NV Koninklijke Lassiefabrieken v Hoofproduktschap voor Akkerbouwprodukten (80/72)

II —Observations submitted to the Court

The observations, written and oral, which have been submitted to the Court may be summarized as follows:Koninklijke Lassiefabrieken NV applicant in the main action, observes that Regulation No 1052/68 of the Council is an implementing regulation based on Regulation No 120/67 especially on Article 16 (5), and cannot therefore derogate from the latter. The footnote to the first page of the Annex to Regulation No 1052/68 contradicts Regulation No 120/67, in that it makes classification under heading 11.01 conditional on the product in question having a starch content exceeding 45 %, and, in the case of products based on barley, an ash content not exceeding 3 %. For this reason alone, the contents of the footnote must be held to be irrelevant.Moreover, since the note had been drawn up by the international customs council, without the assistance of any agricultural expert, it can only be described at the very most, within the meaning of the judgment of the Court in Case 74/69 (Krohn; judgment of 18 June 1970, Rec. 1970, p. 451) as ‘an unofficial interpretation of a Regulation’ lacking any binding effect.However, if the note were considered as a rule with the same legal effect as the Regulation itself, it must be recalled that it involves a derogation from the Common Customs Tariff; a regulation in implementation of Regulation No 120/67, enacted by a qualified majority, cannot validly modify Regulation No 950/68 on the Common Customs Tariff, which adopted the tariff nomenclature deriving in particular from Regulation No 120/67 and thus of the Regulations in implementation of the latter, and which, moreover, was enacted unanimously.So important an alteration in the law as that introduced by the disputed note cannot be enacted without a statement of the reasons therefore, surreptitiously (in the form of a footnote) and without observing any transitional period.The note is relevant only to the fifth export at issue in the main action, as the other four exports were completed prior to the entry into force of Regulation No 1052/68, and fell under the combined provisions of Regulations Nos 120/67, 360/67 and 950/68. With regard to these four exports, the question of their classification under heading 11.01 or 23.02 was settled by the Court's judgment in Case 72/69 (Bremer Handelsgesellschaft; judgment of 18 June 1970, Rec. 1970, p. 427). The main action, in fact, concerns high quality animal foodstuffs, due to their high starch content. According to the Court, ‘starch residues’ were to be distinguished from ‘flour’ by their starch content alone. The Court likewise ruled that ‘in classifying flour as a product of the milling industry, the Common Customs Tariff does not have in view a fixed mode of transforming vegetable products into flour’, and adopted, as a criterion for the minimum starch content of manioc flour, the percentage which ‘is such as to ensure that in every case . . . products derived from manioc, which could be marketed without other additives, as manioc flour’ should be subject to the levy (applicable to flour); the application of this criterion to barley flour immediately entails the classification of the product in dispute under heading 11.01.It emerges from the judgment of the Court that the nature of the product must not be ascertained by visual observation, but by chemical analysis, and that the starch content must be determined on the dry material and not on the goods as such.The question of when Regulation 950/68 came into force is of no importance for the result of the main dispute: there is no difference between the classifications operative on the basis of the combined provisions of Regulations Nos 120/67 and 360/67 on the one hand, and the Common Customs Tariff on the other.The plaintiffs in the main action declare that they share the views argued, in Case 72/69, by the Government of the Federal Republic of Germany, viz. that the starch content is the sole distinguishing factor between the two headings in question, and by the Commission which considers that the composition, quality and manufacturing process are irrelevant, the distinction between the tariff headings being made according to the rules of interpretation proper to the Common Customs Tariff, and in case of doubt as to tariff category, the highest rate of charge should be adopted.The Hoofdproduktschap voor Akkerbouwprodukten, the defendant in the main action, in essence submitted the following observations:1. The first question which concerns the period prior to 29 July 1968, when Regulation No 360/67 was replaced by Regulation No 1052/68, must be answered in the negative. The main action concerns a processed product based on barley; products having a starch content of less than 28 % are classified under a subheading of tariff heading 23.02, its specification in Regulation 360/67 corresponding completely with the Common Customs Tariff annexed to Regulation No 950/68. It emerges from the wording of subheading 23.02 that a starch content limited to 28 % is one of the criteria deciding the inclusion of a residuary product under either subheading 23.02 A I b 1, or subheading 23.02 A I b 2. It does not