Opinion of Mr Advocate General Van Gerven
Mr President,
Members of the Court,
1. The Hessisches Finanzgericht (Finance Court, Hessen) has referred the following questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty:
2. The Community rules on origin are contained in Regulation No 802/68. Article 1 of Regulation No 802/68 provides:
The first question
3. Article 5 of Regulation No 802/68, to which the first question relates (see point 1 above), provides:
4. The observations lodged by Brother, the Commission and the Netherlands and French Governments refer at length to the case-law on the subject and also base arguments on the Commission's implementing regulations in respect of certain products, but not the product at issue. The judgments of the Court already delivered on the subject occupy an important place in those observations but they are interpreted differently. Different theories are put forward. Without wishing to overestimate the significance of those theories, I should like nevertheless to describe them briefly as follows: (1) the theory that there should be a technical or technological test based on the characteristics of the product (see point 5 et seq. below), (2) the theory that there should be an added value test, or, in broader terms an economic test (see point 6 below); and (3) some other theories of lesser importance including one referring to the criterion of classification in another subheading of the customs tariff (see point 5 below). In this opinion I shall first of all cite the case-law of the Court, then I shall briefly mention the different conclusions which the parties draw from it and finally I shall give my own view.
The case-law of the Court
5. In the judgment of the Court of 26 January 1977 in Case 49/76 Gesellschaft für Überseehandel mbH v Handelskammer Hamburg [1977] ECR 41, paragraphs 5 to 7 of the judgment, the Court answered a question put by the Verwaltungsgericht Hamburg as to whether untreated casein obtained in a third country and ground in a Member State to make it fit for use originated in that Member State. The Court held as follows:
6. In its judgment of 31 January 1979 in Case 114/78 Yoshida Nederland BV v Kamer van Koophandel en Fabrieken voor Friesland [1979] ECR 115, the Court declared Commission Regulation (EEC) No 2067/77 of 20 September 1977 concerning the determination of the origin of slide fasteners (Official Journal L 242, 21.9.1977, p. 5) to be invalid. According to that regulation the production of slide fasteners in the Community did not constitute an operation determining origin if sliders originating in non-member countries were used. The Court held inter alia:
7. In the judgment of 23 March 1983 in Case 162/82 Cousin [1983] ECR 1101, concerning the validity of another Commission implementing regulation and a question regarding Article 30 of the EEC Treaty, the Court stated:
8. In its judgment of 23 February 1984 in Case 93/83 Zentrag v Hauptzollamt Bochum [1984] ECR 1095, which concerns an implementing regulation in relation to meat, the Court held:
Interpretation given by the parties
9. What general conclusions may be drawn from that case-law? First of all it is necessary to point out that each of the four judgments cited concerns a specific question differing from that at issue in the present case, which relates to the assembly of machines. Caution is therefore called for in referring to individual passages from those judgments since in this field the specific factual circumstances have a considerable influence on the application of the rules of law.
10. Before coming to my own assessment I should like to point out that both Brother and the Commission rightly reject the condition of an independent intellectual element in the assembly operation. Great importance had been attached to that condition by the national court, which, according to Brother's uncontradicted statement, relied on the German rules prior to the Community regulation. The insertion of a condition of intellectual content or creativity in order for assembly to determine origin is supported neither by the wording of Article 5 nor by the case-law of the Court and would amount to an economically unjustified preference for certain artisanal methods of production. In addition, it would be a very difficult criterion to apply since it is not easy to assess whether or not any intellectual content or creativity is involved.
Simple or substantial assemblies
11. As I have said (see point 3 above) the question put by the national court is essentially whether and in what circumstances is an assembly a substantial operation or process such that (if it is also the last economically justified operation or process) it may determine the origin for the purposes of Article 5 of Regulation No 802/68.
12. It remains necessary to define what assemblies are not simple assemblies but substantial operations. To answer that question it is necessary to take as a basis the terms of Article 5 of Regulation No 802/68 in its various versions. The process or operation is described as ingrijpende in Dutch, substantielle in French, wesentliche in German, sostanziale in Italian and substantial in English.
13. In concrete terms, the combined application of a main technical criterion and an ancillary economic criterion leads to the following approach: a technically substantial operation or process, as defined above, which involves only a small increase in value and/or only relatively small costs is not a substantial operation or process within the meaning of Article 5. If the national court is convinced by the Commission's contentions in the present case that the assembly operations in Taiwan increase the value of the product by much less than 10%, it must in my opinion necessarily conclude that such assembly operations are not substantial even if, from the technical point of view, a new product results from the assembly which is ready for use.
