JUDGMENT OF 26. 1. 1977 - CASE 49/76 GESELLSCHAFT FÜR ÜBERSEEHANDEL v HANDELSKAMMER HAMBURG
In Case 49/76 Reference to the Court under Article 177 of the EEC Treaty by the Verwaltungsgericht Hamburg for a preliminary ruling in the action pending before that court between
THE COURT composed of: H. Kutscher, President, P. Pescatore, President of Chamber, J. Mertens de Wilmars, M. Sørensen, Lord Mackenzie Stuart, A. O'Keeffe and G. Bosco, Judges, Advocate-General: J.-P. Warner Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts
The facts appertaining to the main action, the order for reference and the written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:
I — Facts and procedure
1. For several years, the GESELLSCHAFT FÜR ÜBERSEEHANDEL mbH (Company for Overseas Trade Limited) (hereinafter referred to as ‘the Company’) has imported casein, in the form of pieces from the size of a pea to the size of a hazelnut, from the Soviet Union and from Poland. In its establishment in Hamburg it grinds the imported product to different degrees of fineness, sometimes according to the preferences of its customers (screen sizes 30, 60 and 90). The product is then sorted and packed. The casein thus treated is sold to the different consumers. It is used in the human and animal food industry, in the manufacture of glues, colours and other materials capable of being applied in the form of a coating. From 1967 to June 1972, the Handelskammer (Chamber of Commerce), Hamburg, provided certificates of origin, in accordance with an undertaking to that effect, naming the Federal Republic of Germany as the country of origin of the casein treated by the Company. Article 5 of Regulation No 802/68 of the Council of 27 June 1968 on the common definition of the context of the origin of goods OJ English Special Edition, 1968, p. 165) provides:
‘A product in the production of which two or more countries were concerned shall be regarded as originating in the country in which the last substantial process or operation that is economically justified was performed, having been carried out in an undertaking equipped for the purpose, and resulting in the manufacture of a new product or representing an important stage of manufacture.’
2. In June 1972, the Handelskammer for the first time withdrew its undertaking, but on 21 July 1972 it again undertook to continue to supply certificates of origin, on the ground that the operations carried out by the Company could be considered as the operations carried out by the Company could be considered as the ‘last … process … economically justified’ within the meaning of Article 5 of Regulation No 802/68. It was however stated in the undertaking that it would be reconsidered should new factors, such as a decision of the Community or German authorities acting in pursuance of their powers, later arise so as to justify a different interpretation of the provisions of the aforesaid regulation. By letter of 15 September 1975, the Handelskammer did in fact withdraw its undertaking. It based its action on a communication from the Federal Minister of Food, Agriculture and Forestry, stating that the grinding, mixing and packing of casein could not be considered as activities conferring a particular origin on the product and thus giving it an origin in the country where they took place. By decision of 21 January 1976, the Handelskammer rejected a new request made by the Company on 12 January 1976. On 18 March 1976, the Company, having failed in the proceedings which followed, took the dispute to the Verwaltungsgericht (Administrative Court) Hamburg. By order of 28 May 1976, that court decided to suspend its proceedings and to refer the following question to the Court of Justice under Article 177 of the EEC Treaty:
‘Is untreated casein obtained in a third country, which has been rendered fit for use by being ground up in a Member State of the EEC in the way described by the plaintiff it this action, to be regarded as originating in that Member State according to Article 5 of Regulation (EEC) No 802/68 of the Council?’
3. A copy of the order for reference reached the Court on 8 June 1976. The Gesellschaft für Überseehandel mbH, represented by Jürgen Gündisch, Advocate, of Hamburg, the Handelskammer, Hamburg, represented by its Director, and the Commission of the European Communities, represented by its Legal Advisers, Trevor Townsend and Manfred Beschel, submitted written observations under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate-General, the Court invited the Commission of the European Comunities to produce, before 20 November 1976, certain documents concerning the opinion reached by the Committee on origin at its meetings on 17 and 18 December 1975 on the treating or processing of raw casein. Those documents were lodged on 16 November 1976 and the Court decided to open the oral procedure.
