Report for the Hearing in Case C-265/89

I — The facts

A — Relevant legislation

1. For the purposes of this case the following are the relevant headings of the Common Customs Tariff, as set out in the annex to Council Regulation (EEC) No 3618/86 of 24 November 1986 amending Regulation (EEC) No 3331/85 amending Regulation (EEC) No 950/68 on the Common Customs Tariff (Official Journal 1986 L 345, p. 1): Heading 12.04: ‘Sugar beet, whole or sliced, fresh, dried or powdered; sugar cane: A. Sugar beet I. fresh II. dried or powdered B. Sugar cane’; Heading 23.03: ‘Beet pulp, bagasse and other waste of sugar manufacture; brewing and distilling dregs and waste; residues of starch manufacture and similar residues: A. ... B. Other: I. Beet pulp, bagasse and other waste of sugar manufacture’.

2. By Regulation (EEC) No 1388/85 of 24 May 1985 classifying goods under subheading 12.04 A of the Common Customs Tariff (Official Journal 1985 L 140, p. 7) the Commission defined the respective scope of subheadings 12.04 A and 23.03 B I by reference to a fixed limit for sucrose content of 10%. Article 1 of that regulation provides as follows:

‘Sliced sugar beet, partly de-sugared, whether or not pelletized either directly by compression or by the addition of a binder (up to 3% by weight), having a sucrose content (including any sucrose contained in the binder) exceeding 10% by weight by reference to the dry matter, shall be classified in the Common Customs Tariff under subheading:

12.04 —. Sugar beet whole or sliced, fresh, dried, or powdered; sugar cane:

A. Sugar beet.’

B — Background to the dispute

3. Gebr. Vismans Nederland BV (hereinafter referred to as ‘Vismans’), whose registered office is in Amsterdam, imported into the Netherlands sliced sugar beet consisting of the residue of the sugarextraction process, commonly known as ‘beet pulp’. The slices had been dried, compressed and pelletized using a binding agent. The goods are used as animal feed or as raw material for animal feed. Sugar beet contains 60 to 80% sucrose calculated by reference to the dry matter. Before processing, the slices have the same sucrose content. After processing, their sucrose content is generally around 6 to 7%. Whilst it is technically possible to extract all the sucrose from the slices, it is not economically feasible to do so. In unfavourable conditions (for example when the sugar beet is frozen) the pulp may retain a sucrose content of 10%.

4. According to the national court, the goods imported by Vismans have the following objective characteristics: (i) they are derived from sliced sugar beet and form the residue of a completed process of sugar extraction; (ii) they contain 12% sucrose, calculated by reference to the dry matter, including the sucrose in the binder; (iii) they have been pressed into pellets; (iv) in the current state of technology, extraction of further sugar from them would be uneconomic.

5. At the time of their importation the goods were classified under subheading 23.03 B I of the Tariff. After various analyses the sucrose content was found to be 12%, with the result that the goods were classified under subheading 12.04 A. Consequently, Vismans was asked to pay HFL 414024 by way of agricultural levies. Vismans appealed against the revised classification. Following an unsuccessful administrative appeal it appealed to the Tariefcommissie.

C — The preliminary questions

6. The Tariefcommissie considered that the dispute raised questions concerning the interpretation and validity of a provision of Community law; consequently, by a decision of 11 August 1989 it stayed the proceedings before it and requested the Court of Justice, pursuant to Article 177 of the EEC Treaty, to give a preliminary ruling on the following questions:

‘(1) Do the goods in issue, which contain 12% sucrose but must be regarded as pelletized “beet pulp” which has been de-sugared as far as economically feasible, nevertheless fall under the term “partly de-sugared sugar beet” in Article 1 of Commission Regulation (EEC) No 1388/85 of 24 May 1985?

2) If so, is the regulation referred to in Question 1 valid?’

7. In the order for reference the Tariefcommissie, referring to the objective characteristics of the goods, states that in previous decisions it has classified beet pulp pellets under subheading 23.03 B I of the Tariff even where their sucrose content exceeded 10%. The Tariefcommissie's view is based, first, on the fact that the extraction of sugar has been so complete that further extraction would be uneconomic and that the goods have been pressed into pellets and, secondly, on the fact that the goods in question have undergone more extensive processing than the types of processing referred to in subheading 12.04 A. If none the less the term ‘partly de-sugared sugar beet’ contained in Article 1 of Regulation No 1388/85 must be understood as including goods such as those imported by Vismans, the Tariefcommissie questions the validity of the regulation. According to the Tariefcommissie, such an interpretation would amount in substance to an amendment to the wording of subheading 12.04 A of the Tariff in so far as products which in normal linguistic usage and in commercial terms can be described only as (pelletized) ‘beet pulp’ are regarded ‘as sugar beet’ and classified accordingly. The Tariefcommissie states further that the validity of the regulation may be questioned having regard to the extent of the powers conferred on the Commission by Council Regulation (EEC) No 97/69 of 16 January 1969 on measures to be taken for the uniform application of the nomenclature of the Common Customs Tariff (Official Journal, English Special Edition 1969 (I), p. 12).

