JUDGMENT OF 31. 1. 1979 — CASE 34/78 YOSHIDA v KAMER VAN KOOPHANDEL EN FABRIEKEN VOOR FRIESLAND

In Case 34/78

THE COURT composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), A. M. Donner, P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco and A. Touffait, Judges Advocate General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Summary of the facts and procedure

(a) The validity of Regulation No 2067/77

(b) The interpretation and method of implementing that regulation

II — Summary of the written observations submitted to the Court

A — Observations submitted by Yoshida Nederland B.V.

A. The meaning of Question 1 according to the plaintiff in the main action

Reply to the first sub-question of Question 1

Reply to the second sub-question of Question 1

B. Reply to Question 2 on the invalidity of Regulation No 2067/77 for infringement of Article 5 of Regulation No 802/68 and Articles 30 and 110 of the Treaty

(a) Infringement of Article 5 of Regulation No 802/68

(1) Last operation determining the origin

(2) Vertical integration in one and the same factory

(3) Vertical integration in one and the same group of undertakings

(4) Slide fasteners without a country of origin

(b) Infringement of Articles 30 and 34 of the EEC Treaty

(c) Infringement of Article 110 of the Treaty

C. Reply to Question (3) on the invalidity of Regulation No 2067/77 on other grounds

(a) Restrictions on imports in the EEC

(b) Restrictions on exports from the EEC

(c) Inadequate statement of the reasons upon which it is based

(d) Infringement of the procedural rules laid down in Article 14 of Regulation No 802/68

(e) Carelessness in adopting Regulation No 2067/77

(f) Linguistic differences

(g) Misuse of powers

B — Observations submitted by the Commission

(1) The incompatibility with Article 5 of Regulation No 802/68

(2) The incompatibility with Article 30 of the EEC Treaty

(3) The incompatibility with Article 110 of the EEC Treaty

(4) The application without distinction between Community origin and origin in a Member State (numbered paragraph 4 of the body of the order for reference)

(5) Inadequate statement of reasons for Regulation No 2067/77

(6) Infringement of essential procedural requirements

(7) Carelessness in the preparation of Regulation No 2067/77

(8) Linguistic differences

(9) Misuse of powers

C — Observations submitted by the Netherlands Government

D — Observations submitted by the French Government

E — Observations submitted by the Italian Government

III — Oral procedure

Decision

Costs

I —. Summary of the facts and procedure

1. Must Article 1 of Commission Regulation (EEC) No 2067/77 be interpreted as meaning that a country in which not all the processes listed in the third column in Article 1 of the regulation were carried out, in particular a country in which the slider was not made, can in no circumstances be considered the country of origin of the slide fastener?

2. If the first part of Question 1 is answered in the affirmative, which means that the slide fasteners involved in the case cannot be issued with certificates of origin within the meaning of Articles 9 and 10 of Regulation (EEC) No 802/68 of the Council, is Regulation No 2067/77 invalid as being in conflict with:

3. If Regulation No 2067/77 is not held to be invalid for any of the reasons set out under (a), (b) or (c) must the regulation be regarded as being invalid for one of the reasons listed by the appellant set out under numbered paragraphs (4) to (9) inclusive in the body of this judgment, or else as being in conflict with any other provision or principle of Community law which has not yet been mentioned by the appellant?

(a). The validity of Regulation No 2067/77

(b). The interpretation and method of implementing that regulation

II —. Summary of the written observations submitted to the Court

A —. Observations submitted by Yoshida Nederland B.V.

A. The meaning of Question 1 according to the plaintiff in the main action

(a). If the operations listed in the third column have been carried out in a Member State, the slide fastener originates in that Member State or in the Community;

(b). In all other cases, the origin of a slide fastener must be determined by direct application of the criteria laid down in Article 5 of Regulation No 802/68.

