JUDGMENT OF 23. 9. 1982 — CASE 237/81 ALMADENT v HAUPTZOLLAMT MAINZ

In Case 237/81 REFERENCE to the Court under Article 177 of the EEC Treatv bv the Finanzgericht Rheinland-Pfalz [Finance Court, Rhineland-Palatinate], for a preliminary ruling in the action pending before that court between

THE COURT (Second Chamber) composed of: O. Due, President of Chamber, A. Chloros and F. Grévisse, Judges, Advocate General : Sir Gordon Slynn Registrar: H. A. Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the observations submitted to the Court may be summarized as follows:

I — Facts and written procedure

It appears from the order making the reference to the Court that the plaintiff in the main action cleared through customs and put into free circulation goods from the USA, declared as “modelling plaster”. The defendant, the Hauptzollamt [Principal Customs Office] Mainz, assigned to them the code number 3819 740 90 (tariff subheading 39.19 U) and levied customs dunes at the rate of 14.4 =/s.

The plaintiff objected that the goods were a refractor. embedding composition (moulding compound) and the Hauptzollamt thereupon had a sample of the goods, taken after thai obiection had been raised, examined by the Zolltechnische Prufungs- und Lehranstalt [Customs Laboratory and Training College] (hereinafter referred to as “the Laboratory”), Frankfurt am Main. The analysis certificate and report of the Laboratory dated 3 June 1980 described the goods as

“Goods put up in sets which the results of the chemical analysis show to consist of the following components: 1. A white, odourless powder composed of silicic acid, ammonium phosphate, magnesium oxide and graphite packed in sealed bags having a net weight of 60 grams (Complete Investment); 2. A clear, light red liquid composed of coloured water-glass put up in a plastic bottle containing 946 millilitres (Complete Liquid Concentrate); 3. A rolled-up strip of light grey asbestos board about 35 millimetres wide (asbestos tape); and 4. A plastic measuring cylinder calibrated from 1 to 40 millilitres”.

In accordance with General Rule 3 (b) for the Interpretation of the Nomenclature of the Common Customs Tariff, the Laboratory classified the goods as if they consisted of the component which gave the goods their essential character. That component is the powder called “Complete Investment” which when mixed, so as to form a paste, with 10.5 millilitres of the “Complete Liquid Concentrate” diluted with the same volume of water forms 60 grams of the embedding composition. The report concluded that the goods put up in sets should be classified in tariff subheading 38.19 U (code number 3819 740 90). The report did not accept that the goods were a refractory composition within the meaning of tariff subheading 39.19 K on the ground that according to the Explanatory Notes to that tariff subheading a pyroscopic resistance of at least 1500 oC determined in accordance with Recommendations R 528-1966 and R 1146-1969 of the International Organization for Standardization (known as “the ISO”) is required; the imported goods did not have that characteristic.

After its objection had been rejected by a decision of the customs authorities of 4 JulY 1980, the plaintiff brought an action before the Finanzgericht to have the goods, put up in sets, classified in tariff subheading 38.19 K (code number 3819 240 90) attracting a rate of duty applicable to nonmember countries of 3.2 % and the contested customs notice of 16 November 1979 amended accordingly.

The Hauptzollamt bases its contrary view on the Explanatory Notes to the Common Customs Tariff relating to tariff subheading 38.19 K. There it is stated: “One of the essential characteristics of the refractory compositions of this subheading is thai thev show pyroscopic resistance of 1 5 CC at least (determined in accordance with ISO Recommendations R52S-196ö and R 1146-1969)”. Since, according to the Hauptzollamt, the prepared embedding composition Complete Investment unquestionably does not have that characteristic it must be classified in tariff subheading 38.19 U (code number 3819 740 90).

The decision in the case depends therefore on whether the imported goods put up in sets must be classified in tariff subheading 38.19 K or 38.19 U. Tariff subheading 38.19 K of the Common Customs Tariff covers “refractory cements, mortars and similar compositions” without defining what is to be understood by “refractory”. Therefore the Finanzgericht Rheinland-Pfalz [Finance Court Rhineland Palatinate] considered that a reference to the Court of Justice of the European Communities for a preliminary ruling was necessary in order to clarify the interpretation of tariff subheading 38.19 K in regard to the concept of “pyroscopic resistance”.

It thus referred the following question to the Court of Justice:

“Must tariff subheading 38.19 K of the 1979 Common Customs Tariff be construed as meaning that only products having a pyroscopic resistance of at least 1500 degrees Centigrade determined in accordance with ISO Recommendations R 528-1966 and R 1146-1969 may be classified as ‘refractory’ products for the purposes of that tariff subheading (depending on constituent material and intended use)?”

The order making the reference was received at the Court Registry on 27 August 1981.