serve to ascertain whether the product must be classified under tariff heading 11.01 or heading 23.02; and in particular, that criterion does not appear in the specification of heading 11.01 (cereal flours).The matter may also be understood in the following way: while the limit of 28 % does not appear in the relevant specification of the headings as a criterion for classification under one or other of these headings, it could nevertheless follow from the very nature of the product that it could only be classified under tariff heading 11.01, since it has a starch content exceeding 28 %. This is not the case: processed products based on barley, derived from light grains of barley, too small and broken, with fragments of straw still adhering to them (sometimes this product is termed, ‘light barley’, and is obtained by washing the barley), waste from the first hulling, sharps and hulled grains which were too small, rejected from sifting, with a starch content of between 32·5 % and 35·5 %, a straw content of 20 % and an ash content of between 3·7 % and 4·5 %, are not by their nature, ‘cereal flour’, but bran, sharps and other residues derived from the sifting, milling or working of cereals'. A starch content in excess of 28 % cannot mean that it is to be considered cereal flour.2. Processing the cereal results in a ‘principal’ products and releases residues. The products in question in the main action are the residues which are milled and pressed, in the processing of barley into pearled barley. The description appearing under tariff heading 23.02 defines the relevant product as the residue of certain operations. As a rule, its characteristics can be ascertained by chemical analysis and visual (microscopic) observation.3. Regulation No 950/69, on the Common Customs Tariff, adopts the subdivisions of Regulation No 360/67; thus the reply to the third question, relating to the period prior to 29 July 1968, must be identical with that given to the first question.Concerning heading 23.02, Regulation No 1052/68 also provides a subdivision taking account of a starch content not less than 28 % without indicating whether this content constitutes the criterion of classification of a product under heading 23.02 or heading 11.01. Heading 23.02 is thus not defined otherwise than in Regulation No 360/67. Regulation No 1052/68 excludes from heading 11.01, products with a starch content of less than 45 %, and, in the case of products based on barley, products with an ash content exceeding 3 %; account must be taken of this requirement, to classify the product in dispute. This is indicated by the judgment of the Court in Case No 18/72 (Granaria, judgment of 30. 11. 1972 Rec. 1972, p. 1163).4. It emerges from Regulation No 228/67 of the Commission of 28 June 1967 on the starch content of compound feeding stuffs, on the content of starch and of ash in brans and on the denaturing of manioc flour and other roots (OJ p. 2925), that the bran content is to be ascertained on the goods as such and not on the dry material.5. The footnote relating to heading 11.01 (‘cereal flours’), on the first page of the Annex to Regulation No 1052/68 forms an integral part of that Regulation and enjoys its binding force.There is nothing to prevent the Council, for reasons of its own, from enacting certain provisions of a regulation in the form of a footnote.The Regulation, in Article 4 (1) (c), refers to the note in dispute; this undeniably renders it part of the provisions of the Regulation. Such footnotes are, moreover, very often inserted in the texts of regulations and Community directives, in order to give details of how the schedules are to be used.6. The reference in Regulation No 1052/68 to Columns 3, 4 and 5 of the Annex would be meaningless if Columns 1 and 2 had to be discounted. In that case, it would be impossible to determine the product to which the provisions on basic products, coefficients and fixed components relate. Articles 5 and 8 of the Regulation explicitly refer to tariff headings and to the products, appearing in Columns 1 and 2 of the Annex.7. The footnote to the first page of the Annex to Regulation 1052/68 is covered by the general statement of reasons appearing in the recitals to the Regulation, in particular, the second recital; as a working rule, it may be considered as one of the adaptations provided for by that recital.8. The rule set out in the note in question cannot be considered as merely optional. It involves a modification of Regulation No 360/67, but Regulation 1052/68 in its entirety, which replaced Regulation 360/67 must be regarded as a revision in so far as is necessary, of that Regulation. Moreover, Regulation No 1052/68 as is indicated in connection with the 5th question, in particular Article 4 (1) (c), refers to the note.9. A principle of law such as that invoked by the ninth question, is not at issue in the present case.10. With regard to refunds, Regulation No 1052/68 is legally founded on Article 16 (5) of Regulation No 120/67. It is not irreconcilable with the latter, in particular with Article 18. This provision defines the scope of Regulation No 120/67, which cannot be greater or less than that indicated by the descriptions of the disputed headings in the Common Customs Tariff appearing