II — The procedure

8. The order for reference was registered at the Registry of the Court on 23 August 1989.

9. Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted by: Gebr. Vismans Nederland BV, represented by D. G. van Vliet; the Commission of the European Communities, represented by R. Barents, a member of its Legal Department.

10. On hearing the Repon of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

11. By a decision of 14 March 1990 the Court decided, pursuant to Anicie 95(1) and (2) of the Rules of Procedure, to assign the case to the Second Chamber.

III — Summary of the written observations submitted to the Court

12. Vismans shares the Tariefcommissie's view that the imported goods fall under tariff Heading 23.03. That is in conformity with the Customs Cooperation Council Explanatory Notes relating to subheading 23.03 B I of the Cooperation Council nomenclature, as they stood at the time of the facts. According to those Notes: The heading also covers products which have been pelletized either directly by compression or by the addition of a binder. According to the Cooperation Council's Explanatory Notes concerning Heading 12.04, that heading covers ‘sugar beet, in the forms specified in the headings, and sugar cane’. Sugar beet has a sucrose content of 60 to 80%. The imported goods, derived from sugar beet, are the residue of a completed sugarextraction process and should be classified under tariff Heading 23.03.

‘Beet pulp is the residue which remains after the sugar has been extracted from the root of the sugar beet.’

13. Vismans states further that, since Regulation No 1388/85 is merely intended to distinguish between products classified under subheadings 12.04 A and 23.03 B I, it may not run counter to the wording of the subheadings. If Regulation No 1388/85 applied to the products in question, it would conflict with Regulation No 97/69, according to which a regulation on classification is intended to specify the content of the tariff headings without, however, amending the text thereof. Moreover, Regulation No 1388/85 would be invalid since it would be at variance with the Customs Cooperation Council nomenclature. Vismans concludes from the judgments of the Court in Case 38/75 Nederlandse Spoorwegen v Inspecteur der invoerrechten en accijnzen [1975] ECR 1439, Case 158/78 Biegi v Hauptzollamt Bochum [1979] ECR 1103 and Case 37/75 Bagusat KG v Hauptzollamt Berlin-Packhof [1975] ECR 1339 that the classification is invalid in so far as it cannot be reconciled with the wording of the Customs Cooperation Council nomenclature.

14. Vismans claims that the wording of tariff Headings 12.04 and 23.03 does not allow a specific sucrose content to be adopted as a criterion for distinguishing between the two headings. From a technical viewpoint it is not necessary to lay down a specific limit, since it is easy to establish that the goods in question consist of pulp whose remaining sugar content cannot be extracted economically. If the criterion of sucrose content were adopted, the limit should be much higher than 10%, since it is not disputed that beet pulp may have a sucrose content of up to 15 or 16%.

15. Vismans states that the high levy applicable to products falling under tariff Heading 12.04 was introduced in order to protect production of sugar beet within the EEC and with the objective of ensuring efficient and economically justified sugar production. Such a levy is necessary only for sugar beet whose sugar content can be extracted economically. By imposing an extremely high levy on products covered by tariff Heading 12.04 and no levy on products falling under subheading 23.03 B I, the Community legislature intended that products from which further sugar extraction would be uneconomic should be classified under tariff subheading 23.03 B I. In view of the value on the world market and on the European community market of residual products such as those in question in this case, there can be no question of their falling under tariff Heading 12.04.

16. Vismans therefore concludes that the answer to be given to the first question put by the Tariefcommissie is that ‘the goods in question are not to be regarded as “partly de-sugared sugar beet” for the purposes of Article 1 of Regulation No 1388/85’.

17. With regard to the Tariefcommissie's second question, Vismans concludes that ‘Regulation No 1388/85 is contrary to the terms of the Customs Cooperation Council nomenclature and Regulation No 97/69, in so far as it prevents beet pulp (that is to say the residue from the process of extracting sugar from sugar beet) from which further sugar extraction would be uneconomic from being classified under tariff subheading 23.03 B I where the sucrose content of the beet exceeds 10%.’

18. The Commission observes that the difference between sugar beet (whether sliced or unsliced) and beet pulp (residual sliced beet), within the meaning of subheadings 12.04 A and 23.03 B I, is indicated neither in the Tariff nor in the Customs Cooperation Council nomenclature. The question arises whether partly de-sugared sugar beet should be considered sugar beet or beet pulp. In Regulation No 1388/85 the Commission laid down the criterion of a sugar content of 10%. If the sliced beet contains more than 10% sugar, it must be classified under Heading 12.04. If its sugar content is 10% or less, it is ‘beet pulp’ covered by Heading 23.03.

19. In the Commission's view, that criterion is justified by the fact that it is economically feasible to extract all but 6 to 7% of the sugar content of the beet. Since the binder used for pressing the residual slices itself contains sugar, the Commission took the view that a criterion of 10% was justified.