In pursuance of Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted on behalf of the plaintiff by Mr Redake and by the Commission of the European Communities, represented by Mr Karpenstein, Legal Adviser to the Commission, acting as Agent, assisted by R Streckmann, tax consultant, Hamburg.

On hearing the report of the Judge-Rapporteur and the views of the Aovocate General, the Court, by order of 20 January 1982, decided to assign the case to the Second Chamber and to open the oral procedure without any preparatory inquiry.

II — Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

1. The company almadent, the plaintiff in the main action, states that the question raised by the court making the reference reduces the dispute to the issue of how the term “refractory” appearing in tariff subheading 38.19 K of the Common Customs Tariff should be interpreted. In almadent's view such a formulation of the question might be misleading. In that connection it points out that the Explanatory Notes to the Common Customs Tariff relating to Group K provide in the first paragraph thereof that “one of the essential characteristics of the refractory compositions of this subheading is that they show pyroscopic resisience of 1500 oC at least (determined in accordance with ISO Recommendations R 528-1966 and R 1146-1969)”. It points out that those Explanatory-Notes provide, two paragraphs further on, that: It goes on to stress that the action pending before the Finanzgericht concerns the tariif classification of one of those siiica-based refractory compositions used for making moulds for dental purposes b\the lost-wax process, namely the product Complete Investment by the Jelenko company, which it has imported for a number of years almadent submits that the goods, put up in sets, are a phosphate-bond refractory moulding compound (embedding composition) for the casting of precious metals for dental purposes. Wax models are embedded in the moulding compound and the metal, heated to about 1400 degrees Centigrade, is then poured into the mould. In view of the use of the high-temperature-resistant embedding composition for the purposes of casting high-melting alloys having melting points substantially below 1500 degrees Centigrade the pyroscopic resistance of 1500 degrees Centigrade required by the ISO recommendations is unnecessary. Therefore the reference to the ISO recommendations for tariff classification purposes is in practice inappropriate. In accordance with its characteristics and its intended use the Complete Investment composition should be treated as a refractory composition within the meaning of tariff subheading 38.19 K. almadent sutes that it is common ground that none of the products known on the German market for the making of silica-based moulds for dental purposes by the lost-wax process have undergone tests to establish whether they show a pyroscopic resistance of 1500 degrees Centigrade, given the fact that for the making of moulds for dental purposes using the lost-wax process it is neither necessary nor appropriate to apply that degree of heat. For the purpose of these proceedings it refers, on this point, to the explanations given by a technical expert, Doctor H. Marx, Professor and Director of the Institut für zahnärztliche Werkstoffkunde und Technologie der Klinik und Poliklinik für Zahn-, Mundund Kieferkrankheiien [Institute for Dental Materials and Technology of the Clinic for Tooth, Mouth and Jaw Diseases] at Johannes-Gutenberg-University, Mainz. It is stated in the conclusions of that expert's report that the description of the product Complete Investment as “modelling plaster” is unjustified because it is materially incorrect and, in view of the composition and use of the product, which for years has been used for making moulds for dental purposes, it must be assimilated in principle to a refractory composition, since it may he used for the casting of high-meliing alloys having melting points between 900 and 1260 CC, even if it does not completely achieve a pyroscopic resistance of 1500 oC required by the ISO recommendation. almadent considers that it is clearly demonstrated both by the practice adopted until now by the customs authorities and by the Explanatory Notes mentioned above that silica-based refractory compositions such as the product Complete Investment used for the making of moulds for dental purposes by the so-called lost-wax process are also included in subheading K whether or not a pyroscopic resistance of 1500 oC is achieved. That provision would otherwise be meaningless since all the products known on the German market might well be among those which are precluded from the benefit of tariff subheading K .... although this has not been verified for the reasons set out above. Finally, almadent considers that it does not promote the cutting of costs in the health sector to levy high customs duties on products such as Complete Investment: the plaintiff company would be compelled, in common with competing companies, to pass on costs of more than 10 % imposed on them, which can only lead io a further increase in the costs of production of dentures. According to the plaintiff in the main action that is a valid reason for classifying those products under subheading K and for allowing them as a result to benefit from a more favourable system.

“Also included in this subheading are silica-based refractory compositions used for making moulds for dental purposes or for jewellery by the lost-wax process”.

