Court of Justice of the European Communities (including Court of First Instance Decisions)

(Community Customs Code Implementing measures Regulation (EEC) No 2454/93 Annex 11 Non-preferential origin of goods Television receivers Concept of substantial processing or working Criterion of added value Validity)

In Joined Cases C-447/05 and C-448/05,

REFERENCES for a preliminary ruling under Article 234 EC from the Cour d'appel de Paris (France), made by decisions of 18 November 2005, received at the Court on 16 December 2005, in the proceedings

Thomson Multimedia Sales Europe (C-447/05),

Vestel France (C-448/05)

v

Administration des douanes et droits indirects,

composed of K. Lenaerts, President of the Chamber, E. Juhász, R. Silva de Lapuerta, G. Arestis and J. Malenovský (Rapporteur), Judges,

Advocate General: P. Mengozzi,

Registrar: J. Swedenborg, Administrator,

having regard to the written procedure and further to the hearing on 29 November 2006,

after considering the observations submitted on behalf of:

Thomson Multimedia Sales Europe, by F. Goguel, avocat,

Vestel France, by F. Goguel, avocat, and P. de Baere, advocaat,

the French Government, by G. de Bergues and G. Le Bras, acting as Agents,

the Italian Government, by I.M. Braguglia, acting as Agent, assisted by G. Albenzio, avvocato dello Stato,

the United Kingdom Government, by C. White and K. Beal, acting as Agents,

the Commission of the European Communities, by X. Lewis and J. Hottiaux, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

1. The present references for a preliminary ruling concern the validity of the provisions in column three, under heading 8528 of the Combined Nomenclature, set out in Annex 11 to Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code (OJ 1993 L 253, p. 1, 'the contested provisions of Annex 11 to Regulation No 2454/93').
2. The references have been made in the context of proceedings relating to the origin of television receivers, as determined by the Administration française des douanes et droits indirects (the French Authority responsible for Customs and Indirect Taxes, 'the Customs Authority') in binding information on non-preferential origin ('BOIs') issued in 2003 at the request of the companies Thomson Sales Europe, formerly Thomson Multimedia Sales Europe ('Thomson'), and Vestel France ('Vestel').

Legal context

The Community Customs Code

3. Article 24 in Section 1, entitled 'Non-preferential origin', of Chapter 2 of Title II of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1, 'the Community Customs Code') provides:

'Goods whose production involved more than one country shall be deemed to originate in the country where they underwent their last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture.'

4. Article 249 of the Community Customs Code provides that the Commission of the European Communities is to adopt the measures required for the implementation of that code.

Regulation No 2454/93

5. Pursuant to the first paragraph of Article 39 of Regulation No 2454/93:

'In the case of products obtained which are listed in Annex 11, the working or processing referred to in column three of the Annex shall be regarded as a process or operation conferring origin under Article 24 of the [Community Customs] Code.'

6. Annex 11 to Regulation No 2454/93 provides:

CN code	Description of products	Working or processing carried out on non'originating materials that confers the status of originating products
(1)	(2)	(3)
... ex 8528	... Television receivers, (excluding videotuners, television projection equipment and video monitors), whether or not combined, in the same housing, with radio-broadcast receivers or sound recording or reproducing apparatus, but not with videorecording or reproducing apparatus	... Manufacture where the increase in value acquired as a result of assembly operations and, if applicable, the incorporation of parts originating in the country of assembly represents at least 45% of the ex-works price of the products When the 45% rule is not met, the apparatus shall be treated as originating in the country of origin of parts whose ex-works price represents more than 35% of the ex-works price of the apparatus When the 35% rule is met in two countries, the apparatus shall be treated as originating in the country of origin of parts representing the greater percentage value

The disputes in the main proceedings and the questions referred for a preliminary ruling

Case C-447/05

7. Thomson markets in France television receivers manufactured in Poland from parts originating in Poland and other countries. The cathode ray tube, originating in Korea, represents 42.43% of the ex-works price of a television receiver. The components of the television receivers which originate in Poland and the manufacturing operations carried out in that country represent 31.49% of the ex-works price.
8. At the request of Thomson, the Customs Authority, on the basis of Article 24 of the Community Customs Code and Article 34 of Regulation No 2454/93 and Annex 11 to the latter regulation, issued a BOI on 11 July 2003 declaring Korea to be the country of origin of those television receivers.
9. Challenging the validity of the contested provisions of Annex 11 to Regulation No 2454/93 in the light of Article 24 of the Community Customs Code, Thomson subsequently applied to the Tribunal d'instance du 7^e arrondissement de Paris (District Court, Paris 7) for annulment of that BOI and a declaration that Poland was the country of origin of the receivers in question.
10. The Tribunal d'instance dismissed that application by a judgment of 8 June 2004, against which Thomson appealed to the Cour d'appel de Paris (Paris Court of Appeal). Having expressed doubts as to the validity of the contested provisions of Annex 11 to Regulation No 2454/93, the latter court decided to stay proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

'Is Annex 11 to ... Regulation ... No 2454/93 ... invalid as being contrary to Article 24 of ... the Community Customs Code in that it has the result that a television receiver manufactured in Poland in the circumstances described in the proceedings is held to be of Korean origin?'