II — Written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC
A — Observations submitted by the Gesellschaft für Überseehandel
As regards the facts, the Company states in particular as follows:
Raw casein, which is obtained from curds which are washed, pressed and then dried, comes in the form of fragments from the size of a pea to the size of a hazelnut. Those pieces are not soluble in water and cannot be used. It is in that form that the Company receives the product, which it then subjects to cleaning, grinding or pulverizing into particles calibrated at 30, 60 or 90 units, and to quality inspection and the necessary grading. In many cases, the casein is ground to specifications supplied by the customers and put up in packages according to its state. The process described above, particularly the grinding, is absolutely necessary for using the casein. After this operation, it is soluble under the influence of certain chemical substances.
The production of raw casein on the one hand, and the grinding thereof on the other, are not normally carried out in a single process. At any rate such is the case for most countries other than the Federal Republic of Germany. Since the quality of the casein produced is often mediocre, because production is sporadic and concentrated over short periods, it would not be an economic proposition for the producer undertakings to possess a modern mill in addition to drying equipment. Those undertakings therefore prefer to deliver the raw casein to other undertakings possessing their own mill. Furthermore, in many countries, such as the USSR, there are not enough casein mills and the quality of the milling often does not meet consumer needs. That is why the USSR exports large quantities of unmilled casein. Finally, since casein is sold mainly in small quantities, there is no point in consumer's purchasing their own mill, for it would be impossible to redeem the costs of doing so, as they would not use it enough.
The Company concludes that the operations described above, in particular the grinding, constitute a ‘substantial’ process or operation that is ‘economically justified’ within the meaning of Article 5 of Regulation No 802/68. In support of this conclusion it produces the answers given by many customers to the questions which it put to them on 28 May 1976 on: (a) the circumstances in which the processing and grinding of the casein is carried out; (b) the consequences to be drawn from those circumstances in determining the origin of the ground casein, having regard to Regulation No 802/68 of the Council.
As regards the legal position, the Company next observes that it is not disputed in this case that two of the four requirements that must, under Article 5 of Regulation No 802/68, be met if the treating of the product is to confer a particular origin upon it are fulfilled by the operations at issue. Therefore the present proceedings are only concerned with the question whether those operations also satisfy the other two requirements of the said Article 5, that is to say:
a) whether the treating of the raw product by the Company constitutes a ‘substantial’ process or operation,
b) resulting in the ‘manufacture of a new product or representing an important stage of manufacture’.
a) As to the first point, it appears from the text of Article 5 of Regulation No 802/68 that the word ‘substantial’ is, in semantic terms, similar to the words ‘economically justified’. Therefore its meaning should be assessed with regard to the economic justification for the operation or process. An ‘economically justified’ operation or process can, in cases of doubt, also be considered as ‘substantial’. An interpretation based on the spirit and object of the said Article 5 would lead to the same result. Given that the treating or processing of products implies an economic process, the question whether those operations are of a substantial character or not can only be defined in terms of the economic importance of that process. Therefore an ‘economically justified’ operation or process and a ‘substantial’ operation or process are almost synonymous concepts. Since, therefore, the economic justification for the operation or process carried out by the Company is not contested by the Handelskammer, there can be no denying that those activities are ‘substantial’.
b) As for the second point, the very fact, mentioned above, that the grinding of the casein is essential if the product is to be used shows that the activities under discussion represent ‘an important stage of manufacture’, within the meaning of Article 5 of Regulation No 802/68. It is not necessary, for this purpose, for ground casein to be regarded as a new product as compared with raw casein. When an original product is transformed by a process comprising several stages, each stage of operation constitutes a stage of manufacture at the same time. In so far as an operation upon a product is, at a given stage, of a ‘substantial’ nature, that stage of manufacture is ‘important’. Since the treatment or processing of the casein carried out by the Company is indeed of a ‘substantial’ nature within the meaning of Article 5 of Regulation No 802/68 (see above), it must necessarily be concluded that those activities are at the same time ‘an important stage of manufacture’ for the purposes of that provision.
