JUDGMENT OF 1. 7. 1982 — JOINED CASES 208 AND 209/81 PALTE & HAENTJENS v INSPECTEUR DER INVOERRECHTEN EN ACCIJNZEN
In Joined Cases 208 and 209/81 REFERENCES to the Court under Article 177 of the EEC Treaty by the Tariefcommissie [administrative court of last instance in revenue matters], Amsterdam, for a preliminary ruling in the actions pending before that court between
THE COURT (First Chamber) composed of: G. Bosco, President of Chamber, A. O'Keeffe and T. Koopmans, Judges, Advocate General: S. Rozès Registrar: P. Heim
gives the following
JUDGMENT
Facts and Issues
I — Facts and written procedure
The forwarding agents Palte & Haentjens BV imported into the Netherlands on 14 April 1977 on behalf of Firma Alfred C. Toepfer, Hamburg, and on 15 April 1977 on behalf of Firma K. A. Becker, Bremen, consignments of oats originating in Australia which it declared as “oats”, falling as such under heading 10.04 of the Common Customs Tariff. Chapter 10 of the Common Customs Tariff covers only those grains “which have been neither hulled nor otherwise worked”.
By amending notices of 16 June 1977 and 6 October 1977 the Inspector of Customs and Excise, Rotterdam, having verified that the consignments in question contained a significant proportion of grains which, despite their not having been hulled or subjected to other milling processes, nevertheless had their tips broken off, classified the goods in subheading 11.02 B I (a) 2 (aa): “clipped oats”.
Palte & Haentjens BV, after first lodging objections with the said Inspector, then aopealed against both those decisions to the Tariefcommissie which, by judgments of 3 July 1981, stayed proceedings in both cases until the Court of Justice had given a preliminary ruling on the following question (exactly the same question was submitted in both cases) :
“1. Should oat grains which after being harvested are simply threshed, stored, loaded and transported, as a result of which the tips are broken off, be classified in heading 10.04 of the Common Customs Tariff or in subheading B I (a) 2 (aa) of heading 11.02? 2. If the product described in Question 1 should be classified in subheading B I (a) 2 (aa) of heading 11.02, does there then apply to such a consignment of oat grains, consisting partly of clipped and partly of undipped grains, a percentage of clipped grains above which the consignment must be classified in subheading B I (a) 2 (aa) of heading 11.02 and below which it must be classified in heading 10.04? Does the fact that there are broken-off tips in the consignment have any effect on classification? 3. If it is assumed that the hulling of oat grains results in the grains being clipped as well because the husk or seed-coat, of which the tips form part, is removed in hulling, how should the two further subdivisions of subheading B I (a) 2 of heading 11.02, Hulled oats, namely “(aa) Clipped oats” and “(bb) Other”, then be defined in relation to one another?”
The judgments making the references were received at the Court Registry on 13 July 1981.
Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Palte & Haentjens BV, represented in Case 208/81 by I. H. Wildeboer of the firm of advocates Van Doorne & Sjollema, Rotterdam, and in Case 209/81 by G. H. Warning of the Amsterdam Bar, and by the Commission of the European Communities, represented by its Legal Adviser, R. Wägenbaur, acting as Agent, assisted by T. van Rijn a member of its Legal Department.
By order of 16 September 1981 the Court decided, pursuant to Article 43 of the Rules of Procedure, to join the two cases for the purposes of the procedure and judgment.
On 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, the Court invited the Commission to lodge certain documents before 26 January 1982 and to state whether it had submitted to the Committee on Nomenclature the samples mentioned in the judgments making the references to the Court.
By order of 25 November 1981, made pursuant to Article 95 (1) and (2) of the Rules of Procedure, the Court assigned Joined Cases 208 and 209/81 to the First Chamber.
II — Written observations submitted to the Court
The observations submitted by Palte & Haentjens BV, in Case 208/81 and in Case 209/81 are almost identical.