Case C-448/05

11. Vestel markets in France television receivers manufactured in Turkey from parts originating in Turkey and other countries. The cathode ray tube, originating in China, represents 43.1141% of the ex-works price of a television receiver. The components of the television receivers which originate in Turkey and the manufacturing operations carried out in that country represent 38.47% of the ex-works price.
12. At the request of Vestel, the Customs Authority, on the basis of Article 24 of the Community Customs Code and Article 34 of Regulation No 2454/93 and Annex 11 to the latter regulation, issued a BOI on 24 March 2003 declaring China to be the country of origin of those television receivers.
13. Challenging the validity of the contested provisions of Annex 11 to Regulation No 2454/93 in the light of Article 24 of the Community Customs Code, Vestel subsequently applied to the Tribunal d'instance du 7^e arrondissement de Paris (District Court, Paris 7) for annulment of that BOI and for a declaration that Turkey was the country of origin of the receivers in question.
14. The Tribunal d'instance dismissed that application by a judgment of 8 June 2004, against which Vestel appealed to the Cour d'appel de Paris (Paris Court of Appeal). Having expressed doubts as to the validity of the contested provisions of Annex 11 to Regulation No 2454/93, the latter court decided to stay proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

'Is Annex 11 to ... Regulation ... No 2454/93 ... invalid as being contrary to Article 24 of ... the Community Customs Code in that it has the result that a television receiver manufactured in Turkey in the circumstances described in the proceedings is held to be of Chinese origin?'

15. By order of the President of the Court of 7 March 2006, Cases C-447/05 and C-448/05 were joined for the purposes of the written and oral procedure and the judgment.