B. Reply to Question 2 on the invalidity of Regulation No 2067/77 for infringement of Article 5 of Regulation No 802/68 and Articles 30 and 110 of the Treaty

(a). Infringement of Article 5 of Regulation No 802/68

(1). Last operation determining the origin

(2). Vertical integration in one and the same factory

(3). Vertical integration in one and the same group of undertakings

(4). Slide fasteners without a country of origin

(b). Infringement of Articles 30 and 34 of the EEC Treaty

(c). Infringement of Article 110 of the Treaty

C. Reply to Question (3) on the invalidity of Regulation No 2067/77 on other grounds

(a). Restrictions on imports in the EEC

(b). Restrictions on exports from the EEC

(c). Inadequate statement of the reasons upon which it is based

(d). Infringement of the procedural rules laid down in Article 14 of Regulation No 802/68

(e). Carelessness in adopting Regulation No 2067/77

(f). Linguistic differences

(g). Misuse of powers

B —. Observations submitted by the Commission

(a). The first phase consists in the manufacture of a certain number of semifinished products from raw materials such as crude oil, iron ore, cotton and linen:

(b). These semi-finished products then undergo a certain number of processes or operations from which the components of the slide fastener are obtained:

(c). Finally, the slide fastener properly so-called is assembled as follows:

(d). Treatment such as dyeing or edging may take place at different stages of the production process according to the type of fastener and to the process devised by the manufacturer.

(e). Generally the very last stage consists of packing the product for transport and/or distribution.

(1). The incompatibility with Article 5 of Regulation No 802/68

(2). The incompatibility with Article 30 of the EEC Treaty

(3). The incompatibility with Article 110 of the EEC Treaty

(4). The application without distinction between Community origin and origin in a Member State (numbered paragraph 4 of the body of the order for reference)

(5). Inadequate statement of reasons for Regulation No 2067/77

1. The principle stated in Article 5 of Regulation No 802/68 according to which the determining factor is the last substantial process or operation.

2. The statement that a slide fastener consists essentially of two parallel tapes of the same length, scoops or other interlocking elements, a slider and end pieces and that the assembly of such a slide fastener does not constitute a substantial process or operation nor result in the manufacture of a new product or represent an important stage of manufacture within the meaning of Article 5.

3. The processes of operations which may together be considered as the last substantial process or operation and which result in the manufacture of a new product or represent an important stage of manufacture consist of the forming and placing of the scoops or other interlocking elements onto the tapes and the manufacture of the slider.

4. The manufacture of the end pieces does not constitute a substantial process or operation.

(6). Infringement of essential procedural requirements

(7). Carelessness in the preparation of Regulation No 2067/77

(8). Linguistic differences

(9). Misuse of powers

1. Article 1 of Commission Regulation (EEC) No 2067/77 must be interpreted as meaning that only the country in which all the operations listed in the third column of the table in that article were carried out, which constitute as a whole the last substantial process or operation within the meaning of Article 5 of Regulation (EEC) No 802/68 of the Council, may be regarded as the country of origin of a slide fastener.

2. Commission Regulation (EEC) No 2067/77 is applicable to all slide fasteners coming within tariff heading 98.02 of the Common Customs Tariff whether they contain small metal components in the form of scoops or interlocking nylon spirals.

3. The above-mentioned regulation constitutes a correct application of Article 5 of Regulation (EEC) No 802/68 of the Council and is not incompatible with either Article 30 or with Article 110 of the Treaty establishing the EEC and must not be regarded as invalid for any other reason.

C —. Observations submitted by the Netherlands Government

D —. Observations submitted by the French Government

E —. Observations submitted by the Italian Government

(a). it must be a process or operation which results in the manufacture of a new product;

(b). it must be the last process or operation;

(c). it must be a substantial process or operation;

(d). it must be a process or operation that is economically justified;

(e). it must be a process or operation carried out in an undertaking equipped for the purpose.

III —. Oral procedure

1. By order of 10 March 1978 received at the Court Registry on 14 March 1978 the College van Beroep voor het Bedrijfsleven referred to the Court under Article 177 of the EEC Treaty three questions on the interpretation and validity of Commission Regulation (EEC) No 2067/77 of 20 September 1977 concerning the determination of the origin of slide fasteners (Official Journal L 242 of 21 September 1977, p. 5).

2. These questions have been raised within the context of a dispute between a Netherlands subsidiary of the Japanese Yoshida Kogyo KK group which owns a factory in Sneek in which it produces metal and nylon slide fasteners, the sliders for which are manufactured in Japan, and the Kamer van Koophandel en Fabriek voor Friesland (the Chamber of Commerce and Manufacture of Friesland) which refused, in application of Regulation No 2067/77, to grant it a certificate of origin certifying that those slide fasteners are of Netherlands or Community origin, on the ground that the sliders used in the manufacture of the slide fasteners had not been manufactured in the Netherlands or elsewhere in the European Economic Community.