in the Annex to Regulation No 950/68. Regulation No 1052/68 does not infringe this definition. The footnote in dispute only provides that barley flour having a starch content not exceeding 45 % and an ash content exceeding 3 % shall be treated as equivalent to brans, sharps and other residues for the purpose of calculating levies and refunds.11. As Regulation No 950/68 provided that it should enter into force on 1 July, this was the date of its entry into force, by Article 191 of the EEC Treaty. The fact that publication did not take place until a later date is not irreconcilable with Article 191.12. Since a negative reply should be given to Question 11, it is unnecessary to reply to Question 12.13. The footnote to the Annex to Regulation 1052/68 is not incompatible with Regulation 950/68: it only provides that the calculation of levies and refunds for processed products based on barley classified under tariff heading 11.01, but having a starch content not exceeding 45 % and an ash content exceeding 3 %, must be made as though these products fell under tariff heading 23.02 A.The Commission of the European Communities considers that a reply to the questions put by the ‘College van Beroep’ necessitates an analysis of the rules of interpretation of the system of refunds and of the principles to be applied to the interpretation of the nomenclature of the Common Customs Tariff.

The table mentions, in the case of barley, a starch content of 45 % and an ash content of 3 %.Precise rules of classification were not in force when the exports in dispute in the main action were effected, but a distinction could be drawn between ‘barley flour’ and ‘brans and sharps of barley’, founded objectively on the following basis:It emerges from the wording of the headings in dispute that Chapter 11 of the Common Customs Tariff does not encompass all products from the milling of cereals, but only those which are obtained principally by milling and which are essentially composed of particles obtained by the more or less intensive crushing of the flour element.On the other hand, ‘brans, sharps and other residues derived from the sifting, milling or working of cereals’, classified under heading 23.02, are the by-products and wastes obtained in the course of the various processing operations and in essence comprising particles of tegument and chaff of the grain.This description is, however, insufficient. The distinction requires to be founded on the specific content of the essential components of the products in question, viz. the starch content and the ash content. Principal products and by-products obtained in the course of the various processing operations which normally pertain to the milling of barley display, albeit with a certain margin of variation, specific contents in starch and ash, and possibly in other components, which can be determined by tests and serve as a basis for classification.The experts of the Customs Cooperation Council of Brussels adopted a starch content of 45 % and an ash content of 3 % as the limits which taking account of existing manufacturing procedures and ultimate uses, make it possible to establish, between the products under heading 11.01 and these under heading 23.02, a distinction meeting commercial needs and appropriate to the requirements of the common organization of the market. Since these limits were adopted in the note accompanying the nomenclature of Regulation No 1052/68 and in the text of the Common Customs Tariff, and since starch content might, since April 1967, be employed by national administrations on the basis of a classification opinion by the Common Customs Council, the use of these criteria of delimitation is objectively justified, and from the point of view of the uniform application of Community law, necessary, for the export period in question.Products of the milling of barley which have both a starch content exceeding 45 % and an ash content not exceeding 3 %, therefore, fall to be classified under Chapter 11; on the other hand, products of the milling of barley which have a starch content not exceeding 45 % and an ash content exceeding 3 % fall to be classified under heading 23.02. These limits should be applied, to the extent that they have been inserted in binding Community rules of classification, as legal criteria of distinction, and, where this is not so, as the most appropriate criteria from the point of view of the objective classification of the products in question.In the light of these considerations, the following observations should be made on the questions put by the ‘College van Beroep’:(a) On the first question: a starch content of 28 % is so far below the rate of 45 % considered objectively as the correct limit, that it cannot serve as a criterion of distinction between headings 11.01 and 23.02. Regulations Nos 122/68, 372/68, 814/68 and 1138/68 moreover, only use this rate of 28 % to differentiate the various products within heading 23.02 itself.(b) On the second and third questions: past experience shows that criteria other than the specific content of starch and ash, while not to be rejected outright, do not allow the tariff headings in question to be distinguished with sufficient accuracy. In particular, it is impossible, on the basis of the other criteria, to take sufficient account of the numerous processed products which are common in trade.(c) On the fourth question: various arguments could be invoked in favour of extending to the refunds system Regulation No 228/67 which is directly applicable only for distinguishing the different tariff headings within the framework of the levy system, in particular the quality of the method of analysis laid down for ascertaining the starch content, and the advantages of adopting the same nomenclature and the same method of analysis for levies and refunds. However, the method of analysis provided for by Regulation 228/67 is concerned only with calculating the starch content and its employment would not in itself give any answer to the question whether the content in starch and ash, which are decisive factors for classification, should be calculated on the goods as such or on the dry material.A reply to the question asked can be given only on the basis of the provisions and rules applicable to the tariff classification of the products in question. Most of the rules of classification clearly indicate that they adopt the contents of the various constituents calculated on the dry material, and the absence of such an indication in the note accompanying the nomenclature of Regulation No 1052/68 must be interpreted as requiring the calculation to be effected on the goods as such. In this case, whether recourse is had to one method or the other is of little importance; the ash content (between 3·7 % and 4·5 %), calculated on the goods as such clearly exceeds the maximum limit of 3 % laid down as a criterion of classification in chapter 11 of the Common Customs Tariff, and to convert this limit to a percentage calculated on the dry material could only increase the margin. Likewise, the starch contents calculated on the goods as such are clearly less than 30 or 40 %; conversion of these contents calculated on the dry material, would give percentages between 27·1 % and 40·2 %, clearly less than the minimum of 45 % laid down for products coming under Chapter 11.(d) On questions 5 to 10: the problems relating to the nature and validity of the footnote to the Annex to Regulation No 1052/68 have little relevance for the result of the main action.From the point of view of the content of the note, it gives a description of products for which the sole considerations are the amounts established by heading 11.01. From the point of view of form, the note represents a binding rule of classification, addressed to customs officials and judges who might come to give decisions on the classification of the products in question. It comprises an integral part of the nomenclature of the Annex to Regulation No 1052/68 and from the legal point of view it enjoys the binding force of the provisions of the Regulation on the same basis as the whole Annex. The position of the note is purely a result of editorial expediency and it is impossible to discern in it a basic distinction such as to affect the validity of the explanatory note.According to the Court's decisions, the note, as a binding rule, is only applicable after the entry into force of Regulation No 1052/68. Exports prior to that date fall under the provisions of Regulations Nos 122/68, 372/68 and 814/68 and consequently under the general principles of classification valid for these latter Regulations.Even if the note were considered as not applying as a binding rule of classification to the export effected within the scope of Regulation No 1138/68, or as constituting merely a technical note without any binding force, account must be taken of the consideration and conclusions relating to the classification of the products exported previously. The classification would not have been essentially modified by the note, since its aim is not to modify a prior interpretation, but merely to clarify it.It emerges from this last finding that in practice it is of little importance whether the insertion of the note in Regulation No 1052/68 is valid or not; on any interpretation the tariff headings in question are distinguished by the application of criteria substanially the same as those contained in the note.In any case, there can be no question of any infringement of a legal principle, such as to vitiate the legality of the note as a binding rule of classification.(e) On questions 11 to 13 it should be pointed out that the question of the validity of Regulation 950/68 is irrelevant for the decisions both of the Court and of the ‘College van Beroep’. It is true that Regulation No 950/68 gave the Common Customs Tariff the force of law, but the regulations relating to refunds are based on Article 43 of the EEC Treaty, and are autonomous in relation to, and by virtue of Article 38 prevail over, the customs legislation. Furthermore since the note is concerned with a subject legally independent of Regulation No 950/68, and adopts in essentials the nomenclature of the common Customs Tariff, it must, as a rule of derogation concerned with the refunds system, take precedence over Regulation No 950/68 and consequently cannot be rendered void on the grounds that it contradicts it. Regulations Nos 122/68, 372/68 and 814/68 cannot infringe Regulation No 950/68, which was adopted subsequently.