Opinion of Mr Advocate General

Mr President,

Members of the Court,

The proceedings which have resulted in the present reference to the Court relate to the treatment for customs duty purposes of goods imported from the USA and described as security tags made of synthetic materials for protecting goods electronically from shoplifting. These so-called Alligator

tags, which are to be attached to the goods, consist, according to the description given on page 3 of the order for reference, of two antenna plates placed between layers of paper and synthetic materials, whose length, breadth and curvature reflect the frequencies of an alarm system, and linked together by a diode chip and which, on being brought within range of the alarm system ... emit a coded data frequency which, when received by the electronic apparatus in the system, activates the alarm. It appears from the documents before the Court that the security system consists of an overhead system which generates a field of sensitivity and an alarm console which emits a signal as soon as the Alligator tag enters the field of sensitivity.

A binding tariff notification, which related solely to the tags and not to the alarm system as a whole, stated that the tags were to be classified under tariff heading No 85.22 C II of the Common Customs Tariff (Electrical appliances and apparatus, having individual functions, not falling within any other heading in this Chapter:... Other appliances and apparatus). The classification was based primarily on the fact that the tag was an electrical appliance having an individual function.

The plaintiff in the main proceedings considers, however, that the tags should more correctly have been classified under tariff heading No 85.17 (Electric sound or visual signalling apparatus (such as... burglar alarms)). The plaintiff's objection on that basis was, however, unsuccessful. The failure to classify the tags under the latter heading was justified in the decision rejecting the objection on the ground that the tag was the agent which disturbed the field of sensitivity and that it did not detect any signals activating the alarm. The decision went on to state that if the tag were treated as a part of the security system the significant factor would be that it emitted a data frequency and therefore had an individual electronic function. It was clear from Note 2 to Section XVI of the Common Customs Tariff (Machinery and mechanical appliances; electrical equipment), which provided that

An appeal against that decision was brought before the Bundesfinanzhof. The plaintiff contended that, in accordance with the aforementioned Note 2 (b), the only correct classification was under tariff heading No 85.17 and that the whole security system, of which the tags formed part, had to be regarded as a single unit. In its opinion, it was significant that the tags had no independent electrical function since they did not of themselves emit data frequencies. On the contrary, since they enabled the field of sensitivity to operate and since in their absence the alarm could not be activated, they must be regarded as necessary components of the security system and in that connection it was also significant that they were intended to be used exclusively for the emission of signals in the system in question. The practice of the French and Belgian customs authorities, according to which the tags were classified under tariff heading No 85.17 as being part of a functional unit, namely a security system, was based, according to the plaintiff, on that view.

The Oberfinanzdirektion, on the contrary, continued to take the view that the tags had an individual function since they generated new oscillations and activated the alarm.

The point at issue before the Bundesfinanzhof is thus whether the correct classification is under tariff heading No 85.17 or under tariff heading No 85.22 C II. That court believes that some guidance on the matter is to be found in the [German] Explanatory Notes to the Nomenclature of the Customs Cooperation Council, which suggest that the classification should be under the latter tariff heading. However, it is in doubt as to whether the requirement that the apparatus in question must have an individual function, which also applies to classification under tariff heading No 85.22 according to those Explanatory Notes, is satisfied and states that, in view of the functional unity of the security system, an application of the aforementioned Note 2 (b) could lead to classification under tariff heading No 85.17. The Bundesfinanzhof goes on to state that the ruling of the Court of Justice in Case 60/77 concerning the tariff classification of part of an electrical signalling apparatus is of no assistance in this case. Although it was considered to be important in that decision with regard to Note 2 (b) that the goods were necessary components of machinery forming a functional unit, and indeed it was declared that individual electrical appliances which are suitable for use solely or principally with an electric sound or visual signalling apparatus within the meaning of tariff heading No 85.17 were to be classified according to Note 2 (b) under tariff heading No 85.17, the Bundesfinanzhof takes the view that it may have been significant in that context that the case concerned appliances which were linked by cable to the signal-emitting device (which was clearly not the case in the dispute before it). Consequently, by order of 29 January 1985 it stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling:

The Government of the Federal Republic of Germany has submitted that the correct classification is under tariff heading No 85.22. The only other observations were submitted by the Commission, which is of the opinion that the tags in question must be classified under tariff heading No 85.17 as parts of an electrical signalling apparatus if the system as a whole is covered by that heading.

The argument put forward by the Government of the Federal Republic of Germany turns on the term signalling apparatus contained in the title of heading No 85.17. It takes the view that a distinction must be made between the complete operational unit (in this case the antitheft security system) and the apparatus. Only the latter is covered by tariff heading No 85.17. The apparatus with which the main proceedings are concerned consists solely of an overhead system and an alarm console since with those two elements it is complete and fully operational, that is to say the equipment is thereby capable of fulfilling all its tasks. With regard to the tags, they may be compared to data processing equipment where the software is not regarded as a component of the machinery but is classified for tariff purposes according to its intrinsic characteristics. Alternatively, a comparison may be made with vending machines, where the coins are not pan of the machine, or with burglar alarms where, similarly, the burglar does not form part of the apparatus. If, in accordance with the foregoing, the, tags are to be classified for tariff purposes as independent goods according to their intrinsic characteristics, they must necessarily be classified as electrical apparatus having individual functions under tariff heading No 85.22.

I take the view — as does the Commission — that that argument may be criticized on various counts, and furthermore that, in the final analysis, the Commission's viewpoint (which I shall examine shortly) is more persuasive.

1. Doubts arise immediately with regard to the opinion of the representative of the Government of the Federal Republic of Germany that the apparatus is fully operational as such. I suggest that it is operational only with the security tags and not without them. It is also doubtful whether the tags have an individual function within the meaning of the Explanatory Notes (which will be considered further in connection with the arguments put forward by the Commission).

2. With regard to the Commission's opinion, it is evident to me that a distinction must be made according to whether the security tags are presented to the customs authorities together with the other components of the security system or are imported separately.

3. In the second case, the one at issue in the main proceedings and which alone may give rise to problems, the Commission also argued persuasively that if the tariff classification was to be made according to intrinsic characteristics the material from which the tags are made would scarcely come into consideration. The nature and character of the tags would certainly not be determined by such materials but rather by their construction and operation.

The question referred to the Court by the Bundesfinanzhof should therefore be answered in the manner proposed by the Commission and the ruling to be given to the court making the reference should be that Note 2 in conjunction with Note 5 to Section XVI of the Common Customs Tariff is to be interpreted to the effect that individual electrical appliances, which are presented separately, are to be regarded as parts within the meaning of that note where they are intended to be fixed to goods in such a manner that if the goods are brought within range of another appliance they release an audible or visible signal, and that the individual electrical appliances are to be classified as a result of that function under tariff heading No 85.17 of the Common Customs Tariff pursuant to those Notes.

1 Translated from the German.

2 Translator's note: the reference to individual functions does not appear in the French or German versions of the Common Customs Tariff.

3 Judgment of 15 December 1977 in Case 60/77 Fritz Fun KG v Oberfinanzdirektion München [1977] ECR 2453, at p. 2460 et seq.