity of that regulation could well be court. questioned because, if one subscribed to the view that such a classification was incor- rect, it would mean that the Commission's appraisal was manifestly mistaken and that it had exceeded the limits of its powers to define the subject-matter of a heading of the Combined Nomenclature.

43. In my opinion there is some truth in the positions adopted by each of the parties, but neither provides an appropriate reply to the question under consideration.

Conclusion

48. In light of the above, I therefore propose that the Court answer the questions referred to it by the national court for a preliminary ruling as follows:

(1) Electronic circuit boards which enable automatic-data processing equipment and units thereof to process audio signals (sound cards) and which were released for free circulation into the Community in July 1997, in so far as they do not perform a specific function within the meaning of Note 5(B) to Chapter 84 of the Combined Nomenclature, must be classified under heading 8471 of the CN as 'units' of such machines.

(2) In so far as Commission Regulation (EC) No 1153/97 of 24 June 1997 amending Annex I to Council Regulation (EEC) N o 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff does not provide for the classification of sound cards without speakers and/or a microphone under heading 8453 and in so far as Commission Regulation (EC) No 2086/97 of 4 November 1997 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff is not applicable to the facts of the case in the main proceedings, the circumstances which would require the Court to declare the two abovementioned regulations invalid do not exist.

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