Palte & Haentjens BV states that the oats at issue are not clipped oats, within the meaning of the Common Customs Tariff. The modern, rapid, and consequently somewhat rough, methods used in the harvesting, threshing, storage and transport of grain cause the tips of oat grains to be broken off. That fact does not however provide sufficient grounds for concluding that oats so affected must be regarded as clipped oats. They are in fact ordinary oats which have not been worked in any way, purchased and sold as such, whereas clipped oats are the result of treatment in clipping machines specially designed for that purpose.
In recent years, there have been no Community imports of clipped oats coming from nonmember countries. In Australia, whence the oats at issue come, clipping machines for the export of clipped oats do not even exist.
According to Palte & Haentjens BV, experts in the cereals trade are able by visual examination to recognize and distinguish clipped oats from oats damaged by normal handling.
A consignment of clipped oats may in fact be distinguished from one of ordinary oats by the following features :
absence of broken-off tips, weed and dust, by reason of the cleaning usually carried out after clipping;
greater uniformity of grains;
regular cracking of the grains and exposure of a part of the kernel of a fairly high proportion of grains following clipping of the tips;
a very high percentage (at least 75%) of grains which no longer have tips.
Palte & Haentjens BV adds that the samples taken from the consignments at issue were submitted to the Zolltechnische Prüfungs- und Lehranstalt (Customs Laboratory and Training College), Hamburg, which stated that the oats, made up of “grains a small number of which (around 10 to 15%) have lost their bracteal tips” and not containing “grains of clipped oats (grains from which the tips have been removed)”, should be classified in tariff heading 10.04.
As regards the first question, Palte & Haentjens BV observes that, according to the general scheme of the Common Customs Tariff, a tariff heading (or subheading) may not include an item which does not at the same time fall within the chapter or section in which that heading (or subheading) is comprised.
The question at issue in this case is whether the goods in question fall within Chapter 10 or within Chapter 11 of the Common Customs Tariff.
Chapter 10 refers to “cereals”. The note on that chapter states that it covers only “grains which have been neither hulled nor otherwise worked”. The Customs Cooperation Council Explanatory Notes on Chapter 10 state that the products covered by that chapter are generally marketed after being “simply threshed or winnowed.” Paite & Haentjens BV infers from those provisions as a whole that cereals which, like the oats at issue, have not undergone further treatment after threshing or winnowing or both, must be classified in Chapter 10 of the Common Customs Tariff, regardless of the fact that the tips may have been broken off the grains as a result of threshing, winnowing or other handling connected with storage, loading or transport.
Chapter 11 refers to “products of the milling industry” which, according to the Customs Cooperation Council Explanatory Note on that chapter are derived from cereals classified in Chapter 10 which have undergone milling or the treatments mentioned in the various headings of Chapter 11.
Pake & Haentjens BV points out that the cereals in question have not been milled. As regards other treatments, it states that, on the basis of the general rules for the interpretation of the tariff, only the treatments mentioned in the tariff headings themselves may be taken into account. Clipping is not included in the wording of the headings in Chapter 11. Clipped oats may therefore only be classified in a heading in Chapter 11 if they have undergone one of the treatments mentioned therein, which is not the case here.
The second reason for the inapplicability of heading 11.02 is the fact that the oats in question have not undergone any of the treatments listed in that heading. Since, according to General Rule A for the interpretation of the tariff, the terms of the headings are determinative for legal purposes, oats which have not undergone any special clipping treatment may not be classified in heading 11.02.
Finally, Palte & Haentjens BV stresses that subheading 11.02 B refers to “hulled grains (shelled or husked), whether or not sliced or kibbled” and that hulling is defined in the case-law of the Court as an operation whereby the pericarp is wholly or partially removed. The grains referred to in the questions submitted have not undergone any such treatment and are not therefore hulled grains.
For the reasons given above, Palte & Haentjens BV is of the opinion that the goods in question are absolutely excluded from Chapter 11 of the Common Customs Tariff and may therefore be classified only in heading 10.04 thereof.
Such an answer to the first question renders the second question devoid of purpose. However, in so far as it may be relevant, Palte & Haentjens BV states that in its opinion a consignment of ordinary oats may be regarded as a consignment of clipped oats where more than 75% of the grains have lost their tips and where the consignment contains a low percentage by weight (2 to 3%) of impurities, including the tips.