20. The Commission considers that the criterion of 10% is a valid, objective and suitable basis for distinguishing between sugar beet and beet pulp. The essential characteristic of sugar beet is its sugar content. It is therefore logical and objectively justified to base the distinction between sugar beet and beet pulp on the criterion of sugar content. That criterion is based on the fact that it is not in general economically feasible to reduce the sugar content below 6 to 7%. If the tariff classification were based on the ordinary meaning of the term ‘beet pulp’, the declarant would himself be able to decide whether Heading 12.04 or 23.03 applied. This would be contrary to the objective character of the Common Customs Tariff.

21. The Commission proposes that the Court should reply as follows to the questions put by the Tariefcommissie:

‘(1) The term “partly de-sugared sugar beet” contained in Article 1 of Regulation No 1388/85 must be interpreted as including sliced sugar beet which has been pressed into pellets and has a sugar content of 12% by reference to the dry matter, with the result that such goods must be classified under tariff subheading 12.04 A.

2) Commission Regulation No 1388/85 is valid.’

IV — Replies of the parties to the questions put by the Court

22. The Court requested Vismans and the Commission to reply to the following question:

‘In the present state of technology, is it economically feasible to extract sucrose from beet which, after undergoing a sugarextraction process, still has a sucrose content (including the sucrose from the binder) in excess of 10% but less than 15% by weight by reference to the dry matter? Does it make any difference that the goods in question have been pelletized?’

23. Vismans gives a negative reply to the first question and observes, with regard to the second question, that the fact that the goods in question have been pelletized has no bearing on the reply to the first question. Those replies are based on information obtained from the importer of the goods in question, Feedimpex BV, in Etten-Leur, and from an independent expert, namely N. J. van Geijn, Head of the Chemical Analysis Department of Suiker Unie Research, the central laboratory of the main producer of sugar beet in the Netherlands. Vismans states that the Court's question appears to envisage sugar extraction carried out within the Community, within whose territory the prices are subject to strict regulations. Within the Community, sugar prices are protected up to a certain annual quantity of sugar produced. If production exceeds the quota fixed, it does not qualify for aid and the surplus has to be disposed of at the price prevailing on the world market. As Community production exceeds the protected quota, it must be presumed that if residues from the process of extracting sugar from sugar beet were imported with a view to the extraction of the remaining sugar, the product would be sold at the world market price. That would not be economic, otherwise the original producer in the United States would surely extract the remaining sugar himself. Even if sugar extracted from the residues could be disposed of at the subsidized prices within the Community, this would still not be economic. The cost of transporting the goods from the United States and the production costs would offset any income received. It is not technically possible to extract sucrose from pelletized beet pulp. Sugar beet has a sucrose content of 70 to 80% by reference to the dry matter, whereas the goods concerned contain approximately 12% sugar by reference to the dry matter. Experience demonstrates that such extraction is uneconomic. As far as the importer is aware, sugar beet pulp containing 10 to 15% sugar by reference to the dry matter is in practice never sold with a view to sugar extraction. Within the Community, pulp with a high sugar content (of up to more than 20% by reference to dry matter) is sold for exclusive use as animal feed and not for sugar production. Although the price of such pulp having a high sugar content is lower than that of the pulp in question coming from the United States, it seems none the less that extraction of sugar from Community pulp with a high sugar content is uneconomic, even if it is technically possible. Vismans adds that an expert from Suiker Unie has also stated that it is not economically feasible to extract sugar from sugar beet residue whose sucrose content has been reduced to 10 to 15%. According to that expert, that applies not only to pelletized goods but also to goods that have not been pelletized. The expert has also carried out experiments to investigate the possibility of extracting sucrose from the pellets concerned. He concluded that it is not possible, even from a technical viewpoint, to extract sugar from pellets with a sucrose content of approximately 12% by reference to the dry matter. Vismans concludes that it is impossible to extract in any manner whatsoever sugar from sugar beet which, after being de-sugared, retains a sucrose content in excess of 10% but less than 15% by weight, including the sucrose from the binder. That applies to both unpelletized and pelletized goods.

24. The Commission replies that it is technically possible to extract all the sugar from sugar beet. In general, extraction of all but 6 to 7% of the sugar content of sugar beet should be economic. When the sucrose from the binder is added, the pellets then have a sugar content of approximately 10%. As a general rule, it is not economically feasible to extract sugar from pellets which contain less than 10% sucrose. If that percentage were between 10 and 15%, sugar extraction might certainly be economic depending on the level of world sugar prices. The Commission points out that the international sugar market has traditionally been unstable and is subject at times to enormous surpluses and at other times to serious shortages. Shortages on the world market led, for example, to the introduction of minimum stocks under the common organization of the markets in sugar and to provision being made for export charges and import subsidies. When the price of sugar is high, it may still be economically feasible to extract the sugar from pellets whose sucrose content is between 10 and 15%. Whether or not the beet is transformed into pellets has no bearing on the sugar extraction process.

G. F. Mancini

Judge-Rapporteur

1 Language of the case: Dutch.