2. The Commission of the European Communities refers to the definition of pyroscopic resistance as it appears in that part of the Explanatory Notes to the Customs Tariff of the European Communities which relates to tariff subheading 38.19 K. In the Commission's view the question raised by the Finanzgericht enables the issue to be confined to the question whether the term “refractory” appearing in the wording of subheading 38.19 K should be construed as a technical criterion which is fixed once and for all or whether it is merely necessary for a product to be able to tolerate temperatures corresponding to the use for which it is intended: in other words whether the term “refractory” must be construed absolutely or relatively. The Commission believes that the former acceptation of the term is the only possible one. The Commission acknowledges that the term “refractory” may commonly be used of products which show resistance to heat of less than 1500 oC. However, in the Commission's view that common acceptation of the term “heat-resistant” ceases to be valid where it is sought to lay down a criterion for making a valid distinction between products summarily described as pyroscopic. From a scientific and technical point of view that term must therefore be reserved to nonmetallic products which can tolerate temperatures of at least 1500 oC. In that connection the Commission cites several definitions of elements displaying pyroscopic resistance from encyclopaedias and technical dictionaries which state that an ability to resist a temperature of at least 1500 oC is an essential feature of that concept. The Commission adds that, since the result of the methods for testing pyroscopic resistance vary, however, according to the conditions under which they are carried out (speed of heating, form of the sample), the ISO has drawn up detailed recommendations describing the conditions under which such experiments should be conducted. In that respect the Commission stresses that the range of temperatures applied begins at 1500oC, that temperature being considered as the threshold of pyroscopic resistance, as is borne out by the fact that ISO Recommendation R 528-1966 refers expressly to refractory products and that ISO Recommendation R 1146-1969 mentions a pyroscopic resistance of 1500 oC. The Commission points out that in the Explanatory Notes to tariff subheading 38.19 K the Community adopted the latter definition of pyroscopic resistance which is uniformly recognized in scientific and technological circles. It maintains in that connection that to adopt a temperature threshold lower or higher than 1500 oC in order to define pyroscopic resistance for the purposes of the Common Customs Tariff would, regard being had to the consensus of views existing within scientific and technical circles, be arbitrary and unjustifiable and would give rise to uncertainties and disputes in the carrying out of customs formalities. In the Commission's view, an approval based on relative factors as advocated by the plaintiff in the main action might be acceptable to traders but would be of little use for the purposes of the interpreting the Common Customs Tariff which may only be done on the basis of objective and uniform criteria as is demonstrated by the decision of the Court of Justice in its judgment of 28 March 1979 in Case 158/78, Biegi v Hauptzollamt Bochum [1979] ECR 1103, (last sentence of paragraph 8 of the decision ai p. 1118). The Commission also relies on the case-law of the Court according to which the classification of a product should in principle be based on its objective characteristics (cf. Opinion of Mr Advocate General Warner in Case 11/79 Cieton v Inspecteur der Invoerrechten en Accijnzen [1979] ECR 3068, especially at p. 3088, top right-hand column) and properties (cf. judgment of the Court of 10 December 1975 in Case 53/75 Belgium v Vandertaelen [1975] ECR 1647, paragraph 9 of the decision at p. 1654). Since the characteristic of products coming within subheading 38.19 K is their pyroscopic resistance, that property woula be only capable of being ascertained objectively if it were expressed in terms of the measurable magnitude of 1500 CC mentioned above, thereby using a generally recognized figure. In adopting this approach, the Explanatory Notes did not amend the Common Customs Tariff, but they interpreted and elucidated it within permissible limits. In the Commission's view, although the product in question, moulding compound, shows resistance to heat, it cannot, given its intended use and the technical process in which it is used, be described as refractory since in any event it does not have to resist temperatures higher than 1400 oC. The Commission further remarks that the third paragraph of the Explanatory Notes to tariff subheading 38.19 K which states that also included in that subheading are “silica-based refractory compositions used for making moulds for dental purposes” does not mean that compounds for making moulds for dental purposes or for jewellery automatically come under that subheading. That would only be possible if they were “refractory” in the sense in which that term is used in the first paragraph of the Explanatory Note to subheading 38.19 K, that is to say if they were to show a resistance to heat of at least 1500 oC. If it were otherwise, the Commission stresses, the third paragraph would not mention “refractory compositions” but simply moulding compounds, the term “refractory” retaining the same meaning as it has in the first paragraph, as is demonstrated by the negative reference which is made to it in the fourth paragraph. (“This subheading does not include non-refractory preparations such as ...”). In the Commission's view the purpose of the third paragraph of the Explanatory-Note is to state that the term “refractory compositions” covers not merely materials such as cement and mortar which are handled in bags and in large quantities but also those materials which are processed in very small quantities, for instance in laboratories used by dental technicians and jewellers. Its purpose is therefore first and foremost to prevent an incorrect interpretation of the term “similar” used in subheading 38.19 K. The Commission considers that the product in question is indeed manufactured from silica which is in itself a refractory substance but through the addition of other materials its resistance to heat is reduced below the threshold of pyroscopic resistance. The result of that consideration is to prevent the product from being classified in subheading 38.19 K and to cause it to be classified under subheading 38.19 U of the Common Customs Tariff. The Commission therefore proposes that the Court should give the following reply to the Finanzgericht Rheinland-Pfalz:

Refractory compsitions covered by subheading 38.19 K of the Common Customs Tariff must have a pyroscopic resistance of at least 1500 oC. Pyroscopic resistance is to be determined in accordance with ISO Recommendations R 528-1966 and R 1146-1969.