As regards the third question, Palte & Haentjens BV, having stated that it is unconnected with the two preceding questions and moreover is irrelevant to the legal problem raised, replies that tariff subheading 11.02 B I (a) 2 (bb) is inapplicable because hulling is always accompanied by clipping.
The Commission concedes that there may be a temptation to say, in response to the first question, that since the goods concerned have not undergone any treatment after threshing, they must be classified in heading 10.04 of the Common Customs Tariff. However, it considers such reasoning to be fallacious. It points out that, according to the case-law of the Court, the classification of a product in the Common Customs Tariff must be based on the objective characteristics and properties of that product as defined by the terms of the headings and of the notes on the Common Customs Tariff and as determined by the customs authorities when the import declaration is made.
Oat grains which, upon importation, no longer have tips display the objective characteristics of clipped oats. The manner in which the grains lost their tips is of no significance. Oat grains whose tips have been broken off are, just like grains whose tips have been removed by a clipping machine, of greater financial value than ordinary oats, since, in consequence of the elimination of residues, their food value is greater.
The Commission adds that the oats in question probably lost a large proportion of their tips during threshing in combine harvesters, a new technical development which the Common Customs Tariff has not yet taken into account.
In view of the foregoing, the Commission is of the opinion that oat grains which have lost their tips must in all cases be classified as clipped oats. It points out that the Committee on Nomenclature shares the same view, having at its meeting on 28 October 1980, approved the inclusion, in the Explanatory Notes on subheading 11.02 B I (a) 2 (aa) of the Common Customs Tariff, an addendum worded as follows: “Also included under this subheading are oats which are simply threshed after harvesting but from which the tips have broken off. The grains still retain their husk.”
Having replied in the affirmative to the first question, the Commission goes on to deal with the second question, in which the Tariefcommissie asks what percentage of clipped grains must be present in a consignment of oats to enable it to be regarded as a consignment of clipped oats. The Commission takes the view that as a general rule clipped grains may be regarded as the component bestowing its essential character on a consignment of oats if they represent more than half of the grains therein. It is moreover of the opinion that the fact that the broken tips remain in the consignment does not influence the classification, provided of course that doubts are not thereby raised whether the consignment of oats displays the essential character of “clipped oats”.
As regards the answer to be given to the third question, the Commission points out that, as early as 1958, the German Government had observed that during clipping a part of the husk is not removed. The Committee on Customs Cooperation then stated that the French term “monder” fto hull] may be interpreted to include clipping. Following that reasoning, “clipping” must therefore be regarded as an operation covered by the generic term of “mondage” [hulling]. The Commission infers therefrom that by adopting the term “clipped oats” in the Common Customs Tariff, the Council wished to make it clearly understood that oat grains must not be classified in tariff heading 11.02 B only if they have been “mondés” [hulled] in the normal sense of the term, but also if they have been “mondés” in the sense of merely having been clipped.
Having regard to the foregoing considerations, the Commission suggests that the Court reply as follows to the questions submitted by the Tariefcommissie:
“1. Oat grains which have no tips when imported must be classified in subheading B I (a) 2 (aa) of heading 11.02 even if, after harvesting, they have merely been threshed, stored, loaded and transported. 2. A consignment of oats composed partly of clipped grains and partly of undipped grains must be classified in subheading B I (a) 2 (aa) of heading 11.02 if more than half the grains are clipped. The fact that there are broken-off tips in the consignment does not affect this classification provided that the tips do not deprive the product of the essential character of clipped grain. 3. The goods must be classified in subheading B I (a) 2 (aa) of heading 11.02 in those cases where the oat grains are merely lacking tips in the sense referred to in answer No 1 above; oat grains from which the husk has been completely removed (“mondes” [hulled]) must be classified in subheading B I (a) 2 (bb) of that heading.”
Ill — Oral procedure
At the sitting on 18 February 1982 oral argument was presented by I. H. Wildeboer for Palte & Haentjens BV and by T. van Rijn, for the Commission of the European Communities, acting as Agent. On that occasion the Court asked the Commission to provide statistics concerning the barley imported into the Community under heading 10.04 of the Common Customs Tariff and the Commission did so by letter of 25 February 1982.