14. The criterion put forward above seems to be the only realistic one in view of the large variety of products for which Article 5 of Regulation (EEC) No 802/68 may be relevant.
Answer to the first question
15. In view of the foregoing I propose that the following reply be given to the national court:
The second question
16. Anide 6 of Regulation (EEC) No 802/68 to which the second question relates (see point 1 above) provides:
17. I therefore propose that the following reply be given to the national court:
1 Original language: Dutch.
2 OJ L 163, 22.6.1985, p. 1.
3 OJ C 338.31 12.1985, p 7
4 OJ L 140,27 5 1986, p 52
5 OJ. English Special Edition 1968 (I), p. 165.
6 It is established that the first operation, namely the attaching of resistors and other components to printed circuits was done in Taiwan only on three models of the electronic typewriter in question. For the other models that operation was done in Japan.
7 Since, as will appear later, the answer to the question of law put in the present case stems from the case-law of the Court in relation to Article 5 it will not be necessary to refer further to those implementing regulations.
8 See paragraph 10: (c) the attaching of the metal scoops or the nylon spirals to the tapes and the subsequent joining of the tapes; (d) the attaching of bottom stops and top stops to the tapes; (e) the insertion and where necessary the colouring of the sliders; (0 the drying and cleaning of the slide-fastener lengths followed by the cutting of them to make individual slide fasteners.
9 In this case the criterion is used to determine whether the operations under consideration ted to the manufacture of a new product or constituted an important stage of manufacture and thus amounted to a substantial operation Tfiat shows that the interpretation of the different parts of the sentence in Article !> overlaps and is determined to a large extent aicording to the same criteria It is, however, different in the present case (see point 3 above), because the national court has rightly assumed that in this case the assembly of the separate pieces has given rise to a new product and therefore it has concentrated in its questions on the substantial nature of that assembly
10 The criterion of work done and material expenditure is an accountancy approach in terms of cost. The added value, that is to say the value added by the processor, refers to the difference herween the sale price of the finished product and the purchase price of the raw material, energy and, if necessary, rent and so forth. Theoretically the latter criterion differs from the first in two respects: apart from payment for labour, it also includes capital and real property costs, two production factors which are missing in the calculation of the work done and material expenditure and it is based on the market prices arising from the interplay of supply and demand. In practice those differences are of little importance: the first difference is slight and foreseeable (and may be replaced by a flat rate), no doubt in view of the relative importance of the production factors as part of the total cost or the added value of the final product; the second difference is purely theoretical in many cases and certainly in the present case, for there is no sufficiently wide and transparent market for the various separate (Brother) components for electronic typewriters. In the absence of such a market it is necessary to have recourse to the approach based on cost.
11 See, for example, Bail/Schädel/Hutter: Kommentar Zollrecht, F IV, note 8 in relation to Article 5 of Regulation No 802/68.
12 Council Decision 75/199/EEC of 18 March 1975 concluding an International Convention on the simplification and harmonization of customs procedures and accepting the annex thereto concerning customs warehouses (OJ L 100, 21.4.1975, p. 1), to which the convention is annexed.
13 Council Decision 77/415/EEC of 3 June 1977 accepting on behalf of the Community several annexes to the International Convention on the simplification and harmonization of customs procedures (OJ L 16ū, 4.7.1977, p. 1).
14 See the last paragraph of the introduction: The annex deals solely with the customs aspects of rules of origin. It does not, tor example, extend to measures taken to protect industrial or commercial property or to ensure respect for origin indications or other trade descriptions in force.
15 Sec Mr Advocate General Warner's Opinion in the judgmeni of 26 January 1977 Gesellschaft für Überseehandel case, [1977] ECR 61; paragraphs II and 12 of the judgment of 31 January 1979 cited above in point 6 and (for a rebuttal of the view that the economic criterion should be the main criterion) the last sentence of paragraph 14 of the judgment of 23 February 1984, cited above in point 8.
16 Thus it is substantially less than the 22% referred to by the Court in paragraph 14 of the judgment of 23 February 1984, cited above in point 8.
17 See the last two sentences of paragraph 12 of the judgment of 31 January 1979 cited above in point 6 and the Opinion of Advocate General Sir Gordon Slynn, [1983] ECR 1128 and 1129 in the Cousin case, cited above in point 7.