In Joined Cases C-274/95, C-275/95 and C-276/95,
REFERENCES to the Court under Article 177 of the EC Treaty by the Bundesfinanzhof for a preliminary ruling in the proceedings pending before that court between
Ludwig Wünsche & Co.
and
Hauptzollamt Hamburg-Jonas
on the interpretation of the Common Customs Tariff, as laid down in Council Regulation (EEC) No 3618/86 of 24 November 1986 amending Regulation (EEC) No 3331/85 amending Regulation (EEC) No 950/68 on the Common Customs Tariff (OJ 1986 L 345, p. 1), and of the Combined Nomenclature, as contained in 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),
THE COURT
(Fourth Chamber),
composed of: J.L. Murray, President of the Chamber, P.J.G. Kapteyn (Rapporteur) and H. Ragnemalm, Judges,
Advocate General: G. Tesauro,
Registrar: H.A. Rühl, Principal Administrator,
after considering the written observations submitted on behalf of:
- Ludwig Wünsche & Co., by Klaus Landry, Rechtsanwalt, Hamburg,
- Commission of the European Communities, by Francisco Fialho, of its Legal Service, acting as Agent, and Hans-Jürgen Rabe, Rechtsanwalt, Hamburg,
having regard to the Report for the Hearing,
after hearing the oral observations of Ludwig Wünsche & Co., represented by Klaus Landry, and the Commission, represented by Georg M. Berrisch, Rechtsanwalt, Hamburg, at the hearing on 14 November 1996,
after hearing the Opinion of the Advocate General at the sitting on 12 December 1996,
gives the following
Judgment
1 By three orders of 20 June 1995, received at the Court on 14 August 1995, the Bundesfinanzhof (Federal Finance Court) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty questions on the interpretation of the Common Customs Tariff as laid down in Council Regulation (EEC) No 3618/86 of 24 November 1986 amending Regulation (EEC) No 3331/85 amending Regulation (EEC) No 950/68 on the Common Customs Tariff (`CCT') (OJ 1986 L 345, p. 1), and of the Combined Nomenclature (`CN'), as contained in 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).
2 Those questions were raised in proceedings between Ludwig Wünsche & Co. (`Wünsche') and Hauptzollamt (Principal Customs Office) Hamburg-Jonas (`the Hauptzollamt') concerning the tariff classification of a product known as `Perfectamyl KKS', certain consignments of which were exported in 1987 and 1988 to non-Member States.
3 The version of the CCT contained in Regulation No 3618/86 applied to exports made during 1987 (Cases C-275/95 and C-276/95). Headings 11.08 A IV and 39.06 B I of the CCT are worded as follows:
- Heading 11.08 A IV:
`11.08 Starches; inulin: A. Starches: IV. Potato starch';
- Heading 39.06 B I:
`39.06 Other high polymers, artificial resins and artificial plastic materials, including alginic acid, its salts and esters; linoxyn:
B. Other: I. Starches, esterified or etherified'.
4 As regards exports made during 1988 (Case C-274/95) the text applicable is the CN published in Regulation No 2658/87, subheadings 1108 13 00 and 3505 10 50 of which are worded as follows:
- Subheading 1108 13 00:
`1108 Starches; inulin: - Starches 1108 13 00 - - potato starch';
- Subheading 3505 10 50:
`3505 Dextrins and other modified starches (for example, pregelatinized or esterified starches); glues based on starches, or on dextrins or other modified starches:
3505 10 - Dextrins and other modified starches;
3505 10 10 - - Dextrins - - Other modified starches: 3505 10 50 - - Starches, esterified or etherified'.
5 According to Article 1 of Commission Regulation (EEC) No 28/90 of 4 January 1990, concerning the classification of certain goods in the codes 1108 11 00, 1108 12 00, 1108 13 00 and 1108 14 00 of the combined nomenclature and repealing Regulation (EEC) No 1463/87 (OJ 1990 L 3, p. 9), which entered into force on 1 March 1990, and point 3 of the Annex thereto, products in the form of fine white powder consisting of a mixture of native potato starch and small quantities of acetylated potato starch or very weakly acetylated potato starch, and having a starch content of 95% or more by weight and an acetyl content of less than 0.5% by weight, must be classified under subheading 1108 13 00. According to the reasons set out in the Annex, those products, by virtue of their characteristics, notably their low acetyl content, are to be regard as starches under CN code 1108 13 00 and not as esterified starches under CN code 3505 10 50.
6 Between March 1987 and February 1988 Wünsche applied to various customs offices in Germany for customs clearance of certain quantities of Perfectamyl KKS, a product intended for export to countries outside the Community. That product was declared for customs purposes as a food preparation consisting as to 96.5% of potato starch (Case C-275/95) and as potato starch having a starch content of 78% or more by weight (Cases C-274/95 and C-276/95).