The Advocate General delivered her opinion at the sitting on 1 April 1982.
Decision
1. By judgments of 3 July 1981, received at the Court on 13 July 1981, the Tariefcommissie [administrative court of last instance in revenue matters] of the Netherlands referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty three questions concerning the interpretation of heading 10.04 and subheading 11.02 B I (a) 2 (aa) of the Common Customs Tariff.
2. The questions arose in two actions concerning the tariff classification of consignments of oats imported into the Netherlands from Australia by the forwarding agents Pake & Haentjens BV, which declared them as “oats” classified in heading 10.04 of the Common Customs Tariff, whereas the Inspecteur der Invoerrechten en Accijnzen [Inspector of Customs and Excise] subsequently took the view that the goods in question were “clipped oats” and should be classified in subheading 11.02 B I (a) 2 (aa) of the Common Customs Tariff.
3. Heading 10.04 of the Common Customs Tariff (“oats”) is in Chapter 10 of the tariff which according to the introductory note thereto, covers only “those grains which have been neither hulled nor otherwise worked”. Subheading 11.02 B (a) 2 (aa) on the other hand is in Chapter 11 which relates inter alia to “products of the milling industry” and within that chapter forms part of heading 11.02 B concerning “hulled grains, (shelled or husked) whether or not sliced or kibbled.”
4. The questions submitted to the Court by the Tariefcommissie are as follows:
“1. Should oat grains which after being harvested are simply threshed, stored, loaded and transported, as a result of which the tips are broken off, be classified in heading 10.04 of the Common Customs Tariff or in subheading B I (a) 2 (aa) of heading 11.02?
2. If the product described in Question 1 should be classified in subheading B 1 (a) 2 (aa) of heading 11.02, does there then apply to such a consignment of oat grains, consisting partly of clipped and partly of undipped grains, a percentage of clipped grains above which the consignment must be classified in subheading B I (a) 2 (aa) of heading 11.02 and below which it must be classified in heading 10.04? Does the fact that there are broken-off tips in the consignment have any effect on classification?
3. If it is assumed that the hulling of oat grains results in the grains being clipped as well because the husk or seed-coat, of which the tips form part, is removed in hulling, how should the two further subdivisions of subheading B I (a) 2 of heading 11.02, Hulled oats, namely “(aa) Clipped oats” and “(bb) Other”, then be defined in relation to one another?”
5. In the first question the Court is asked to indicate the correct tariff classification for oat grains from which the tips have been broken off following threshing, storage, loading and transport.
6. Such grains, which at the time of the import declaration display all the objective properties and characteristics of clipped oats, fall within subheading 11.02 B I (a) 2 (aa) of the Common Customs Tariff and no check need be carried out to establish how the tips were broken off. Such a check is not compatible with the exigencies of the efficient accomplishment of customs impon formalities and moreover would be prohibited as causing products having the same objective properties and characteristics to be treated differently according to whether or not those properties and characteristics were the result of a specific process.
7. The first question must therefore be answered to the effect that oat grains whose tips have been broken off must be classified under subheading 11.02 B 1 (a) 2 (aa) of the Common Customs Tariff.
8. In the second question the Court is asked to indicate the criteria upon which must be based the classification of a consignment of oats composed partly of clipped and partly of undipped grains and to state whether the presence of broken-off tips in the consignment has any effect on classification.
9. Clipped grains as such fall within subheading 11.02 b I (a) 2 (aa) of the Common Customs Tariff; undipped grains fall within heading 10.04. Recourse must therefore be had to General Rule No 3 (b) for the Interpretation of the Nomenclature of the Common Customs Tariff, concerning mixtures, according to which such products are to be “classified... as if they consisted of the material... which gives the goods their essential character”. It may reasonably be considered that clipped oats give a mixed consignment its essential character where the clipped grains exceed 50 % by weight of the total consignment.
