Report for the Hearing delivered in Case 268/87

I — Summary of the facts

In 1983, Cargill BV imported a consignment of goods into the Netherlands, describing them on the customs declaration as soya husks, being residues resulting from the extraction of vegetable fat oils and fats from seeds and fruit containing oil, cattle feed. The declaration bore statistical number 230440010, which corresponds to subheading 23.04 B, which at the time of import enjoyed exemption from duty.

The Customs and Excise Administration in Amsterdam had a sample of the goods analysed in order to determine the nature and composition of the goods indicated in the declaration. As a result of the analysis, the product in question was classified not under heading 23.04, which covers oilcake, olive husks and other residues resulting from the extraction of vegetable oils, but under heading 23.06, which covers products of vegetable origin of a kind used for animal food, not elsewhere specified or included. At the time of the importation, products classified under that heading were liable to import duty of 2% ad valorem. Consequently, Cargill BV was required to pay HFL 49787.90.

Cargill BV lodged an objection, which was unsuccessful, against that change of classification and then appealed to the Tariefcommissie (Administrative Tribunal in customs and excise matters).

During the oral procedure, the Tariefcommissie asked the Rijks-Kwaliteitsinstituut voor Land- en Tuinbouwprodukten (Royal Quality Grading Institute for Agricultural and Horticultural Products) and the Ministry of Finance laboratory in Amsterdam to carry out an analysis of a sample of the soya husks. In their replies those two bodies stated in substance that the sample consisted of milled soya-bean pods (seed coats) and that there was virtually no trace of soya skins or kernels.

In the course of the same procedure, the parties agreed to use the term soya covers as a synonym for soya pods, husks, shells and hulls.

The plaintiff claimed essentially that the soya covers imported by it could not be classified under heading 23.06 since they contained no milled skins. On the other hand, they should be classified under heading 23.04 as residues resulting from the extraction of vegetable oils.

The defendant contends that it is apparent from the Explanatory Notes to the Common Customs Tariff that residues must be taken to mean the solid residues resulting from the extraction of oil. However, it follows from the absence of any particles of kernels in the samples examined that the milled soya covers in question had not undergone the physical process of extraction of oil but were removed before that process was carried out. Accordingly, they cannot be classified as residues resulting from the extraction of oil and must therefore be classified under heading 23.06.

The Tariefcommissie, considering that the soya covers could be classified not only under heading 23.04 or 23.06 as claimed by the parties to the proceedings but also under subheading 23.02 B as residues deriving from other treatments of leguminous vegetables or again under heading 23.07 as a raw material used in animal feed, stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:

The tariff headings of Chapter 23 to be examined with a view to classification of the products in question are as follows:

Heading 23.02 covers the following products:

Heading 23.04 covers the following products :

Heading 23.06 covers the following products :

Heading 23.07 covers the following products :

II — Procedure before the Court

The order for reference was received at the Court Registry on 7 September 1987.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were lodged:

on 15 December 1987 by the Commission of the European Communities, represented by René Barents, a member of its Legal Department;

on 17 December 1987 by the plaintiff, Cargill BV, represented by D. G. Van Vliet, of the Amsterdam Bar;

on 21 December 1987 by the United Kingdom, represented by H. R. L. Purse, of the Treasury Solicitor's Department.

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

III — Written observations submitted to the Court

The Commission proposes that the Court should rule in response to the question submitted by the Tariefcommissie that milled soya-bean covers must be classified under subheading 23.06 B of the Common Customs Tariff.

In arriving at that conclusion, the Commission first rejects the possibility of including soya covers under heading 23.04. Even though the Dutch-language version of the Common Customs Tariff might give the impression that that heading includes residues in the sense of waste, that is to say products which continue to be present in the course of or during the process of oil extraction, the other language versions show that residues must be taken to mean the result of applying the oil extraction process. That conclusion was confirmed by the Court in its judgment of 11 March 1982 in Case 129/81 (Fancon v SIAT [1982] ECR 967), and is in conformity with the wording of the explanatory note to the Common Customs Tariff for heading 23.04.

According to the Commission, the process used for extracting oil from soya beans is immaterial for the purpose of tariff classification of soya-bean covers. If the modern procedure known as head-end dehulling is used, the covers are separated before the physical extraction of the oil and are not therefore the result of that extraction. If on the other hand the technique known as tail-end dehulling is used, once again the covers are not considered as resulting from the oil extraction because they are already present when the process commences, by contrast with oilcakes and other residues; moreover, it is necessary to apply a special technique in order to separate the covers from the product which remains after extraction.

The Commission then claims that since soya covers cannot be regarded as seeds or leguminous vegetables, they cannot be included under subheading 23.02 B of the Common Customs Tariff.

Finally, heading 23.07 is likewise ruled out since the soya covers in question do not have the sugar or syrup content required for products under that heading.

Consequently, as the soya covers cannot be included in a more specific heading of the Common Customs Tariff nomenclature, the Commission is of the opinion that they must be classified under heading 23.06.

In the view of Cargill BV, the soya-bean covers described in the Tariefcommissie decision must be classified under subheading 23.04 B of the Common Customs Tariff.

First, it rejects tariff heading 23.07 as inappropriate. That heading covers sweetened forage and in the present case the product is an isolated unprepared product. Moreover, in its judgment of 23 March 1972 in Case 36/71 Henck v Hauptzollamt Emden [1972] ECR 187, the Court held that heading 23.07 refers to products which have been finally processed or are the result of a mixture of different substances, excluding products of which the basic component or components are classified as such under a specific heading. Since in this case there is only one basic component, which can incontestably be classified under a specific heading, it is clear that heading 23.07 cannot apply.