3. Until the entry into force of that regulation these certificates of origin, which are necessary for the plaintiff for the purpose of obtaining the benefit of certain advantages reserved to Community products where they are exported to third countries, were granted without difficulty by the defendant under Article 5 of Regulation No 802/68 of the Council of 27 June 1968 on the common definition of the concept of the origin of goods (Official Journal, English Special Edition 1968 (I), p. 165).

4. In these circumstances the national court referred to the Court of Justice several questions; to be logical, the question relating to the validity of Regulation No 2067/77, having regard to Article 5 of Regulation No 802/68, must be examined first.

5. Under Article 5 of Regulation No 802/68 A product in the production of which two or more countries were concerned shall be regarded as originating in the country in which the last substantial process or operation that is economically justified was performed, having been carried out in an undertaking equipped for the purpose, and resulting in the manufacture of a new product or representing an important stage of manufacture.

6. To reply to this question it is necessary to inquire as to the circumstances in which Regulation No 2067/77 came into being and was then drawn up and finally to interpret it having regard to the technical operations resulting in the manufacture of slide fasteners.

7. In 1975 the Commission found that imports into the Community of slide fasteners, particularly of Japanese origin, had increased considerably in recent years and that those developments threatened to cause injury to Community producers of like products and therefore introduced on 13 March Regulation (EEC) No 646/75 establishing Community surveillance over imports of slide fasteners (Official Journal L 67 of 14 March 1975, p. 21).

8. In accordance with Article 14 of Regulation No 802/68, the Commission submitted to the Committee on Origin set up by Article 12 of Regulation No 802/68 and consisting of representatives of the Member States with a representative of the Commission acting as Chairman a draft of the provisions to be adopted which did not obtain the required qualified majority. The Commission then applied the provisions of Article 14 (3) (b) and submitted to the Council a proposal which received no reply.

9. It is therefore necessary to examine whether those operations correspond to the requirements laid down in Article 5 of Regulation No 802/68 and may be interpreted as constituting the last substantial process or operation resulting in the manufacture of the slide fastener or representing an important stage of manufacture. This is a question of a technical nature which must be examined having regard to the definition of a slide fastener and of the various operations resulting in its formation.

10. The characteristic feature of the finished product known as a slide fastener is that two flexible tapes to which scoops or other interlocking elements are attached in parallel staggered formation can be opened or closed by means of the action of a slider.

11. It follows from the examination of those various operations that the last substantial process or operation must be interpreted as being constituted by the combination of operations (c), (d), (e) and (f) resulting in the manufacture of a new and original product which, in contrast to each of the basic products, is a linking element which can be separated over and over again and is used to join objects, in particular pieces of fabric.

12. The Commission, in taking the view that it had to go back beyond the last process to the process of the manufacture of the slider and make that a binding condition for the grant of a certificate of origin, relied upon an operation which is extraneous to the objectives of Regulation No 802/68 which requires a real and objective distinction between raw material and processed product depending fundamentally on the specific material qualities of each of those products.

13. Consequently, without its being necessary to examine whether the provisions of Regulation No 2067/77 are compatible with Articles 30 and 110 of the EEC Treaty, it is necessary to state that Article 1 of Commission Regulation No 2067/77 of 20 September 1977 concerning the determination of the origin of slide fasteners is invalid. Since Regulation No 2067/77 has been held to be invalid for the abovementioned reasons, the other questions have become purposeless.

14. The costs incurred by the Commission and by the Governments of the Kingdom of the Netherlands, the French Republic and the Italian Republic which submitted observations to the Court are not recoverable and since the proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.

THE COURT, in answer to the questions referred to it by the College van Beroep voor het Bedrijfsleven by order of 10 March 1978, hereby rules:

1 Article 1 of Commission Regulation No 2067/77 of 20 September 1977 concerning the determination of the origin of slide fasteners (Official Journal L 242 of 21 September 1977, p. 5) is invalid.

2 There is therefore no further need to interpret that regulation.