7 Following inspections of the starch used in the manufacture of the exported products, the Hauptzollamt came to the conclusion that Wünsche had not exported native potato starch but esterified starch which, under the applicable Community regulations, did not attract the export refunds and monetary compensatory amounts provided for in the case of native potato starch. Therefore, by decision of 30 May 1988, the customs authority ordered Wünsche to repay the export refunds and monetary compensatory amounts which it had received (Cases C-275/95 and C-276/95). Moreover, by decision of 23 June 1988, it refused to pay Wünsche such amounts and refunds (Case C-274/95).
8 Wünsche brought proceedings against those decisions before the Finanzgericht (Finance Court) which upheld the decisions on the ground that potato starch with a degree of esterification of 0.5% or more was not native potato starch coming under heading 11.08 A IV of the CCT (and subheading 1108 13 00 of the CN), but had to be regarded as esterified starch falling under tariff heading 39.06 B I of the CCT (and subheading 3505 10 50 of the CN). However, according to the findings of the Finanzgericht, the exported products had a degree of esterification of up to 0.61% by weight in Case C-275/95 and up to 0.74% by weight in Case C-276/95. Moreover, in Case C-274/95 the degree of esterification of the exported products amounted, according to information provided by Wünsche, to 0.67% by weight.
9 Before the Bundesfinanzhof Wünsche argued that the Finanzgericht had misinterpreted headings 11.08 and 39.06 of the CCT and the corresponding subheadings 1108 13 00 and 3505 10 50 of the CN. In support it relied on the judgment of the Court in Case C-256/91 Emsland-Stärke v Oberfinanzdirektion München [1993] ECR I-1857, in which the Court held that starch having an acetyl content of less than 0.5% was to be classified under heading 1108, but that an acetyl content greater than that did not preclude classification of the potato starch under that heading. On the other hand, the Hauptzollamt considered that the judgment in Emsland-Stärke concerned only tariff classification of a product made up of a mixture of native starch and potato starch ester, with the result that its conclusions could not apply to the product at issue in the main proceedings, which is a homogeneous product.
10 It is apparent from the order for reference that, according to the Bundesfinanzhof, doubts subsist as a matter of law as to the correct classification of esterified potato starch having an acetyl content of 0.5% or more by weight.
11 In that connection, it stresses that any chemical alteration to natural starch results in esterification, no matter how weak, with the result that classification of a product as esterified starch is not dependent on the acetyl content established, but rather on the fact that the starch has been subjected to a chemical process of esterification. Where esterified potato starch has been manufactured by means of a chemical alteration, as in the case at issue in the main proceedings, and not by admixture, it should in principle be classified under heading 39.06 B I of the CCT or under heading 3505 of the CN. On the other hand, both the judgment in Emsland-Stärke, cited above, and Regulation No 28/90 favour the conclusion that the tariff classification of esterified potato starch is dependent not only in the case of admixture, but also in the case of chemical processing, on the acetyl content, the substance which gives the product its essential character.
12 Under those circumstances, the Bundesfinanzhof decided to stay proceedings and refer the following questions to the Court:
- In Case C-274/95:
`1. Does the tariff classification of esterified potato starch under subheading 3505 10 50 of the Combined Nomenclature depend on its acetyl content and consequently on the degree of its esterification?
2. If the answer is in the affirmative: how high could the maximum acetyl content have been in the case of esterified potato starch exported in February 1988 so as not to preclude its tariff classification under subheading 1108 13 00 of the Combined Nomenclature?'
- In Case C-275/95:
`1. Does the classification of esterified potato starch under tariff subheading 39.06 B I of the Common Customs Tariff 1987 or under tariff subheading 11.08 A IV of the Common Customs Tariff 1987 depend on its acetyl content and consequently on the degree of its esterification?
2. If the answer is in the affirmative: how high could the maximum acetyl content have been in the case of esterified potato starch exported between April 1987 and August 1987 so as not to preclude its classification under tariff subheading 11.08 A IV of the Common Customs Tariff 1987?'
- In Case C-276/95:
`1. Does the classification of esterified potato starch under tariff subheading 39.06 B I of the Common Customs Tariff 1987 or under tariff subheading 11.08 A IV of the Common Customs Tariff 1987 depend on its acetyl content and consequently on the degree of its esterification?
2. If the answer is in the affirmative: how high could the maximum acetyl content have been in the case of esterified potato starch exported between March 1987 and December 1987 so as not to preclude its classification under tariff subheading 11.08 A IV of the Common Customs Tariff 1987?'
13 By order of the President of the Court of 20 September 1995 the three cases were joined, in accordance with Article 43 of the Rules of Procedure, for the purposes of the written and oral procedure and of the judgment.
The first question
14 By its first question in each of the cases, the national court is essentially seeking to ascertain whether the classification of esterified potato starch under heading 11.08 A IV of the CCT (and under subheading 1108 13 00 of the CN) or under heading 39.06 B I of the CCT (and under subheading 3505 10 50 of the CN) is dependent on its acetyl content and thus on its degree of esterification.
15 The Court has consistently held that, in the interests of legal certainty and ease of verification, the decisive criterion for the customs classification of goods must be their objective characteristics and properties, as defined by the wording of the headings of the Common Customs Tariff and the notes to the sections or chapters (see, in particular, Case 40/88 Weber [1989] ECR 1395, paragraph 13, and Case C-265/89 Vismans Nederland [1990] ECR I-3411, paragraph 14).