Tariff heading 23.03 is likewise inapplicable since it covers only residues of the various treatments of cereals and leguminous vegetables. Since soya beans are clearly not cereals and cannot be classified as leguminous vegetables, they cannot be included under that heading.

Finally, relying on the general rule for the application of the Common Customs Tariff to the effect that goods classifiable under more than one heading must by way of priority be classified under the heading which is most specific, Cargill BV considers whether soya covers may be classified under heading 23.04, which is more specific, before considering heading 23.06, which is much more general.

In its opinion, heading 23.04 covers all types of residual products which exist during the process of vegetable oil extraction. That process, which begins with the sifting and kibbling of beans and ends with the oil extraction, is a continuous and uninterrupted process from the time when the beans leave the storage silo and are poured into the sieve until the oil is physically extracted, and it is carried out in a single plant. The Court itself, following the Advocate General in that respect, recognized in Case 129/81, cited above, that that process yields several products which remain as residues.

Those products include soya husks or covers, and they should therefore be classified under heading 23.04.

In response to the statement by the Inspecteur der Invoerrechten en Accijnzen (Inspector of Customs and Excise), based on an explanatory note approved after the importation of the product, that only soya covers deriving from the physical extraction of oil, and not those separated before that operation, are classifiable under that heading, Cargill BV advances two arguments.

In the first place, the two types of soya cover are, from the qualitative point of view, exactly the same product, and it is of little importance whether the covers are removed before the physical extraction of the oil (head-end dehulling) or at the same time as the oil (tail-end dehulling), the stage at which they are removed thus being of no economic importance. Moreover, they were extracted in the same plant and by the same process, albeit at different stages in that process. In those circumstances, the Common Customs Tariff cannot draw a distinction which is artificial from the economic point of view.

In the second place, such a distinction would give rise to insurmountable difficulties for the customs authorities and importers. In fact, it is not possible, merely by looking at a product, to determine at which stage the oil extraction giving rise to the soya covers took place, and even a detailed laboratory examination would not give a definitive answer.

The Court has consistently held (see Joined Cases 208 and 209/81 Palte and Haentjens v Inspecteur de Invoerrechten en Accijnzen [1982] ECR 2511) that for the purpose of classifying goods it must be possible to determine the nature of the goods at the time of importation, without its being necessary, in principle, to make a detailed investigation into their origin and method of production. Similarly, it is the objective properties of the imported goods which constitute the decisive yardstick for their classification, without its being necessary to check the manner in which the product was obtained, since such a check is not compatible with the exigences of the efficient accomplishment of customs formalities and would be prohibited as causing products having the same objective properties and characteristics to be treated differently.

Since the product at issue is soya covers and it is undisputed that they are obtained when the oil is extracted, heading 23.04 must apply. Therefore it is not possible to classify the product under heading 23.06, which is residual in character.

The United Kingdom, like the Commission, is of the opinion that the soya covers in question must be classified under subheading 23.06 B, despite the fact that in the sample analysed there were no milled hulls (skins) present; that follows from the Court's judgment of 8 December 1977 in Case 62/77 (Carlsen Verlag v Oberfinanzdirektion Köln [1977] ECR 2343), according to which the decisive criterion for the classification of goods for customs purposes is to be sought in their characteristics and objective properties as defined in the wording of the relevant heading of the Common Customs Tariff and of the notes to the sections or chapters. The United Kingdom submits that if that criterion is applied to the goods in question they fall within subheading 23.06 B since they are products of vegetable origin of a kind used for animal food and they are not specified or included elsewhere.

Although the explanatory note for subheading 23.06 B speaks of hulls, and no trace of milled hulls was found in the sample analysed, the United Kingdom does not consider that that note prejudices its argument. The United Kingdom states that the Court has held on a number of occasions that the explanatory notes to the Common Customs Tariff, although an important factor as regards interpretation in all cases where the provisions of the tariff give rise to uncertainty, cannot amend those provisions, the meaning and scope of which are sufficiently clear (see judgments of 12 December 1973 in Case 149/73 Witt v Hauptzollamt Hamburg-Ericus [1973] ECR 1587 and of 8 May 1974 in Case 183/73 Osram GmbH v Oberfinanzdirektion Frankfurt [1974] ECR 477).

In the United Kingdom's view, not only are the terms of subheading 23.06 B sufficiently clear but the explanatory note for that subheading is consistent with the United Kingdom's interpretation. The subheading is in general terms. If the intention had been to make it clear that only soya-bean hulls are to be classified under subheading 23.06 B some other wording would have been chosen.

Alternatively, if the Court were to rule that soya covers cannot be classified in subheading 23.06 B, the United Kingdom considers that they should be classified under subheading 23.02 B. Whilst the United Kingdom accepts that soya beans could not be strictly termed leguminous vegetables, Rule A.4 of the Rules for the Interpretation of the Nomenclature of the Common Customs Tariff provides that goods not falling within any heading of the tariff shall be classified under the heading appropriate to the goods to which they are most akin. According to the United Kingdom, soya covers are more akin to the goods specified under subheading 23.02 B than to those specified under subheadings 23.04 B or 23.07 B.

As regards subheading 23.04 B, the United Kingdom states that the analysis showed that the soya covers had not undergone oil extraction operations. That heading covers only residues resulting from the extraction of vegetable oils, so that products obtained before that process was carried out cannot be included in it.

Finally, the United Kingdom does not accept that the goods in question fall to be classified under heading 23.07 since that refers to other preparations of a kind used in animal feeding. However, soya covers cannot be regarded as a preparation.

1 Language of the Case: Dutch.