JUDGMENT OF 29. 5. 1979 — CASE 165/78 IMCO — MICHAELIS v OBERFINANZDIREKTION BERLIN

In Case 165/78 REFERENCE to the Court under Article 177 of the EEC Treaty by the Bundesfinanzhof [Federal Finance Court] for a preliminary ruling in the action pending before that court between

THE COURT (Second Chamber) composed of: Lord Mackenzie Stuart, President of Chamber, P. Pescatore and A. Touffait, Judges, Advocate General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the observations submitted pursuant to 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

The General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff (Official Journal 1977, L 289, p. 11) include inter alia the following rules:

‘1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as imported, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), imported unassembled or disassembled’.

The last phrase of General Rule 2 (a) is worded in the German version as follows: ‘… wenn sie zerlegt gestellt wird.’

IMCO — J. Michaelis GmbH & Co., Stuttgart, submitted samples of certain products to the Oberfinanzdirektion Berlin and on 25 February 1977 requested a binding opinion as to tariff classification (‘verbindliche Zolltarifauskunft’) in respect of them. The products concerned were:

Caps (in base metal) for ball-point pens with depressing mechanism;

Barrels (in base metal) for ball-point pens with depressing mechanism;

Magazines for the above-mentioned ball-point pens.

The caps and barrels in various finishes contain all the parts of the mechanism and are always delivered in pairs. The magazines are delivered in boxes of 600 units (of different calibres and mixed colours). These magazines are in part intended to be made up with the caps and barrels with which they are imported to form ball-point pens. A number of these magazines are intended for IMCO's stock of refill-magazines. In its request IMCO described the articles in dispute as ‘parts for “Fisher Space Pen” (caps, barrels and magazines)’. These articles are imported from the United States and assembled in the Federal Republic of Germany.

The Oberfinanzdirektion, in its classification opinion of 15 June 1977, found that the caps, barrels and the corresponding number of magazines came under tariff heading 98.03 A (‘Fountain pens and stylograph pens and pencils (including ball-point, felt-tipped and fibre-tipped pens and pencils’) [German text: ‘Füllhalter, Kugelschreiber, Filzschreiber und Faserschreiber’] of the Common Customs Tariff whilst the surplus magazines came under tariff subheading 98.03 C II‘Parts and fittings … Other’) [German text: ‘Teile und Zubehör … andere’] and were thus liable to a lower customs duty than was applicable to the other articles. IMCO considered that the articles which it imported all came under subheading 98.03 CII and therefore lodged an objection (Einspruch) against the classification opinion. The Oberfinanzdirektion, by a decision of 14 December 1977, dismissed the objection whereupon IMCO lodged an application with the Bundesfinanzhof on 27 February 1978. By an order of 13 June 1978 the VIIth Senate of the Bundesfinanzhof stayed the proceedings and, under Article 177 of the EEC Treaty, referred the following preliminary questions to the Court of Justice:

‘1. Is the application of the second sentence of Rule 2 (a) of the General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff excluded in accordance with the third sentence of General Rule 1 if the Common Customs Tariff contains a special tariff heading for the parts of an unassembled or disassembled [‘zerlegt’] article? If the answer to this question is in the negative: 2. Must the second sentence of General Rule 2 (a) of the Common Customs Tariff be interpreted as meaning that, in addition to articles which are “zerlegt” it also covers articles which have not yet been assembled? If the answer to this question is in the affirmative: 3. Does the second sentence of General Rule 2 (a) also apply if, when a number of parts of articles which have not yet been assembled is presented for customs clearance, it is uncertain which parts will be assembled with which other parts will be assembled with which other parts to form an article?’

The order was received at the Court Registry on 31 July 1978.

The plaintiff in the main action and the Commission of the European Communities submitted written observations in accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC.

By an order of 22 November 1978 the Court assigned the case to the Second Chamber.

Having heard the report of the Judge-Rapporteur and the views of the Advocate General the Court (Second Chamber) decided to open the oral procedure without any preparatory inquiry.

II — Observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

The plaintiff in the main action submitted the following observations on the three questions submitted by the Bundesfinanzhof.

Question 1

The goods to be classified, by their objective nature and intended purpose, constitute ‘parts of ball-point pens’ for which the Common Customs Tariff contains a special subheading, namely 98.03 C II. The second sentence of General Rule 2 (a) accordingly cannot apply to them.

In accordance with the third sentence of General Rule 1 and the generally-accepted principles of legal interpretation, where the Common Customs Tariff contains a special subheading for the components of disassembled goods that heading must take precedence, as a lex specialis, over the second sentence of General Rule 2 (a).

Question 2

The ball-point pens are assembled only after the separate parts have been imported into the country. Since until then the ball-point pen has not been assembled, it is likewise impossible to concede that it constitutes a ‘disassembled’ article within the meaning of the second sentence of General Rule 2 (a) for the Interpretation of the Nomenclature of the Common Customs Tariff.

Question 3

The view taken with regard to Question 2 must apply with even greater force when, as in the present case, construction into a ball-point pen takes place in accordance with the customer's specifications.

According to the Commission under the Common Customs Tariff a distinction is drawn between, on the one hand, complete or finished articles (or falling to be completed or finished) and on the other hand the constituent parts of such articles. There is no contradiction between these two categories, which stand in a graduated relationship to each other. Where an article fulfils the conditions laid down in the second sentence of General Rule 2 (a) in that it constitutes a complete article disassembled into its constituent parts it cannot be classified as separate parts and the provisions relating to such parts are no longer applicable. Consequently General Rule 1 does not apply either.

This view is confirmed both by the background to the development of the provisions of the Common Customs Tariff and by the Explanatory Notes to the Nomenclature of the Customs Cooperation Council.

Finally, the Commission maintains that a different interpretation would also be contrary to the second sentence of General Rule 1. That rule, which is an expression of the principle of the lex specialis, means in fact that specific rules, as they may be deduced from the terms of the headings and Section or Chapter Notes take precedence over the General Rules of the Common Customs Tariff. There is no special relationship between complete articles presented disassembled or unassembled on the one hand and separate parts on the other. The most that can be said is that a whole article disassembled has a special character in relation to the mere separate parts inasmuch as only parts which form a whole disassembled article can be assembled to form a whole article.

On these grounds the Commission suggests that the first preliminary question should be answered in the negative.

The Commission, in suggesting an affirmative reply to the second question, concedes that the word ‘zerlegt’ employed in the German version of the second sentence of General Rule 2 (a) presupposes the existence of an article which has been initially fully assembled and has subsequently been disassembled (‘zerlegt’) into its constituent pans. That restrictive concept, which emerges only from the German text of the second sentence of General Rule 2 (a), disregards the principle that tariff classification must be effected on the basis of objective criteria. In fact it is only in very rare cases that it is possible to establish from parts whether or not they have been previously assembled. On the other hand examination of separate parts makes it objectively possible to assess whether they can be assembled to form a given article. Having regard to the clear wording of the versions of that provision in other languages there is no doubt that it refers both to disassembled articles and to those which have not yet been assembled.

With regard to the third question the Commission claims in particular that ballpoint pens which have not (yet) been assembled fall under subheading 98.03 A pursuant to the second sentence of General Rule 2 (a). Although at the time of the importation of a certain number of parts (caps, barrels and magazines) it is impossible to say which part will be assembled with which other part it is nevertheless possible to establish clearly the number of finished articles (ballpoint pens) which may be produced from such parts. In that case all the conditions for the existence of a complete article, within the meaning of the rules on classification for tariff purposes, are fulfilled.

The Commission accordingly suggests that the reply to the question submitted should be as follows:

1) The second sentence of General Rule 2 (a) for the Interpretation of the Nomenclature of the Common Customs Tariff also applies where the Common Customs Tariff contains a particular subheading for the parts which make up a complete article submitted unassembled or disassembled.

2) The second sentence of General Rule 2 (a) also applies to articles which have not yet been assembled.

3) Where separate parts are imported with a view to their assembly into complete articles the second sentence of General Rule 2 (a) applies even though it is not yet known at the time of importation which pieces will be assembled together.

III — Oral procedure

The Commission of the European Communities, represented by Jean Amphoux, a member of its Legal Department, presented oral argument at the hearing on 15 February 1979.

The Advocate General delivered his opinion at the hearing on 22 March 1979.

Decision

1. By an order of 13 June 1978 which was received at the Court Registry on 31 July 1979, the Bundesfinanzhof submitted the following preliminary questions pursuant to Article 177 of the EEC Treaty:

‘1) Is the application of the second sentence of Rule 2 (a) of the General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff excluded in accordance with the third sentence of General Rule 1 if the Common Customs Tariff contains a special tariff heading for the parts of an unassembled or disassembled [“zerlegt”] article? If the answer to this question is in the negative:

2) Must the second sentence of General Rule 2 (a) of the Common Customs Tariff be interpreted as meaning that, in addition to articles which are “zerlegt” it also covers articles which have not yet been assembled? If the answer to this question is in the affirmative:

3) Does the second sentence of General Rule 2 (a) also apply if, when a number of parts of articles which have not yet been assembled is presented for customs clearance, it is uncertain which parts will be assembled with which other parts to form an article?’

2. These questions were raised in the context of a dispute concerning a binding opinion as to tariff classification (verbindliche Zolitarifauskunft), issued on the application of a German importer, the plaintiff in the main action, by the Oberfinanzdirektion Berlin, the defendant in the main action, setting out the headings of the Common Customs Tariff applicable to the articles described by the plaintiff as ‘parts for “Fisher Space Pen” (caps, barrels and magazines)’ which it intended to import from the United States into the Federal Republic of Germany with a view to assembling them to form ballpoint pens.

3. The file establishes that the caps and barrels, in various finishes, contain all the parts of the device and are supplied in pairs, whilst the magazines, which are of different sizes and mixed colours, and are supplied in boxes of 600 units, are intended in part to be assembled with the caps and barrels with which they are imported and in part to supplement the plaintiff's stock of refill-magazines.

4. The defendant, in its classification opinion of 15 June 1977, stated that the caps, barrels and the corresponding number of magazines came under subheading 98.03 A of the Common Customs Tariff (‘Fountain-pens and stylograph pens and pencils (including ball-point, felt-tipped and fibre-tipped pens and pencils)’) as parts for ball-point pens. For the classification of the caps and barrels and the corresponding number of magazines intended to be assembled in the form of ball-point pens, the defendant relied on General Rule 2 (a) of the Rules for the Interpretation of the Nomenclature of the Common Customs Tariff, which provides:

‘Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as imported, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), imported unassembled or disassembled.’

5. The plaintiff claims that all the above-mentioned articles constitute parts of ball-point pens for which the Common Customs Tariff contains a special subheading, namely subheading 98.03 C II, and that the second sentence of General Rule'2 (a) is therefore not applicable to them. The plaintiff relies on the German version of that provision which, unlike the versions in all the other languages of the Community, does not refer to the ‘unassembled or disassembled’ article but only to the ‘disassembled’ (‘zerlegt’) article; the plaintiff therefore claims in particular that since the articles in question are assembled in the form of ball-point pens only after their importation into the Federal Republic of Germany they cannot constitute ‘disassembled’ articles within the meaning of General Rule 2 (a).

6. The questions submitted by the national court require the following answer.

7. With regard to Question 1 and 2, tariff heading 98.03 covers on the one hand complete articles such as fountain-pens and stylograph pens, and, on the other, ‘parts and fittings’. It is clear from the general plan of that heading and from the very concept of ‘parts and fittings’ that that tariff category implies the existence, even if.possibly only in the future, of a complete article of which such pieces are fittings or pans. It follows that, given the existence of the constituent parts, disassembled or not yet assembled, of a complete article, such parts cannot be classified as ‘parts and fittings’, within the meaning of subheading 98.03 C II, in respect of the complete article of which they form the totality of the components.

8. The reply to the first two questions submitted by the national court must therefore be that General Rule 2 (a) for the Interpretation of the Nomenclature of the Common Customs Tariff covers articles not yet assembled as well as articles which have been disassembled and to the extent to which the parts not yet assembled allow of the assembly of a complete article they are covered by the provisions governing that article even though the Common Customs Tariff contains a specific heading for parts and fittings.

9. Question 3 is intended to settle a special difficulty arising from the fact that in a large consignment of parts of a given article which have not yet been assembled there is no correspondence between any one of such parts and any other, so that it is impossible to establish which, when put together, will ultimately form the finished article.

10. In such a situation, since standard and interchangeable parts are concerned, only those parts which may be assembled to form the finished article must be classified under the tariff heading for that article whilst any surplus must thus be covered by the concept of ‘parts and fittings’. The reply to Question 3 must therefore be that when unassembled parts of an article are presented for customs clearance only any surplus parts not allowing of the assembly of a complete article are to be regarded as ‘parts and fittings’ of the said article within the meaning of the Common Customs Tariff.

Cost

11. 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, in the nature of a step in the action pending before the Bundesfinanzhof, costs are a matter for that court.

On those grounds, THE COURT (Second Chamber) in answer to the questions submitted to it by the Bundesfinanzhof, by an order of 13 June 1978, hereby rules:

(1) General Rule 2 (a) for the Interpretation of the Nomenclature of the Common Customs Tariff covers articles not yet assembled as well as articles which have been disassembled and to the extent to which the parts not yet assembled allow of the assembly of a complete article they are covered by the provisions governing that article even though the Common Customs Tariff contains a specific heading for parts and fittings.

(2) When unassembled parts of an article are presented for customs clearance only any surplus parts not allowing of the assembly of a complete article are to be regarded as ‘parts and fittings’ of the said article within the meaning of the Common Customs Tariff.

1 Translator's note: The English version of General Rule I (already quoted) is not a word-for-word translation of the German and in particular it contains no readily identifiable third sentence. A close translation of the German version of the rule would be as follows: “The titles of Sections, Chapters and sub-Chanters are only for reference. The wording of the tariff headings and the Section or Chapter Notes and General Rules are decisive for the purposes of classification. The General Rules only apply however in so far as the tariff headings and Section and Chapter notes do not otherwise provide”.

2 Translator's note: Since the words “unassembled or disassembled” in the English version are represented by the single German word “zerlegt”, which means primarily to dismount, disassemble or dismantle, to avoid the apparent absurdity of discussing whether “unassembled or disassembled” can also mean “unassembled” the German word “zerlegt” is retained in this translation where appropriate.