The Company then deals with the weight to be given to the opinion expressed in December 1975 by the Committee on Origin set up under Articles 12 and 13 of Regulation No 802/68, according to which the grinding of casein is neither an operation nor a process for the purposes of Article 5 of Regulation No 802/68. Taking into account the composition of that committee and the powers conferred upon it by Article 13 of the same regulation, the opinions of the Committee on Origin cannot be considered as measures capable of involving an amendment to or an official interpretation of Regulation No 802/68 or of any regulation implementing it. As long as the Commission has not adopted a legally binding definition of the question of the origin of ground casein, the declarations of the Committee on Origin have no binding effect. Nor can they be assimilated to the explanations and to the opinions on tariffs provided for in the Convention on Nomenclature for the Classification of Goods in Customs Tariffs, which the Court of Justice has considered as decisive criteria for the interpretation of the different provisions of the Common Customs Tariff. On the contrary, the declarations made by the Committee on Origin have no evidential value because representatives of the Member States alone sit on the committee and the Community undertakings concerned are not heard. Such is indeed what happened in the present case, for the Company had no opportunity of expressing its views before the abovementioned opinion was adopted, and had no means of ascertaining how the committee obtains its information on the various methods of operating or of processing or on the economic justification for them.
On the basis of these observations, the Company claims that the Court should answer the question referred to it as follows:
‘Casein obtained in a third State and which has been rendered fit for use by pulverization in a Member State of the European Communities according to the process described by the plaintiff in the main action, has its origin in that Member State according to Article 5 of Regulation No 802/68 EEC of the Council’.
B — Written observations submitted by the Handelskammer, Hamburg
The Handelskammer, Hamburg, refers to its pleadings in the main action, particularly those of 21 January 1976 and 5 May 1976, which were lodged with the Court as an annex to the order for reference.
It admits that the grinding of the casein meets two of the four requirements under Article 5 of Regulation No 802/68: it takes place in an ‘undertaking equipped for the purpose’ and is ‘economically justified’. However, the treatment to which the Company subjects the product does not constitute a ‘substantial process or operation’ within the meaning of the aid article and does not result in the ‘manufacture of a new product’ or represent ‘an important stage of manufacture’.
That treatment consists of activities which only alter the external aspect of the goods and do not affect its substantial characteristics. The fact that the goods can only be put to commercial use in the altered form is not relevant because the ‘substantial’ nature of a person or operation is necessarily linked to the kind and to the attributes of the process or operation. From this point of view, the grinding of casein carried out by the Company is solely comparable to turning sugar into lump sugar, to crushing blocks of granite and so on.
Moreover the two conditions mentioned above are closely linked with each other in the sense that where there is no ‘substantial process or operation’ then as a general rule it is also the case that the activities in question do not result in a new product or in an important stage of manufacture. In the present case, common sense runs counter to the notion that the milling of casein results in such a product or represents such a stage.
The Handelskammer considers that the following facts are ‘significant pointers’ in favour of its argument:
As regards the various preferential agreements to which the Federal Republic of Germany is party, the milling of casein does not bring about any change in the tariff classification of that product, such classification being decisive, according to the national rules implementing the said agreements, for the grant of a marketing certificate.
Nor is casein mentioned in the lists annexed to those agreements among the operations or processes which, although not bringing about a change in tariff classification, are of such a nature as to confer a particular origin on the product (cf. for example the agreement made with the State of Israel, in OJ 1975, L 136, p. 169).
C — Written observations submitted by the Commission of the EEC
The Commission of the EEC first makes certain remarks of a general order on the significance and the fundamental content of the provisions of Community law governing the matter. In doing so it points out that the provisions of Regulation No 802/68 establishing the criteria to be applied in determining the origin of goods, that is to say their economic link with a particular country, are provisions arising exclusively under Community law. It follows both from the nature and from the purposes of those provisions that they must apply in the same manner in all the Member States. Therefore the latter are not entitled to draw up unilaterally binding rules of interpretation within the field covered by the regulation.