16 Since, in the present case, the terms of the headings and subheadings, and of the corresponding explanatory notes, provide no useful guidance for answering the question, it falls to be considered whether the acetyl content and the degree of esterification are characteristics or objective properties of potato starch.
17 In that connection it should be recalled that in Emsland-Stärke the Court held, at paragraph 34, that the acetyl content of starch is an indicator of its degree of substitution: the higher the acetyl content, the more extensive the modification of the starch. Consequently, starch with a very low acetyl content may be close to native starch. The Court therefore accepted classification of a product with a low acetyl content under subheading 1108 13 00 of the CN.
18 Although that judgment was concerned with a mixture of native potato starch and esterified starch, none the less the Court based itself on general considerations as to the degree of substitution as between acetylated starches and native starches which are entirely capable of being transposed to a case of uniformly esterified potato starch of the kind at issue in the main proceedings.
19 It follows that the mere chemical process of esterification occurring in the manufacture of the product is not sufficient in itself to enable it to be decided that the potato starch should be classified under heading 11.08 A IV of the CCT (and under subheading 1108 13 00 of the CN) or under heading 39.06 B I of the CCT (and under subheading 3505 10 50 of the CN). The acetyl content, and thus the degree of esterification, must, inter alia, be taken into consideration in order to determine the tariff classification of esterified potato starch.
20 Moreover, that interpretation is corroborated by Regulation No 28/90, which has since been adopted; both in the case of mixtures of native potato starch and small quantities of acetylated potato starch and in the case of very weakly acetylated potato starch, that regulation expressly identifies the acetyl content as a characteristic to be taken into account for the purposes of determining the tariff classification.
21 It must therefore be held that the tariff classification of esterified potato starch is dependent primarily on its acetyl content.
22 Nevertheless, as the Commission has rightly observed, acetyl content constitutes, in the first place, an indication of the degree of transformation of the starch from a purely quantitative point of view. Whilst, as a general rule, it must be regarded as a determinative classification criterion, the national court will, nevertheless, also have to examine any parallel alterations in the properties, possibilities for use and other qualities of the starch in order to determine whether and when the degree of esterification expressed by the acetyl content causes the starch, from a qualitative point of view, to pass from its native state to a modified state within the meaning of the CCT and the CN.
23 Consequently, the answer to the national court's first question must be that the classification of esterified potato starch under heading 11.08 A IV of the CCT (and under subheading 1108 13 00 of the CN) or under heading 39.06 B I of the CCT (and under subheading 3505 10 50 of the CN) is primarily dependent on its acetyl content and thus on its degree of esterification. Nevertheless, it is for the national court to determine whether the nature of the esterification does not amount to an alteration of the potato starch such that it no longer corresponds qualitatively to native potato starch.
The second question
24 Regard being had to the facts of the main proceedings, this question, in each of the cases, must be construed as seeking essentially to determine whether a maximum acetyl content of between 0.61% and 0.74% by weight of the esterified potato starch precludes its being classified under heading 11.08 A IV of the CCT and under subheading 1108 13 00 of the CN.
25 In that connection it should be pointed out that the Court has already held in Emsland-Stärke, at paragraph 35, that a slightly higher acetyl content (0.65% or 0.67% by weight) than the 0.5% by weight mentioned in Regulation No 28/90 is not sufficient to prevent the product's being classified under subheading 1108 13 00.
26 Similarly, an acetyl content of 0.74% by weight cannot prevent the esterified potato starch being classified under that subheading of the CN. Moreover, Wünsche relied in its written observations on scientific data which, in its view, show that starches having an acetyl content of that level differ in no way from native starches.
27 The foregoing considerations are valid also for the classification of esterified potato starch under heading 1108 A IV of the CCT.
28 The answer to the national court's second question must therefore be that a maximum acetyl content of between 0.61% and 0.74% by weight of esterified potato starch does not preclude its being classified under heading 11.08 A IV of the CCT and under subheading 1108 13 00 of the CN.
Costs
29 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT
(Fourth Chamber),
in answer to the questions referred to it by the Bundesfinanzhof by orders of 20 June 1995, hereby rules:
1. The classification of esterified potato starch under heading 11.08 A IV of Council Regulation (EEC) No 3618/86 of 24 November 1986 amending Regulation (EEC) No 3331/85 amending Regulation (EEC) No 950/68 on the Common Customs Tariff (and under subheading 1108 13 00 of the Combined Nomenclature, as contained in Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff), or under heading 39.06 B I of the Common Customs Tariff (and under subheading 3505 10 50 of the Combined Nomenclature) is primarily dependent on its acetyl content and thus on its degree of esterification. Nevertheless, it is for the national court to determine whether the nature of the esterification does not amount to an alteration of the potato starch such that it no longer corresponds qualitatively to native potato starch.
2. A maximum acetyl content of between 0.61% and 0.74% by weight of esterified potato starch does not preclude its being classified under heading 11.08 A IV of the Common Customs Tariff and under subheading 1108 13 00 of the Combined Nomenclature.
