JUDGMENT OF 14.7.1981 — CASE 205/80 ELBA v HAUPTZOLLAMT BERLIN-PACKHOF

In Case 205/80 REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht [Finance Court] Berlin for a preliminary ruling in the action pending before that court between

THE COURT (Second Chamber), composed of: P. Pescatore, President of Chamber, O. Due and A. Chloros, Judges, Advocate General: G. Reischl Registrar: H. A. Rühl, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

The facts and the arguments presented by the parties during the written procedure may be summarized as follows :

I — Facts and written procedure

The undertaking ELBA Elektroapparate-und Maschinenbau Walter Goettmann KG, the plaintiff in the main action before the Finanzgericht Berlin, imported from Taiwan via the Hauptzollamt Berlin-Packhof a quantity of what may conveniently be called flashing light circles for which it applied for release into free circulation on 20 December 1978. The article consists of a circular plastic frame (diameter roughly 21 cm) to which are attached by means of plastic holders 49 candle-shaped electric light bulbs, about 24 mm long, of various colours and connected together with electric cable. They are in addition decorated with silver tinsel and a coloured loop of tinfoil. The incandescent bulbs, which are arranged in three circles of different colours in each case, light up (flash) alternately when the electricity is switched on. The bulbs, which are not provided with sockets and are simply inserted by their lead-in wires into the lamp-holders, which are integral parts of the electric cables, are connected in series. Their voltage is less than 42 volts and their nominal power is less than 15 watts.

On importation ELBA declared the flashing light circles under tariff heading 97.05 of the Common Customs Tariff. The Hauptzollamt, the defendant in the main action, classified the light circles under tariff heading 97.05, in accordance with the initial request of the applicant, which consequently paid the customs duty of 10%.

Under tariff heading 97.05 of the Common Customs Tariff are classified :

“Carnival articles; entertainment articles (for example, conjuring tricks and novelty jokes); Christmas tree decorations and similar articles for Christmas festivities (for example, artificial Christmas trees, Christmas stockings, imitation yule logs, Nativity scenes and figures therefor)”.

ELBA objected and sought a fresh classification of the light circles under tariff heading 85.20 of the Common Customs Tariff but the Hauptzollamt Berlin-Packhof decided in the end that the goods should be classified under tariff subheading 39.07 E IV of the Common Customs Tariff and consequently imposed a customs duty of 17.6%.

Tariff subheading 39.07 EIV of the Common Customs Tariff is a “catch-all” tariff heading and includes the following goods :

“39.07. Articles of materials of the kinds described in headings nos 39.01 to 39.06: A. Of regenerated cellulose B. Of vulcanized fibre C. Of hardened proteins D. Of chemical derivatives of rubber E. Of other materials: ... IV. Other”.

According to the order of the Finanzgericht Berlin referring the matter to the Court, the arguments of the parties to the main action are these:

The plaintiff which, in its action before the Finanzgericht, seeks to have the “flashing light circles” classified as Christmas-tree decorations under tariff heading 97.05 of the Common Customs Tariff submits that they are not goods put up in sets. The items which give the goods their essential character are the electric light bulbs and not the plastic components which perform only a subsidiary function. The goods in question have been manufactured as Christmas-tree decorations for the American market.

In its decision of 25 January 1980 on the objection the Hauptzollamt Berlin-Packhof on the other hand came to the view that the goods in question were goods set up in sets to be classified on the basis of the component giving them their essential character. The character of the “light circles” is determined essentially by the items made of plastic so that, viewed as a whole, they are to be regarded as “Other goods made of plastic — electric indoor lights”.

The defendant admits that the flashing light circles may possibly be used as Christmas-tree decorations but it takes the view that they are used in Germany mainly as decorative lights for other purposes. However, it concedes that their principal use within the European Communities might possibly be different and determinative.

The order of 29 September 1980 referring the matter to the Court was received at the Court Registry on 20 October 1980.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC written observations were submitted by the Commission of the European Communities, represented by its Legal Adviser, Rolf Wägenbaur, on 19 December 1980.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure without any preparatory inquiry.