10. However, the fact that the broken-off tips remain within the consignment deprives it of its character of a mixture since in such circumstances the clipped grains can no longer be regarded as “clipped oats” within the meaning of subheading 11.02 B I (a) 2 (aa) of the Common Customs Tariff.
11. In fact, as is apparent from paragraph (7) of the Explanatory Note to heading 11.02 in the Customs Cooperation Council Nomenclature, “Clipped grain (principally oats)” is “grain which has been clipped to facilitate ingestion by livestock”. That definition necessarily presupposes that the broken-off tips have been separated from the clipped grains. If that were not the case, the higher nutritional value obtained by clipping, which is the property distinguishing clipped oats from undipped oats, would be eliminated.
12. A consignment of oats containing the broken-off tips may not be marketed as “clipped grain” for use as animal feed until it has undergone a process for the removal of those tips. It is therefore neither realistic nor commercially practical to classify such a consignment in subheading 11.02 B I (a) 2 (aa) of the Common Customs Tariff if that process has not been carried out.
13. Thus the amendment which according to the Commission was made to the Explanatory Notes to the Common Customs Tariff in November 1980, so as to bring within subheading 11.02 B I (a) 2 (aa) “oat grains which have only been threshed after harvesting and, although retaining their husks or bract, have had their tips broken off” may be interpreted as meaning that the broken-off tips must be separated from the remainder of the consignment, since only that interpretation allows a real distinction to be drawn between clipped oats and undipped oats.
14. It follows from the foregoing considerations that clipped grains may be regarded as clipped oats only if the quantity of broken-off tips with which they are mixed is very low in relation to the quantity of clipped grains, as would be the case following a process specifically intended to remove the tips. On the other hand, if the quantity of broken-off tips is not negligible even clipped grains are to be regarded as unprocessed oats.
15. The answer to the second question must therefore be that a consignment of oats consisting partly of clipped and partly of undipped grains must be classified under subheading 11.02 B I (a) 2 (aa) if the clipped grains exceeded 50% by weight of the total consignment and that a consignment of oats consisting partly of clipped grains, partly of undipped grains and partly of broken-off tips must be classified under heading 10.04 of the Common Customs Tariff if the quantity of broken-off tips is not negligible in relation to that of the clipped grains.
16. As regards the third question, it should be noted that, as the Common Customs Tariff now stands, a reply to that question is of no practical importance, since the rate of duty prescribed by the Common Customs Tariff is the same for subheading 11.02 B I (a) 2 (aa) as for subheading 11.02 B I (a) 2 (bb). It should nevertheless be pointed out, in so far as may be relevant, that clipping constitutes a kind of less extensive hulling, which removes only the extremities from the grains and not a large part or all of the pericarp. It follows that subheading 11.02 I (a) 2 (aa) refers only to clipped grains whereas subheading 11.02 B (a) 2 (bb) refers to oat grains which have been subjected to a hulling process which is more extensive than mere clipping.
17. It is appropriate therefore to answer the third question to the effect that oat grains which have merely been clipped must be classified under subheading 11.02 B I (a) 2 (aa); oat grains which have undergone more extensive hulling must be classified under subheading 11.02 B I (a) 2 (bb).
Costs
18. 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 proceedings pending before the national court, the decision on costs is a matter for that court.
On those grounds, THE COURT (First Chamber) in answer to the questions referred to it by the Tariefcommissie by judgment of 3 July 1981, hereby rules:
1 Oat grains whose tips have been broken off must be classified under subheading 11.02 B I (a) 2 (aa) of the Common Customs Tariff.
2 A consignment of oats consisting partly of clipped and partly of unclipped grains must be classified under subheading 11.02 B I (a) 2 (aa) if the clipped grains exceed 50% by weight of the total consignment; a consignment of oats consisting partly of clipped grains, partly of unclipped grains and partly of broken-off tips must be classified under heading 10.04 of the Common Customs Tariff if the quantity of broken-off tips is not negligible in relation to that of the clipped grains.
3 Oat grains which have merely been clipped must be classified under subheading 11.02 B I (a) 2 (aa); oat grains which have undergone more extensive hulling must be classified under subheading 11.02 B I (a) 2 (bb).