The questions referred

16. By its questions, the referring court seeks to ascertain whether the contested provisions of Annex 11 to Regulation No 2454/93 are invalid in so far as they require that the increase in value acquired as a result of assembly operations and, if applicable, the incorporation of parts originating in the country of assembly must represent at least 45% of the ex-works price of the television receivers in order for their manufacture to confer on them the origin of the country in which that assembly took place.
17. The appellants in the main proceedings are essentially claiming that, by thus relying on a criterion based on added value, which they consider to be 'quantitative' and incompatible with the 'qualitative' criteria which, they submit, are set in Article 24 of the Community Customs Code, the Commission has exceeded the powers conferred on it by the Council of the European Union for the purpose of implementing the rules which the Council set out in that code.
18. The first point to be noted is that the issue of the validity of the contested provisions of Annex 11 to Regulation No 2454/93 has been raised in the context of actions in the main proceedings which seek to challenge the legality of BOIs relating to television receivers, some of which were assembled in Poland and others in Turkey. The applications which gave rise to those BOIs were submitted in 2003 by undertakings with their headquarters in France and which wished to determine the non-preferential origin of those receivers as defined under the rules set out in Articles 22 to 26 of the Community Customs Code.
19. Those applications did not seek to determine the preferential origin of goods, as defined in Article 27 of the Community Customs Code, and therefore did not seek to establish whether those goods benefited from preferential tariff measures contained in agreements concluded between the European Community and certain countries or groups of countries.
20. Accordingly, although the Republic of Poland and the Republic of Turkey enjoyed, when the BOIs at issue were issued, a special status in their customs relations with the European Communities, that fact is not in itself such as to cast doubt on the relevance of the questions raised by the referring court.
21. In that regard it should be recalled, first, that, under Article 24 of the Community Customs Code, goods whose production involved more than one country are to be deemed to originate in the country where they underwent their last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture.
22. That article reproduces the terms of Article 5 of Regulation (EEC) No 802/68 of the Council of 27 June 1968 on the common definition of the concept of the origin of goods (OJ, English Special Edition 1968 (I), p. 165), which applied before the entry into force of the Community Customs Code. For the purpose of interpreting that regulation, the Court has held that it is clear from Article 5 that the decisive criterion is that of the last substantial process or operation (Case C-26/88 Brother International [1989] ECR 4253, paragraph 15).
23. Secondly, Article 249 of the Community Customs Code constitutes a sufficient basis for the Commission to adopt a set of rules for the implementation of that code (Case C-48/98 Söhl & Söhlke [1999] ECR I-7877, paragraph 35).
24. It follows from the Court's case-law that the Commission is authorised to adopt all the measures which are necessary or appropriate for the implementation of the basic legislation, provided that they are not contrary to such legislation or to the implementing legislation adopted by the Council (see, inter alia, Söhl & Söhlke, paragraph 36).
25. In addition, the Commission has, in exercising the power conferred upon it by the Council for the implementation of Article 24 of the Community Customs Code, a margin of discretion which allows it to define the abstract concepts of that provision with reference to specific working or processing operations (see Case 162/82 Cousin and Others [1983] ECR 1101, paragraph 17).
26. Concerning the issue whether the operation of assembling various parts amounts to a substantial working or processing operation, the Court has already held that such an operation may be regarded as conferring origin where it represents, from a technical point of view and having regard to the definition of the goods in question, the decisive production stage during which the use to which the component parts are to be put becomes definite and the goods in question are given their specific qualities (Case 114/78 Yoshida [1979] ECR 151 and Brother International, paragraph 19).
27. The Court has, however, held that, in view of the variety of operations which may be described as assembly, there are situations where consideration on the basis of technical criteria may not be decisive in determining the origin of goods. In such cases it is necessary to take account of the value added by the assembly as an ancillary criterion (Brother International, paragraph 20).
28. The Court has specified that the relevance of that criterion was also confirmed by the International Convention on the simplification and harmonisation of customs procedures (Kyoto Convention), several annexes to which were accepted on behalf of the Community by Council Decision 77/415/EEC of 3 June 1977 (OJ 1977 L 166, p. 1 and 3), and the notes of which in relation to Rule 3 of Annex D.1 state that in practice the substantial processing criterion can be expressed by the ad valorem percentage rule, where either the percentage value of the materials utilised or the percentage of the value added reaches a specified level (Brother International, paragraph 21).
29. Furthermore, by Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1), the Council approved, inter alia, the Agreement on Rules of Origin attached to the final act signed in Marrakech on 15 April 1994 (OJ 1994 L 336, p. 144), which provides that, when developing those rules, the ad valorem percentage criterion may be used.
30. It should be recalled in this connection that international agreements, from their entry into force, are an integral part of the Community legal order (see, inter alia, Case C-344/04 IATA and ELFAA [2006] ECR I-403, paragraph 36). It is settled case-law that Community legislation must, so far as possible, be interpreted in a manner that is consistent with those agreements (see, inter alia, Case C-76/00 P Petrotub and Republica v Council [2003] ECR I-79, paragraph 57).
31. It follows from the foregoing that the choice of the criterion of added value is not per se incompatible with Article 24 of the Community Customs Code and that reliance on that criterion cannot, in itself, prove that the Commission has exceeded its powers of implementation under Article 249 of that code.
32. The appellants in the main proceedings must be deemed to be claiming also that the situation in the industrial sector of television receiver manufacturing is such that consideration of the operations involved in the assembly of those television receivers on the basis of technical criteria may be conclusive for the purpose of determining the origin of those goods and therefore precludes the Commission from having regard, as it does in the contested provisions of Annex 11 to Regulation 2454/93, to the criterion of added value, which is merely subsidiary.
33. It must be pointed out in this connection that, for the purpose of applying Regulation No 802/68, the Commission adopted Regulation (EEC) No 2632/70 of 23 December 1970 on determining the origin of radio and television receivers (OJ, English Special Edition 1970 (III) p. 911), the provisions of which, referring to the criterion of the increase in value, are essentially reproduced in the contested provisions of Annex 11 to Regulation No 2454/93.