However, although, within that field, the power of the national authorities is thus considerably limited, there can be no denying that a uniform interpretation of Regulation No 802/68 is difficult to achieve both because in some Member States the enforcement of the regulation is in the hands of a large number of public bodies, and because of the new products and processes which make their appearance. Given these circumstances, and for the very purpose of ensuring that the provisions of Regulation No 802/68 shall be applied uniformly, Article 12 et seq. provide for the setting up of a Committee on Origin, whose task is to prepare the provisions necessary for applying the regulation or to submit opinions on certain questions.
The committee has submitted an opinion concerning the treatment of casein. Such an opinion, although it does not have direct legal effect, constitutes an important factor in interpreting the provisions of Regulation No 802/68 on the origin of goods. By reason of its purpose, its constitution, its composition, and its method of working, the Committee on Origin is in every way similar to the Committee on Common Customs Tariff Nomenclature. The wording of the provisions setting up the two committees and defining their tasks is identical. From this it may be concluded that the opinions submitted by the two bodies have the same legal status. In its case-law, the Court has considered the opinions submitted on tariff matters by the Committee on Common Customs Tariff Nomenclature as an important factor to be taken into account in interpreting the tariff. In the light of these considerations and having regard to the subject-matter of the question referred to the Court, it would therefore be useful if the Court could also express its view in this case on the status of the opinions of the Committee on Origin.
In addition to Regulation No 802/68, other texts, namely agreements concluded between the Community and third countries, contain provisions on the origin of goods. However, those provisions cannot be considered as the application of the general principles contained in Regulation No 802/68. First, Regulation No 802/68 itself expressly says in Article 2 that its provisions shall not affect the special rules concerning trade, such as those appearing in the said agreements. Secondly, the said rules exist only for the specific purposes of the agreements in which they appear, and are therefore more restrictive than the general provisions adopted by the Community.
From the fact that the agreements and conventions mentioned above are to a large extent concerned with the way in which goods are to be treated for tariff purposes, it may be deduced that the provisions on origin contained in them are all directly connected with the Common Customs Tariff. As regards that tariff, there is applied the general principle that a change in the tariff classification of goods, resulting from an operation or process, has the result that those goods originate in the country where the operation or process takes place.
There are, however, exceptions to this principle, the Common Customs Tariff having been organized according to criteria peculiar to itself and not in order to determine the origin of goods. This is why the said agreements normally have appended to them lists of the activities involving a process or operation which, while bringing about a new tariff classification, do not confer a particular origin on the goods (list A) or which, conversely, while not bringing about a change in tariff heading, confer a particular origin on the goods (list B). In the context of this system, the grinding of casein cannot be considered as conferring a particular origin on that product. The tariff classification of casein does not change (at subheading 35.01 of the Common Customs Tariff), but it is not included in list B as one of the operations which confer a particular origin. Furthermore, since the general provisions of Regulation No 802/68 recognize the fundamental importance of the determination of origin for applying the Common Customs Tariff, the fact that the tariff classification of casein remains unchanged leads to the view that activities involving a process or operation carried out by the Company do not confer any particular origin on the ground casein. This conclusion is also confirmed by the fact that certain regulations in implementation of Regulation No 802/68 consider a tariff change as a decisive criterion in determining origin.
Passing next to a more particular examination of the question referred, the Commission notes first of all that according to Article 5 of Regulation No 802/68, four requirements must be met simultaneously in order that a process or operation applied to a product shall confer a particular origin upon it. The process or operation must:
a) be ‘substantial’;
b) be ‘economically justified’;
c) have been carried out in an undertaking equipped for the purpose;
d) have resulted in the manufacture of a new product or represent an important stage of manufacture.