III — Oral procedure

The plaintiff in the main action, represented by Claus-Michael Redeke, Rechtsanwalt, Mainz, and the Commission of the European Communities, represented by its Legal Adviser, Peter Karpenstein, presented oral argument at the sitting on 17 June 1982. The representatives of the plaintiff and the Commission, as well as Mr Staub, the Commission's expert, replied to the questions put to them by the Court.

The Advocate General delivered his opinion at the sitting on 8 July 1982.

Decision

1. Bv order of 13 August 1981, which was received at the Court on 11 August 1981, the Finanzgericht Rheinland-Pfalz [Finance Court, Rhineland-Palatinate] referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question relating to the interpretation of the concept “refractorv compsitions” appearing in subheading 38.19 K of the Common Customs Tariff in the version in force in 1979 (Official Journal 1978, L 335 p. 1) for the purpose of the tariff classification of a silica-based product, used for making moulds for dental purposes by the lost-wax process, known as “Complete Investment” and imponed from the United States by the plaintiff company in the main action.

2. The Hauptzollamt [Principal Customs Office] Mainz classified that product, which on its importation was declared as “modelling plaster”, under subheading 38.19 U, “Other”, giving rise to the payment of a duty of 14.4%.

3. According to the plaintiff in the main action, the product in question ought to be classified under subheading 38.19 K, “Refractory cements, mortars and similar compositions”, even though it does not show a pyroscopic resistance of at least 1500 oC, as required by the first paragraph of the Explanatory Note to the Common Customs Tariff relating to that subheading. It argues that the concept “refractory compositions” may be appropriate for a pyroscopic resistance which is particular to the products referred to in that paragraph, in relation to the use to which they are put, and which may be lower than 1500 oC. Such a high degree of pyroscopic resistance is neither necessary nor appropriate for products used for making moulds for dental purposes by the lost-wax process.

4. The Hauptzollamt maintains on the other hand that the fact that the product in question shows a pyroscopic resistance of less than 1500 oC deprives it of its “refractory” nature for the purposes of the first paragraph of the Explanatory Note to the same subheading 38.19 K which, by reason of its generality, must also apply to the products referred to in the third paragraph of the Explanatory Note in question.

5. In order resolve that dispute the Finanzgericht referred the following question to the Court:

“Must tariff subheading 38.19 K of the 1979 Common Customs Tariff be construed as meaning that only products having a pyroscopic resistance of at least 1500 oC determined in accordance with ISO Recommendations R 528-1966 and R 1146-1969 may be classified as ‘refractory’products for the purposes of that tariff subheading (depending on constituent material and intended use)?”

6. It is stated in the Explanatory Note to subheading 38.19 K:

“One of the essential characteristics of refractory compositions of this subheading is that they sho* a pyroscopic resistance of 1500 oC at least (determined in accordance with ISO Recommendations R 528-1966 and R 1146-1969)

This subheading includes certain preparations composed of refractory materials, such as chamotte ...

Also included in this subheading are silica-based refractory compositions used for making moulds for dental purposes or for jewellery by the lost-wax process...”.

7. According to the case-law of the Court, the Explanatory Notes to the Common Customs Tariff constitute an important means of interpretation which makes it possible to define or clarify the scope of the various tariff headings or subheadings.

8. In that respect it should be stated that the decisive criterion for the tariff classification of products must generally be looked for in the description of their characteristics and objective properties contained in the wording of Common Customs Tariff headings and the notes relating thereto.

9. The concept “refractory compositions” appearing in subheading 38.19 K is to be understood as requiring a pyroscopic resistance of 1500oC, which was laid down in the Community Explanatory Notes on the basis of the ISO recommendations and, in that respect, supplies the element of certainty needed to ensure the uniform application of the Common Customs Tariff.

10. The reference in the third paragraph to silica-based products used for making moulds for dental purposes or for jewellery is merely an indication of various products which come within subheading 38.19 K only if they satisfy the definition of refractor) composition given in the first paragraph of the Explanatory Note to that subheading.

11. It follows that subheading 38.19 K of the 1979 Common Customs Tariff is to be interpreted as meaning that only products having a pyroscopic resistance of at least 1500 degrees Centigrade may be classified amongst the “refractory compositions” mentioned in that subheading.

Costs

12. The costs incurred by the Commission of the European Communities which submitted observations to the Court, are not recoverable. As the 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)