34. According to the second recital in the preamble to Regulation No 2632/70, the assembly of radio and television receivers can involve processes of a more or less complicated character depending on the type of apparatus that is being assembled, the methods used and the conditions in which assembly takes place. The third recital in the preamble to that regulation also notes that the assembly operations, 'at the present stage of technical development in this branch of industry', do not generally constitute in themselves an important stage of manufacture within the meaning of Article 5 of Regulation No 802/68, but that the position may be otherwise in certain cases, for example where high performance apparatus or apparatus requiring strict control of the parts used is concerned or where assembly of all the component parts of the apparatus is involved. The fourth recital in the preamble to Regulation No 2632/70 adds that the variety of operations which come within the scope of 'assembly' makes it impossible to establish on the basis of a technical criterion the cases in which those operations represent an important stage of manufacture and that it is advisable, in those circumstances, to take into account the increase in value from those operations.
35. Such grounds are capable of warranting retention of the criterion of added value in the contested provisions of Annex 11 to Regulation No 2454/93.
36. The onus is on the Commission, within the framework of its discretion to adopt the measures required for the implementation of the Community Customs Code and in particular those relating to the origin of goods, to adopt provisions of a general nature which, with a view to ensuring legal certainty, take into account the overall situation of an industrial sector on a long-term basis and which, consequently, will not be called into question by the specific situation at a given time of one particular undertaking within that sector.
37. In those circumstances, the account taken by the Commission of the wide variety of operations covered by the concept of assembly throughout the industrial sector concerned justified reliance being placed on the criterion of added value.
38. Indeed, the appellants in the main proceedings themselves emphasise in their written observations that the operations to assemble the various components of the receivers at issue in the main proceedings form part of a complex industrial process. Furthermore, the documents in the files submitted to the Court do not permit the inference that that process is identical for all television receiver manufacturers. In any event, those documents do not allow the conclusion to be drawn that the operations covered by the concept of assembly throughout the industrial sector concerned are very diverse in nature.
39. Against that background, the need to apply customs rules uniformly throughout the customs territory of the Community requires that the abstract concepts of the last substantial working or processing operation, to which Article 24 of the Community Customs Code refers in respect of all goods, are defined, with regard to particular products such as television receivers, by specific provisions which can take into account the diversity of the processes for manufacturing that equipment. Consequently, it cannot be incorrect in law to have recourse to a clear and objective criterion, such as that of added value, which, in respect of such goods composed of many different parts, makes it possible to explain what is meant by the substantial processing conferring on them their origin.
40. The fact that the Commission has been led, for the reasons mentioned above, to thus define the rules on determination of origin of television receivers by relying on the criterion of added value in no way implies that that criterion is per se, and generally speaking, stricter than the general criteria set out in Article 24 of the Community Customs Code or that it would necessarily place such products in a more unfavourable position than those products, even if comparable in character, to which those general criteria or other criteria are applied. The appellants in the main proceedings cannot therefore effectively challenge the validity of the contested provisions of Annex 11 to Regulation No 2454/93 by invoking the Court's findings in Cousin and Others, which concerned the provisions of a regulation which was held to be discriminatory because it relied on considerably stricter criteria to define the origin of a product than those used to define another comparable product.
41. Furthermore, the documents in the files submitted to the Court do not indicate that applying that criterion of added value, as the appellants in the main proceedings submit, is any more problematic than applying the general concepts to which Article 24 of the Community Customs Code refers. There is no mention, in this connection, of any problem having been encountered by the Customs Authority responsible for dealing with the appellants' requests for BOIs when that authority applied, in the cases before the Court, the criterion of added value set out in the contested provisions of Annex 11 to Regulation No 2454/93.
42. It is, admittedly, true that if, as the appellants in the main proceedings also claim, the cathode ray tube now always represents at least 35% of the ex-works price of television receivers, there is a risk that the origin of that part will more often than not confer on those receivers their origin. Nevertheless, fulfilling the condition referred to above will be impossible only where the cathode ray tube represents at least 55% of the ex-works price. By contrast, the situations described before the referring court do not suggest that that condition will not be fulfilled in any situation. Application of the contested provisions of Annex 11 to Regulation No 2454/93 cannot therefore have the effect that the origin of the television receivers will be treated as being the same as that of the cathode ray tubes.
43. The provisions at issue are drafted in general terms and do not confer any decisive significance in the determination of the origin of the product concerned on any of its particular components, such as the cathode ray tube. Those provisions, contrary to what is contended by appellants in the main proceedings, are therefore not comparable to the provisions which were at issue in Yoshida and which precisely did confer such a significance on one of the components of the product concerned in that case.
44. It must be observed, in addition, that, although the situation described by the appellants in the main proceedings is the result of developments in television receiver manufacturing techniques, that situation appears in the present case to be merely circumstantial whereas, as the observations submitted at the hearing demonstrate, developments in current manufacturing techniques such as those for plasma screens have the potential substantially to affect that alleged situation. It follows that that situation is not a valid ground on which the soundness of relying on the criterion of added value may be challenged.
45. Finally, it must be stated that, by requiring that the value acquired as a result of assembly operations and, if applicable, the incorporation of parts originating in the country of assembly must represent at least 45% of the ex-works price of the products in order for their manufacture to confer on them the origin of the country where that assembly from material originating in several countries took place, the contested provisions of Annex 11 to Regulation No 2454/93 thereby set a sufficient percentage for those operations to be considered to involve an appreciable increase in the commercial value of the finished product (see, to that effect, Brother International, paragraph 22). Such a percentage does not therefore appear to be vitiated by any manifest error of assessment.
46. In the light of all the foregoing, the answer to the questions raised is that consideration of them has disclosed nothing capable of affecting the validity of the contested provisions of Annex 11 to Regulation No 2454/93.

Costs

47. Since these proceedings are, for the parties to the main proceedings, a step in the actions pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fourth Chamber) hereby rules:

Consideration of the questions raised has disclosed nothing capable of affecting the validity of the provisions in column three, under heading 8528 of the Combined Nomenclature, set out in Annex 11 to Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code.

[Signatures]

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1* Language of the cases: French.