The requirements mentioned at (b) and (c) are satisfied in the present case, but various difficulties emerge as regards requirements (a) and (d). In order to clarify the scope of the latter two requirements, the Commission first mentions the cases in which some of its regulations have given a clear answer to the question of what factors may be taken as the basis for the proposition that the said requirements are met. For these purposes, it mentions cases in which the existence of a ‘substantial’ process or operation has, or has not, been accepted, and in which an activity has been recognized as resulting in the manufacture of a new product, or as an important stage of manufacture.
Secondly, the Commission mentions the cases on the application of Article 5 of Regulation No 802/68 in respect of which the Committee on Origin has submitted an opinion. More particularly, it points out that at its meeting on 17 and 18 December 1975, the committee in fact adopted an opinion to the effect that the following processes and operations do not confer a particular origin on the product treated:
very fine milling or pulverizing (screen sizes 30, 60 or 90) in a mill of foreign unground or roughly ground casein;
indispensable quality control carried out by grading at the same time as the milling;
replacement of the packing of the foreign casein by a new packing adapted to the very finely ground casein.
The committee maintained that opinion at its meeting on 22 and 24 June 1976, taking into account the observations made by the Company on 24 February 1976.
Finally, the Commission mentions a number of cases met with by the national authorities of the Member States concerning the grant of certificates of origin, and which, so far as it is aware, are in line with a general and undisputed practice in this matter. Such cases support a clear finding that the national authorities have not considered the milling of casein as an operation conferring a particular origin on the product.
Taking these considerations into account, the Commission is of the opinion that it is not possible to draw up a rule which is general and at the same time precise on the question of when a process or operation must be considered as ‘substantial’ and when it results in the ‘manufacture of a new product’ or represents ‘an important stage of manufacture’. In determining origin, it is necessary to take into account in particular the characteristics of the product itself or of a group of products. Moreover, it must not be forgotten that technical and economic progress constantly face us with different methods of production which cannot be assessed according to the criteria currently in force.
Although it is true that there is a certain connexion between the two criteria in question: ‘substantial process or operation’ on the one hand, and ‘manufacture of a new product’ or ‘an important stage of manufacture’ on the other, it nevertheless remains a fact that it is possible for a substantial process not to result in a new product or not to represent an important stage of manufacture. The two criteria represent two different elements for assessing processing.
The criterion ‘substantial process or operation’ expresses a ‘dynamic’ point of view, because in order to decide whether processing is substantial, it is necessary to examine whether that activity as such plays an important part in the production as a whole. As regards this, the question whether such an activity is indispensable to putting the product to its final economic use is not decisive.
Conversely, the criteria ‘manufacture of a new product’ or ‘important stage of manufacture’ express more of a ‘static’ point of view since they involve making some sort of comparison between the product as it was before the process and the one obtained after it. If upon making that comparison it can be said that there is a significant qualitative change, it is possible to speak of an ‘important stage of manufacture’. If the change is such that the original properties of the product have disappeared, there is a ‘new product’.
Such being the position, it can be stated, at least as regards industrial production and craftsmanship, that simple mechanical or manual activities carried out on a product generally do not suffice to fulfil the requirements of a ‘substantial process or operation’. For this purpose, either the process should be of a certain complexity, or very special skills should be necessary in order to apply it. In addition, account should be taken of the significance of the activity as such from the point of view of the production process as a whole, though not as an indispensable condition, but having regard to its importance in the manufacturing process in terms of quantity and quality.
As regards the milling of casein, first it represents nothing other than a simple mechanical operation, similar in every way to the milling and crushing carried out on other material of varying hardness, and which indisputably do not represent a substantial process or operation. In addition, it would not appear that the significance of that operation in the process of manufacture is such as to render it ‘substantial’.
The way in which the production of casein is described in specialized works confirms this assessment. In many cases, the activity in question is not even mentioned. The fact that the said activity is associated with others (cleaning, grading, packing) does not alter this analysis in any way, for those activities are mere preliminaries to packing.
Secondly, the grinding of casein does not lead to the ‘manufacture of a new product’, because it does not alter the physico-chemical composition of the casein in any way. It is only the external aspect of the product that is affected. Nor, moreover, since the substantial characteristics typical of casein are not changed at all by the grinding which therefore does not bring about any significant qualitative change in the product, is it possible to speak of an ‘important stage of manufacture’.
