Staatssecretaris van Financiën v X BV (C-423/09)

Contents

Judgment of the Court (Fifth Chamber)28 October 2010^noteIn Case C-423/09,REFERENCE for a preliminary ruling under Article 234 EC from the Hoge Raad der Nederlanden (Netherlands), made by decision of 2 October 2009, received at the Court on 29 October 2009, in the proceedingsStaatssecretaris van FinanciënvX BV,THE COURT (Fifth Chamber),composed of E. Levits (Rapporteur), acting as President of the Chamber, M. Safjan and M. Berger, Judges,Advocate General: J. Mazák,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 2 September 2010,after considering the observations submitted on behalf of:— X BV, by N.J. Helder, M. Chin-Oldenziel and G. Danilović, advocaten,— the Netherlands Government, by C. Wissels and M. de Ree, acting as Agents,— the United Kingdom Government, by S. Hathaway, acting as Agent, and by K. Beal, Barrister,— the European Commission, by L. Bouyon and W. Roels, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following

Judgment

1This reference for a preliminary ruling concerns the interpretation of the relevant subheadings for the purpose of classifying garlic bulbs under the Combined Nomenclature (‘the CN’) in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1), as amended by Commission Regulation (EC) No 1810/2004 of 7 September 2004 (OJ 2004 L 327, p. 1) (‘Regulation No 2658/87’).

2The reference has been made in proceedings between the Staatssecretaris van Financiën (Netherlands State Secretary for Finance) and X BV (‘X’) concerning the tariff classification of certain imports of garlic bulbs.

Legal context

European Union legislation

3The CN subheadings in Regulation No 2658/87 which are relevant to the case in the main proceedings are the following:‘0703 Onions, shallots, garlic, leeks and other alliaceous vegetables, fresh or chilled:…07032000 – Garlic…0712 Dried vegetables, whole, cut, sliced, broken or in powder, but not further prepared:…07129090 – Other’

The explanatory notes to the Harmonised System

4The Customs Cooperation Council, now the World Customs Organisation, established by an international agreement concluded at Brussels on 15 December 1950, approves, under the conditions laid down in Article 8 of the International Convention on the Harmonised Commodity Description and Coding System (‘the HS’), the explanatory notes and classification opinions adopted by the HS Committee.

5Explanatory Note 2 in Section I of the HS states:‘Except where the context otherwise requires, throughout the Nomenclature any reference to “dried” products also covers products which have been dehydrated, evaporated or freeze-dried.’

6The explanatory note concerning Chapter 7 is worded as follows:‘This Chapter covers vegetables, including the products listed in Note 2 to the Chapter, whether fresh, chilled, frozen (uncooked or cooked by steaming or boiling in water), provisionally preserved or dried (including dehydrated, evaporated or freeze-dried). …The term “chilled” means that the temperature of a product has been reduced, generally to around 0° C, without the product being frozen. However, some products, such as potatoes, may be considered to be chilled when their temperature has been reduced to and maintained at +10° C....’

7The explanatory note concerning heading 0712 of the HS states:‘This heading covers vegetables of headings 07.01 to 07.09 which have been dried (including dehydrated, evaporated or freeze-dried) i.e., with their natural water content removed by various processes. …The heading also covers dried vegetables, broken or powdered, such as asparagus, cauliflower, parsley, chervil, onion, garlic, celery, generally used either as flavouring materials or in the preparation of soups.…’

The dispute in the main proceedings and the question referred for a preliminary ruling

8Over the period from 9 December 2004 to 6 June 2005 inclusive, X, acting as a customs forwarding agent, submitted 15 declarations for the release into free circulation of consignments of garlic bulbs located in chilled containers at the time of importation and originating in China. Each of the import declarations referred to subheading 07129090 of the CN and described the goods as ‘garlic’, ‘dried garlic’ or ‘white dry garlic’.

9After the goods had been released by the customs authorities, the container housing the garlic was transferred to a chilled room belonging to a storage undertaking where it was kept at a temperature of - 3° C.

10After an administrative check carried out in August 2005, the customs inspector concluded that the imported garlic ought to have been classified as chilled garlic under subheading 07032000 of the CN. He thereupon issued the requests for payment of the customs duty at issue.

11X lodged an unsuccessful objection. It then brought an action before the Rechtbank (District Court), which declared the action unfounded. X lodged an appeal against that decision with the Gerechtshof te Amsterdam (Amsterdam Regional Court of Appeal). That court held that the inspector had failed to establish any ground for departing from the CN tariff heading which had been indicated, namely heading 0712. The Staatssecretaris has appealed in cassation against the ruling of the Gerechtshof to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands).

12In those circumstances, the Hoge Raad der Nederlanden decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:‘What criteria are to be applied in order to determine whether vegetables (garlic bulbs) which have been dried to some degree, but from which not all, or not almost all, of the moisture has been removed, and which are imported in a chilled state, are to be classified under tariff subheading 07032000 of the CN or under tariff subheading 07129090 of the CN?’

Consideration of the question referred

13By its question, the referring court asks, in essence, what criteria are to be applied to determine whether garlic which has undergone a drying process comes under tariff subheading 07032000 of the CN or under tariff subheading 07129090 of the CN.

14As a preliminary point, it should be borne in mind that, when the Court is requested to give a preliminary ruling on a matter of tariff classification, its task is to provide the national court with guidance on the criteria which will enable the latter to classify the products at issue correctly in the CN, rather than to effect that classification itself, a fortiori since the Court does not necessarily have available to it all the information which is essential in that regard. In any event, the national court is in a better position to do so (Case C-196/05 Sachsenmilch [2006] ECR I-5161, paragraph 19 and the case-law cited).