However, it requested the parties to the main action and the Commission to reply in writing to a question concerning the possibility of considering the goods in question as “carnival... [and] entertainment articles” under tariff heading 97.05, and the Commission did so within the prescribed period.

II — Written observations submitted to the Court under Article 20 of the Protocol on the Statute of the Court of Justice of the European Economic Community

The Commission of the European Communities argues that in view of the presentation of the “flashing light circles” and especially of the fact that they are decorated with silver tinsel in the form of fir-tree branches it cannot be ruled out that the goods were designed by the manufacturer to be used as Christmas-tree decorations.

According to the Commission that theory is confirmed by the fact that the goods have a casing which enables the light circle to be attached to the top of a fir tree and it is borne out by the fact that the manufacturer had such use in mind, as is disclosed by a reading of the brochure attached to the sample included with the documents placed before the Court.

The Commission believes that the “flashing light circle” may in fact occasionally be actually used as a Christmas-tree decoration.

However, the Commission thinks that owing to the way in which the article is presented (at least on the European market) it is, on the contrary, generally used “at parties” in accordance with the view taken by the Zentralverband der Elektrotechnischen Industrie e.V. and the Vereinigung Bayerischer Spielwarenund Christbaumschmuckhersteller e.V. [National Federation for the Electronic Industry and Association of Bavarian Manufacturers of Toys and Christmas Tree Decorations].

In order that the goods in question may be classified under tariff heading 97.05 of the Common Customs Tariff it is not sufficient in the Commission's view that they are used occasionally as Christmas tree decorations. They must be an article which is used primarily as a Christmas-tree decoration.

The Commission points out that the goods in question are not included in any of the tariff headings of the Common Customs Tariff. They are “goods consisting of more than one material or substance”, within the meaning of Rule 2 (b) of the General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff, consisting of a plastic frame with synthetic decoration and electrical fittings in which are fixed the candle-shaped incandescent light bulbs without sockets.

According to the last sentence of the above-mentioned Rule 2 (b) the procedure to be applied is that of Rule 3 (b) (Rule 3 (a) not being relevant), which provides that “goods consisting of... different components” should “be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable”. Bearing in mind the external appearance of the goods on the one hand and their function on the other, consisting of lighting up at regular intervals when the electricity is switched on thereby producing a decorative effect, it is the plastic lighting equipment which must be regarded as tne component which gives the goods their essential character.

The Commission therefore concludes in favour of classifying the “flashing light circles” under tariff subheading 39.07 EIV of the Common Customs Tariff and proposes the following answer to the question put by the Finanzgericht Berlin :

“So-called ‘flashing light circles’ consisting of a plastic frame to which are attached incandescent light bulbs of different colours which flash when an electrical current is passed through them must be classified under tariff subheading 39.07 E IV”.

III — Replies to the question posed by the Court

The Court, by letter of 23 February 1981, asked the Commission whether the goods in question might be considered as coming under tariff heading 97.05 of the Common Customs Tariff as “Carnival articles; entertainment articles (for example, conjuring tricks and novelty jokes)” and the Commission replied in the negative on 13 March 1981. According to the Commission tariff heading 97.05 covers carnival articles and entertainment articles intended for ephemeral use, flimsy and of simple construction, not to be confused with articles in ordinary use of which they are an imitation. The “flashing light circles” are lighting equipment which may be used for example as decorations for a private bar or similar installation and for shop windows or exhibition halls. Their manufacture is such as to make it appear that they are not designed for ephemeral use but intended to be used over a period of time, either permanently or at repeated intervals as lighting equipment. They cannot therefore be regarded as novelty jokes or the like and consequently cannot, in the Commission's view, come under tariff heading 97.05.

IV — Oral procedure

The Commission of the European Communities, represented by Rolf Wägenbaur, a member of its Legal Department, acting as Agent, presented oral argument at the sitting on 26 March 1981.

The Advocate General delivered his opinion at the sitting on 4 June 1981.

Decision

1. By order of 29 September 1980 which was received at the Court of Justice on 20 October 1980, the Finanzgericht [Finance Court] Berlin, Seventh Senate, submitted to the Court the following question for a preliminary ruling on the interpretation of tariff headings 97.05 and 39.07 of the Common Customs Tariff:

“Are ‘flashing light circles’ (diameter roughly 21 cm) consisting of a circular plastic frame, to which are attached candle-shaped incandescent lights bulbs, about 24 mm long, of various colours which flash when switched on and which may be placed at the top of a Christmas tree to be classified as Christmas-tree decorations under tariff heading 97.05 of the Common Customs Tariff (rate of duty 10 %) or, because plastic materials are among their constituents, under tariff subheading 39.07 EIV of the Common Customs Tariff (rate of duty 17.6 %)?”

2. This question was raised in the course of an action between ELBA Elektroapparate and the Hauptzollamt [Principal Customs Office] Berlin-Packhof [hereinafter referred to as “the Hauptzollamt”] concerning the question whether the light circles which ELBA on 20 December 1978 sought to have released into free circulation, must be classified, as they were initially, under tariff heading 97.05 of the Common Customs Tariff or, as was finally decided by the Hauptzollamt, under tariff heading 39.07 of the Common Customs Tariff.

3. Tariff heading 97.05 covers the following goods:

“Carnival articles; entertainment articles (for example, conjuring tricks and novelty jokes); Christmas-tree decorations and similar articles for Christmas festivities (for example, artificial Christmas trees, Christmas stockings, imitation yule logs, Nativity scenes and figures therefor)”.

4. According to the version of the text in force at the date of importation, tariff heading 39.07 of the Common Customs Tariff covered the following goods: It is to be noted that headings 39.01 to 39.06 cover plastics, cellulose and similar products.

“Articles of material of the kinds described in headings Nos 39.01 and 39.06:

A) Of regenerated cellulose

B) Of vulcanized fibre

C) Of hardened proteins

D) Of chemical derivatives of rubber

E) Of other materials : ... IV Other”.

5. As may be seen from the grounds of the order of the Finanzgericht referring the matter to the Court, the Hauptzollamt, the defendant in the main action, took the view in its decision of 25 January 1980 given on the objection to the classification that the goods were put up in sets and should be classified as if they consisted of the component which gave them their essential character. That character was determined by the components made of plastic, so that the “flashing light circles”, as units, should be considered as “other” goods made of plastic under tariff subheading 39.07 E IV of the Common Customs Tariff.

6. ELBA contends that the “flashing light circles” are not goods which are put up in sets and that the components which give them their essential character are the light bulbs and not the plastic parts, which fulfil only a subsidiary function. It further maintains that these are goods which were manufactured for the American market as Christmas-tree decorations.

7. The Hauptzollamt admits that the flashing light circles may be used as Christmas-tree decorations but believes that in Germany they are used mainly as decorative lights for other purposes. It recognizes, however, that their principal use within the European Communities may possibly be different and determinative.

8. In its written observations and oral argument the Commission considers that, in view of the presentation of the “flashing light circles” and taking into account especially the fact that they are decorated with silver tinsel in the form of fir-tree branches and equipped with a casing enabling them to be attached to the top of a fir tree and that, as is apparent from the brochure attached to the sample which forms part of the Court file, the manufacturer had in fact such use in mind, it cannot be ruled out that these goods were designed by the manufacturer to be used as Christmas-tree decorations.

9. The Commission believes, however, that the “flashing light circles” can be used in fact only occasionally as Christmas-tree decorations. In view of the way in which the article is put up, at least on the European market, it is generally used as decoration “at parties”.

10. In this regard the Commission submits that the goods in question are not covered by any of the specific tariff headings of the Common Customs Tariff and, as “composite”, goods, must be classified according to Rule 3 (b) of the General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff “as if they consisted of the component which gives them their essential character”. Since the goods consist of a plastic frame with synthetic decoration and electrical fittings in which are fixed candle-shaped incandescent light bulbs without holders, it is, in the Commission's view, clear that their essential character is determined by the part made of plastic.

11. Furthermore, according to the Commission, the possibility of classifying the goods concerned under tariff heading 97.05 as “Carnival articles; entertainment articles (for example, conjuring tricks and novelty jokes)” must be excluded owing to the fact that this heading, according to the Explanatory Notes to the Customs Co-operation Council Nomenclature (Paragraph A of the Note on heading 97.05), covers articles which, being flimsy and of simple construction, are intended for ephemeral use and are not to be confused with articles in ordinary use of which they are an imitation.

12. According to the Commission, it follows that the “flashing light circles” are lighting appliances which are used as decorations and which are so made as to be intended for use over a period of time either continuously or at repeated intervals. This means that they may not be regarded as novelty jokes or the like under the first part of tariff heading 97.05 of the Common Customs Tariff.

13. In the opinion of the Commission, the external appearance of the goods and their function, which consists of lighting up at regular intervals when the electricity is switched on, thereby producing a decorative effect, lead to the conclusion that it is the plastic lighting equipment which must be considered as the component which gives the goods their essential character. The Commission therefore proposes that the goods should be classified under tariff subheading 39.07 E IV.

14. According to Rule 3 (a) of the General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff, “the heading which provides the most specific description shall be preferred to headings providing a more general description”. There is no doubt that tariff heading 39.07 which, according to the Explanatory Notes to the Customs Co-operation Council Nomenclature covers articles made of material falling within headings 39.01 to 39.06 (plastic materials or other) provided that these articles are not specified or included in other headings of Chapter 39 or in other more specific headings of the Nomenclature, is a generic heading of a residual nature (judgment of 1 May 1974 Osram GmbH ν Oberfinanzdirektion Frankfurt am Main [1974] ECR 477) and that as such its scope is less specific than that of heading 97.05 of the Common Customs Tariff.

15. Furthermore, it follows from the external appearance of the goods in question and from their function, as contemplated by the manufacturer or objectively determined by their own structure, that they are essentially intended to produce a decorative effect by means of light-play, whatever may be their precise use for a particular decorative purpose.

16. The “flimsy and... simple construction” in conjunction with ephemeral use, which according to the Commission, is a condition for classification under the first part of heading 97.05, does not constitute an absolute requirement in this regard. According to the Explanatory Notes to the Customs Cooperation Council Nomenclature, it is only in general and usually that articles to be classified under heading 97.05 are characterized by being flimsy and of simple construction, corresponding to the light materials of which they are made. It is clear from the explanatory note on heading 97.05 that the materials used as well as the construction of the articles concerned may confer on them a longer life and the possibility of extended use. The classification of the “flashing light circles” under heading 97.05 should not, therefore, be excluded.

17. Furthermore, it cannot be argued that the “essential character” of the article within the meaning of Rule 3 (b) of the General Rules for the Interpretation of the Nomenclature of the Common Customs Tariff is determined by the materials used. The essential character of the article is in this case determined by its intended purpose as a decorative lighting appliance regardless of the material used for its frame.

18. It follows that the essential character of the goods complies with the conditions for classification under heading 97.05. The goods concerned may therefore be classified under heading 97.05 and there is no need to determine whether they constitute “carnival... [and] entertainment articles” or “Christmas-tree decorations”, since each of these descriptions falls within the wording of the heading concerned.

19. The reply to the question submitted to the Court should therefore be that “flashing light circles” consisting of a circular plastic frame, to which are attached incandescent light bulbs of various colours which flash when switched on, are to be classified under tariff heading 97.05 of the Common Customs Tariff.

Costs

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 national court, the decision on costs is a matter for that court.

On those grounds, THE COURT (Second Chamber) in answer to the question referred to it by the Finanzgericht Berlin, Seventh Senate, by order of 20 October 1980, hereby rules:

1 Translator's note: The words “flimsy and of simple construction” and “are not to be confused with articles in ordinary use of which they are an imitation” are a translation of passages in the authentic French text of the Note in question. Equivalent passages do not appear in the authentic English text of the Note.

2 Translator's note: See footnote on page 2104 in regard to the phrase “flimsy and of simple construction”. The phrase “in general” does not appear in the authentic English text of the Note on heading 97.05 whereas the word “généralement” does appear in the authentic French text.