The Commission thus concludes that the Committee on Origin correctly interpreted Community law governing the matter in its opinion of 17 and 18 December 1975 and of 22 and 24 June 1976. It suggests that the Court should answer the question referred to it as follows:
‘The grinding, cleaning, grading and packing, performed in a Member State of the Community, of unground casein imported into the Community from a third country do not confer a community origin on the casein thus treated under Article 5 of Regulation No 802/68 of the Council, because the said operations do not represent a substantial process or operation, do not result in the manufacture of a new product and do not represent an important stage of manufacture’.
III — Oral procedure
The oral observations of the Gesellschaft für Überseehandel mbH, the Handelskammer, Hamburg, represented by Herbert Flohr, and the Commission of the European Communities were made at the hearing on 1 December 1976.
The Gesellschaft fur Überseehandel mentioned a number of cases, such as the production and printing of textiles, the manufacture of powdered egg yolk, etc. which, it claimed were analogous in every way to the processing of raw casein, and which, it alleged, had been considered as constituting a substantial operation or process.
It also argued that the soundness of its argument was confirmed by the attitude adopted in the past by the Handelskammer, Hamburg, which had for several years issued certificates of origin on the basis of the contested operation on casein.
The Handelskammer objected that in the Federal Republic of Germany and in other Member States, such as the Netherlands, the classifying, for the purposes of article 5 of Regulation No 802/68, of the activities whereby raw casein is treated has for long constituted a difficult and complex problem.
The Commission of the European Communities stressed, amongst other matters, the fact that opinions adopted by the Committee on origin were not binding, and emphasized that it was necessary and appropriate to dispose of the matter by a judicial decision of the Court.
In answer, moreover, to two questions put by the Court, the Commission stated that it felt that it could support the opinion of the said Committee in the present case.
Furthermore, since casein imported into the Federal Republic of Germany from third countries is in free circulation as regards intra-Community trade, the certificates of origin at issue are only necessary in order to export the casein to third countries which require those certificates for the purpose of importation.
The Advocate-General delivered his opinion at the hearing on 12 January 1977.
Law
1. By order of 28 May 1976, which reached the Court on 8 June 1976, the Verwaltungsgericht Hamburg has referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Article 5 of Regulation No 802/68 of the Council of 27 June 1968 on the common definition of the concept of the origin of goods (OJ English Special Edition, 1968, p. 165). More particularly, the national court asks the Court of Justice to say whether untreated casein obtained in a third country, which has been rendered fit for use by being ground up in a Member State of the EEC in the way described by the Gesellschaft für Überseehandel is to be regarded as originating in that Member State according to Article 5 of Regulation (EEC) No 802/68 of the Council.
2. The question has arisen in a dispute concerning the refusal of the Handelskammer, Hamburg, to issue to the Gesellschaft für Überseehandel certificates stating for the purposes of Regulation No 802/68 that the Federal Republic of Germany is the country of origin of the casein treated by the said undertaking. It appears from the file in the main action that in the establishments of the Gesellschaft für Überseehandel, raw casein is cleaned, ground to various degrees of fineness, graded and then appropriately packaged. The Handelskammer explained as the reason for its refusal that the cleaning, grinding, grading and packing of the raw casein did not constitute activities conferring a particular origin on the product, according to Article 5 of Regulation No 802/68 of the Council of 27 June 1968.
3. Article 5 of Regulation No 802/68 provides: ‘A product in the production of which two or more countries were concerned shall be regarded as originating in the country in which the last substantial process or operation that is economically justified was performed, having been carried out in an undertaking equipped for the purpose, and resulting in the manufacture of a new product or representing an important stage of manufacture.’ It appears from the order for reference that it is not denied that, in accordance with the said provision, the process or operation to which the raw casein is subjected in this case constitutes an activity ‘carried out in an undertaking equipped for the purpose’, and that it is ‘economically justified’ because it is necessary for the industrial use of the product. Thus, the dispute is concerned in essence with the question whether the said activity constitutes a ‘substantial’ process or operation for the purposes of Article 5 of Regulation No 802/68, resulting in ‘the manufacture of a new product’ or representing ‘an important stage of manufacture’. It is therefore in respect of this question that an answer should be given to the national court.