15It is settled case-law that, in the interests of legal certainty and ease of verification, the decisive criterion for the classification of goods for customs purposes is in general to be sought in their objective characteristics and properties as defined in the wording of the relevant heading of the CN and in the section or chapter notes (see, inter alia, Case C-376/07 Kamino International Logistics [2009] ECR I-1167, paragraph 31, and Case C-370/08 Data I/O [2010] ECR I-4401, paragraph 29).

16The explanatory notes drawn up by the European Commission as regards the CN and by the World Customs Organisation as regards the HS are an important aid to the interpretation of the scope of the various tariff headings but do not have legally binding force (Case C-250/05 Turbon International [2006] ECR I-10531, paragraph 16, and Data I/O, paragraph 30).

17X claims that heading 0703 of the CN refers exclusively to fresh or chilled vegetables which have not undergone treatment for their preservation other than refrigeration. Since, it argues, the vegetables in this case underwent treatment for their preservation other than refrigeration, such as drying, they can no longer be classified under heading 0703 of the CN.

18According to X, if a certain amount of the moisture which the garlic contained has been removed, without all that moisture being removed, the garlic bulbs then come under heading 0712 of the HS.

19That interpretation cannot be accepted. The explanatory note to the HS indicates that heading 0712 covers ‘vegetables of headings 07.01 to 07.09 which have been dried (including dehydrated, evaporated or freeze-dried) i.e., with their natural water content removed by various processes’.

20It thus follows from the wording of that explanatory note that, for classification under heading 0712, the vegetables must have undergone an intensive drying process in accordance with a specific treatment as a result of which all, or almost all, of the moisture in the product is removed.

21Following that process, the amount of residual moisture in the vegetables must be insignificant, for example, as the Commission suggested at the hearing, not exceeding 10 %.

22X cites Case 120/75 Riemer [1976] ECR 1003 in support of its line of argument which seeks to establish that, when garlic bulbs are dried to a certain degree, they cannot be classified as ‘fresh’ garlic or ‘chilled’ garlic under subheading 07032000, and that even partially dried garlic comes under subheading 07129090.

23However, in Riemer, the Court examined the difference between ‘fresh’ berries and ‘frozen’ berries. That judgment therefore relates to goods which come under a different chapter and which have undergone treatment other than drying.

24Furthermore, in that judgment, the Court held that the characteristics of the berries which had been subjected to the freezing process underwent certain irreversible changes as a result of that very process, in particular changes to the structure of the flesh, with the result that they were no longer in the natural state, even after they had started to thaw or had thawed out (see Riemer, paragraph 4).

25By analogy, in order to classify garlic bulbs under heading 0712, the process of drying the garlic must give rise to substantial and irreversible changes, with the result that the product is no longer in the natural state.

26Therefore, the removal of water must substantially change the properties and objective characteristics of the product in such a way that that change results in classification under a tariff heading other than heading 0703, which covers fresh or chilled vegetables.

27Consequently, partially dried garlic which retains the properties and characteristics of fresh garlic must be classified under tariff heading 0703 and not under heading 0712.

28Moreover, the fact that the partially dried garlic was imported in a chilled state indicates that the drying did not remove all, or almost all, of the moisture in the product, since dehydration is a method of preservation which obviates the need to preserve the dehydrated products at temperatures below 0° C, as the Commission points out in its observations.

29The United Kingdom Government states in its observations that garlic in the form of whole bulbs or cloves cannot be sufficiently dried, in contrast to broken or powdered garlic.

30In that regard, it should be borne in mind that the explanatory note to the HS concerning heading 0712 states that ‘[t]he heading also covers dried vegetables, broken or powdered, such as … garlic …, generally used either as flavouring materials or in the preparation of soups’.

31It follows that garlic classified under heading 0712 is generally in broken or powdered form. However, the wording of heading 0712 of the CN – ‘Dried vegetables, whole, cut, sliced, broken or in powder, but not further prepared’ – does not expressly preclude whole garlic bulbs or cloves from also coming under that heading if they are sufficiently dried, even if such a product is not widely marketed.

32In its observations, the Commission suggested that the length of time for which they are preserved should be an additional criterion for the classification of garlic bulbs, since only garlic which has been completely dried can be preserved for a long period, whereas fresh or chilled garlic necessarily can be preserved only for a shorter period.

33In that regard, it is, admittedly, true that preservation over a long period may constitute an additional indicator as to the degree to which moisture has been removed from the garlic for its classification under heading 0712 as a dried vegetable, in contrast to fresh or chilled garlic.

34However, it must also be held that headings 0703 and 0712 of the CN do not include any reference to preservation as a classification criterion, from which it must be concluded that the length of time for which a product is preserved has itself no effect on its classification for customs purposes (see, by analogy, Case 40/88 Weber [1989] ECR 1395, paragraph 16).

35In the light of the foregoing, the answer to the question referred is that the CN in Annex I to Regulation No 2658/87 must be interpreted as meaning that garlic which has undergone an intensive drying process in accordance with a specific treatment as a result of which all, or almost all, of the moisture in the product is removed comes under tariff subheading 07129090 of the CN, but that partially dried garlic which retains the properties and characteristics of fresh garlic comes under tariff subheading 07032000 of the CN.

Costs

36Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fifth Chamber) hereby rules: The Combined Nomenclature in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, as amended by Commission Regulation (EC) No 1810/2004 of 7 September 2004, must be interpreted as meaning that garlic which has undergone an intensive drying process in accordance with a specific treatment as a result of which all, or almost all, of the moisture in the product is removed comes under tariff subheading 07129090 of the Combined Nomenclature, but that partially dried garlic which retains the properties and characteristics of fresh garlic comes under tariff subheading 07032000 of the Combined Nomenclature.