4. Although the Court has no jurisdiction under Article 177 of the EEC Treaty to apply the provision of Community law to actual cases, it may nevertheless furnish the national court with the interpretative criteria necessary to enable it to dispose of the dispute.
5. According to the last recital in the preamble to Regulation No 802/68 and to Article 1 of that regulation, a common definition of the concept of the origin of goods constitutes an indispensable means of ensuring the uniform application of the Common Customs Tariff, of quantitative restrictions and of all other measures adopted, in relation to the importation or exportation of goods, by the Community or by the Member States. For those purposes, Articles 4 and 5 of the regulation base such a definition on objective criteria, making it possible to ensure the uniform application in all the Member States of the concept of the origin of goods and thus to avoid deflections of trade and abuses. In particular, there can be seen in Article 6 of the regulation the intention to prevent the origin of goods in the production of which two or more countries are concerned from being determined by way of a non-substantial process or operation in such a manner as to defeat the purposes of Article 1 or to circumvent the measures adopted by the Member States in relation to importation or exportation. In these circumstances, it would not seem sufficient to seek criteria defining the origin of goods in the tariff classification of the processed products, for the Common Customs Tariff has been conceived to fulfil special purposes and not in relation to the determination of the origin of products. On the contrary, in order to meet the purposes and requirements of Regulation No 802/68, the determination of the origin of goods must be based on a real and objective distinction between raw material and processed product, depending fundamentally on the specific material qualities of each of those products.
6. Therefore, the last process or operation referred to in Article 5 of the regulation is only ‘substantial’ for the purposes of that provision if the product resulting therefrom has its own properties and a composition of its own, which it did not possess before that process or operation. In providing that the said process or operation must, in order to confer a particular origin, result in the manufacture of a new product or represent an important stage of manufacture, the abovementioned Article 5 shows in fact that activities affecting the presentation of the product for the purposes of its use, but which do not bring about a significant qualitative change in its properties, are not of such a nature as to determine the origin of the said product.
7. The grinding of a raw material such as raw casein to various degrees of fineness cannot be considered as a process or operation for the purposes of Article 5 of Regulation No 802/68, because the only effect of doing so is to change the consistency of the product and its presentation for the purposes of its later use; it does not bring about a significant qualitative change in the raw material. Furthermore, the quality control by grading to which the ground product is subjected and the manner in which it is packaged relate only to the requirements for marketing the product and do not affect its substantial properties.
8. In its opinions expressed at its meetings of 17 and 18 December 1975 and of 22 to 24 June 1976, the Committee on Origin set up under Article 12 of Regulation No 802/68 has found that the grinding to different degrees of fineness, the sorting and packaging of casein do not constitute activities involving a process or operation conferring on the product resulting from those activities a particular origin for the purposes of the said regulation. Although opinions expressed by the Committee are not binding, except in so far as the Commission has adopted implementing provisions in application of Article 14 (3) (a) of Regulation No 802/68, nevertheless, until such time as the Commission adopts contrary provisions under subparagraphs (b) and (c) of the said Article 14 (3), they constitute an important criterion for interpreting Article 5 of the said regulation, the scope of which they define in respect of specific cases.
9. It is therefore to be concluded that the cleaning and grinding of a raw material, such as raw casein imported from a third country into a Member State, together with the grading and packaging of the product obtained, do not constitute a substantial process or operation for the purposes of Article 5 of Regulation No 802/68, and do not confer a Community origin on the said product, according to that regulation.
Costs
10. 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 action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.
On those grounds, THE COURT in answer to the question referred to it by the Verwaltungsgericht Hamburg by order of 28 May 1976, hereby rules: