Provisional text

OPINION OF ADVOCATE GENERAL

COLLINS

delivered on 18 January 2024 (1)

Case C‑104/23

A GmbH & Co. KG

v

Hauptzollamt B

(Request for a preliminary ruling from the Bundesfinanzhof (Federal Finance Court, Germany))

(Reference for a preliminary ruling – Customs union – Common Customs Tariff – Combined Nomenclature – Classification of goods – Tariff heading 9406 – Concept of prefabricated buildings – Calf hutches – Classification under subheading 9406 00 80)

I.      Introduction

1.        By this reference for a preliminary ruling, the Bundesfinanzhof (Federal Finance Court, Germany) asks the Court whether, for the purposes of the Combined Nomenclature, calf hutches made of plastic are ‘prefabricated buildings’ under Chapter 94 or ‘plastics and articles thereof’ under Chapter 39.

II.    Legal framework

2.        The Combined Nomenclature set out in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (2) governs the classification of articles imported into the European Union for customs purposes. In accordance with the International Convention on the Harmonized Commodity Description and Coding System (3) concluded in Brussels on 14 June 1983, the Combined Nomenclature is based on the Harmonized Commodity Description and Coding System (‘the harmonised system’). It consists of chapters, sections, headings and subheadings, each heading and subheading having its own code number. The first six digits relate to the headings and subheadings of the nomenclature of the harmonised system, whilst the seventh and eighth digits identify specific subheadings.

3.        The Combined Nomenclature, as amended by Commission Implementing Regulation (EU) No 1101/2014 of 16 October 2014, amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, (4) entered into force on 1 January 2015. (5) It applied at all times material to the main proceedings. (6)

4.        In Section I of Part One of the Combined Nomenclature, subsection A is entitled ‘General rules for the interpretation of the Combined Nomenclature’. So far as may be relevant here, it provides that:

‘1.      The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not require otherwise, according to the following provisions.

2.      (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled.

…

3.      When, by application of rule 2(b) or for any other reason, goods are prima facie classifiable under two or more headings, classification shall be effected as follows:

(a)      the heading which provides the most specific description shall be preferred to headings providing a more general description. …

(b)      mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable;

…

4.      Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.

…

6.      For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section and chapter notes also apply, unless the context requires otherwise.’

5.        Chapter 39 and Chapter 94 are the provisions of the Combined Nomenclature relevant to the questions referred to the Court. Heading 3926 of the Combined Nomenclature is headed ‘Other articles of plastics and articles of other materials of headings 3901 to 3914’. Subheading 3926 9097 bears the heading ‘Other’. Note 1 to Chapter 39 of the Combined Nomenclature states:

‘Throughout the nomenclature, the expression “plastics” means those materials of headings 3901 to 3914 which are or have been capable, either at the moment of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which are retained on the removal of the external influence. …’

6.        Note 2(x) to Chapter 39 of the Combined Nomenclature states that that chapter does not cover articles falling under Chapter 94, including ‘prefabricated buildings’. Heading 9406 of the Combined Nomenclature is entitled ‘Prefabricated buildings’. Note 4 to Chapter 94 of the Combined Nomenclature states:

‘For the purposes of heading 9406, the expression “prefabricated buildings” means buildings which are finished in the factory or put up as elements, presented together, to be assembled on site, such as housing or worksite accommodation, offices, schools, shops, sheds, garages or similar buildings.’

III. The facts of the main proceedings, the questions referred for a preliminary ruling and the procedure before the Court

7.        According to the referring court, the applicant, A Gmbh, supplies what it describes as calf hutches or calf igloos, of different sizes and designs, to house calves whilst they are being reared. The calf hutches are in the form of a plastic shell, composed of walls and a roof, and, depending on the model, a floor. They have openings for bedding and ventilation. The front consists of a doorless entrance, although for some models doors may be available as an option. The largest model (‘group hutch’) is imported without a floor, with a view to the subsequent addition of one made of solid wood. The dimensions of the smallest model of calf hutch are 147 cm in length, 109 cm in width and 117 cm in height. The group hutch has dimensions of 220 cm in length, 273 cm in width and 183 cm in height. Calf hutches are usually placed outdoors with a view to protecting calves from the weather. They consist of polyethylene, containing 8% titanium dioxide. Between 12% and 21% of each item consists of a metal base and doorframes.

8.        On 5 August 2015, the applicant applied to the defendant, Hauptzollamt B (Principal Customs Office B), to issue a binding tariff information to have the calf hutches classified under subheading 9406 0080 of the Combined Nomenclature as ‘prefabricated buildings’ composed of ‘other materials’. On 29 September 2015, the defendant issued a binding tariff information which classified the items under subheading 3926 9097 as articles of plastics other than those falling under Combined Nomenclature subheadings 3926 1000 to 3926 9092. As a consequence, the calf hutches attracted a rate of duty of 6.5%, rather than the rate of 2.7% that would have applied had they been classified as prefabricated buildings.

9.        The applicant brought an action before the Finanzgericht (Finance Court, Germany) to challenge the defendant’s classification and to have the calf hutches classified as ‘prefabricated buildings’. The Finanzgericht (Finance Court) rejected that action on the basis that, since they were composed of polyethylene, which gave them their essential character, the calf hutches were classified correctly under subheading 3926 9097. The Finanzgericht (Finance Court) held that since almost the entire front of the calf hutches consisted of an entrance they were not enclosed and therefore could not be classified as prefabricated buildings.

10.      The applicant appealed on a point of law to the referring court against that decision.

11.      According to the referring court, the applicant submits that it is not essential for calf hutches to be enclosed on all sides for them to come within heading 9406 of the Combined Nomenclature. Neither the regulation nor its notes make such a requirement and the examples of buildings in Note 4 to Chapter 94 of the Combined Nomenclature include ‘sheds’, which may have entry and exit openings that cannot be closed, or a side that is completely open. These examples reproduce the explanatory notes to heading 9406 of the harmonised system and Note 4 to Chapter 94 of the Harmonized Tariff Schedule of the United States. The applicant observes that the weather conditions in many Member States are such that it is not always necessary that a building consist of a completely enclosed space in order for it to be used as such. Nor is it obvious that persons ought to be able to enter ‘prefabricated buildings’ or that all such persons, including tall individuals, must be able to do so whilst upright.

12.      The referring court also records that, according to the defendant, it is necessary, due to the absence of definitions in the heading, notes and explanations, to have recourse initially to everyday language when determining what is a ‘prefabricated building’ for the purposes of classification under heading 9406. The defendant observes that not all items that fall within the concept of a ‘building’ in everyday language are ‘prefabricated buildings’ for the purposes of Note 4 to Chapter 94 and tariff heading 9406 of the Combined Nomenclature. The defendant submits that the buildings to which Note 4 to Chapter 94 refers are, inter alia, enclosed on all sides; intended for long-term (immobile) use; have a stable construction; and are sufficiently large to allow a person of average height to enter them upright.

13.      The referring court observes that, in accordance with the general rules for the interpretation of the Combined Nomenclature, the calf hutches would be classified under heading 3926 unless they were excluded from it, in accordance with Note 2(x) to Chapter 39, on the basis that they are prefabricated buildings covered by Chapter 94. Contrary to the position taken by the Finanzgericht (Finance Court) and the defendant, the referring court is inclined to the view that heading 9406 does not require a prefabricated building to enclose a space on all sides. The referring court is also of the opinion that, in order to come within heading 9406, a prefabricated building must allow persons of average height to enter and have at least one space in which they can stand upright. In the light of its doubts as to the classification of the items, the Bundesfinanzhof (Federal Finance Court) stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling:

‘(1)      Does Combined Nomenclature heading 9406 necessarily require that a prefabricated building completely enclose a space on all sides?

(2)      If Question 1 is answered in the negative, does Combined Nomenclature heading 9406 require that the prefabricated building be large enough for a person of average height to be able to enter it, and does that require it to have at least one area that such a person can enter in an upright position, or is it sufficient for the person to be able to enter it in a bent-over position?’

14.      The European Commission submitted written observations.

IV.    Assessment

 Observations of the European Commission

15.      Addressing the questions asked together, the Commission, in line with the referring court’s approach, observes that, in classifying the calf hutches at issue, it is necessary to determine if they are ‘prefabricated buildings’ which, by virtue of Note 2(x) to Chapter 39 of the Combined Nomenclature, excludes them from classification under Chapter 39. It follows from Note 4 to Chapter 94 that a ‘prefabricated building’ must be a ‘building’ that corresponds to the examples in the note, which refer to housing, worksite accommodation, offices, schools, shops, sheds, garages and similar buildings. The 2022 explanatory notes to the harmonised system (7) also assign certain types of greenhouses and street kiosks to the heading ‘prefabricated buildings’.

16.      The Commission observes that neither the Combined Nomenclature nor the harmonised system define the concept of ‘building’. The meaning and scope of terms that EU law does not define are to be ascertained according to their meaning in everyday language whilst taking account of the context in which they appear and the aim pursued by the rules of which they form part. (8) By reference to the definition of ‘building’ in English and ‘Gebäude’ in German, the Commission takes the view that, for a structure to be classified as a ‘prefabricated building’, it must have a roof and walls, be intended for use by persons who can move about in it in order to carry on their activities, be placed outdoors and have a certain stability and durability.

17.      On the number of walls that a building must have and/or whether it must contain an enclosed space, the Commission and the referring court refer to the minutes of the 227th meeting of the Customs Code Committee. Whilst these conclusions are not binding, they represent that whilst a building need not necessarily have four walls it must have a roof and some walls. (9) That view is confirmed by the fact that sheds, cited as an example in Note 4 to Chapter 94, do not always have four walls. A requirement that a building must have four walls or be otherwise enclosed could lead to items being classified under different subheadings depending on whether they have doors, which would run counter to the objective of uniform classification.

18.      The requirement that a building must be used by persons who are able to move about in it in order to carry out their activities is corroborated by the fact that all of the articles listed under Chapter 94 are intended for human use and that the Combined Nomenclature classifies articles for animal use elsewhere. The Commission thus concludes that ‘prefabricated buildings’ within the meaning of heading 9406 must be for human use, that it must be possible for persons to move about in them and that they must be of such a size that persons can access and carry out activities in them without difficulty. It is in that context that the Commission refers to the Combined Nomenclature’s treatment of greenhouses and polytunnels. To classify a greenhouse as a ‘prefabricated building’, it must be sufficiently large to allow a person of average height to enter it. It refers to Regulation (EC) No 1655/2005, (10) which provides that a ‘mini-greenhouse’ measuring 50 cm in length, 24 cm in width and 25 cm in height is not considered as a ‘prefabricated building’ under heading 9406. Similarly, according to the 2019 explanatory notes to the Combined Nomenclature, (11) in order for it to be a ‘prefabricated building’, a polytunnel must be sufficiently large to enable a person to enter it. It would also be incompatible with the examples given in Note 4 if a person of average height was able to move about inside such structures without that person being able to stand upright. The Commission concludes that calf hutches are not ‘prefabricated buildings’ under heading 9406 unless they are of such a size that a person would be able to move about within them whilst upright.

19.      The Commission has no doubt that the calf hutches at issue in the main proceedings are for use outdoors.

20.      By reference to the examples in Note 4, the Commission has doubts as to whether the items at issue in the main proceedings meet the requirement of durability and stability. It invokes the example of polytunnels which, according to the 2019 explanatory notes to the Combined Nomenclature, do not fall under heading 9406 if they can be easily dismantled and moved from one location to another. Given their apparent size and weight, the Commission is of the view that it may be possible to move the calf hutches at issue from place to place easily, in which case the requirement of durability and stability would not be met.

 Analysis

21.      As the Commission rightly observes, the Court’s task, when requested to give a preliminary ruling on a matter of tariff classification, is to provide guidance on the criteria that will enable the referring court to classify the products correctly in the Combined Nomenclature, rather than to effect that classification itself. (12) Although classification ultimately consists in a purely factual assessment that it is not for the Court to provide in a reference for a preliminary ruling, (13) it can give indications and guidance by reference to the facts of an individual case. (14)

22.      In accordance with the Court’s established case-law and in the interests of legal certainty and ease of verification, the decisive criterion for the tariff classification of goods is the assessment of their objective characteristics and properties as defined in the relevant heading of the Combined Nomenclature and its section or chapter notes. (15) Although the explanatory notes to the harmonised system and to the Combined Nomenclature are not binding, they are an important means to ensure the uniform application of the Common Customs Tariff and, as such, may be a useful aid in its interpretation. (16)

23.      The referring court states that, in accordance with rule 3(b) of the general rules for the interpretation of the Combined Nomenclature and the fact that they are predominantly composed of polyethylene, in principle the calf hutches at issue come under heading 3926. Note 2(x) excludes ‘prefabricated buildings’ under Chapter 94 from Chapter 39. The issue before the referring court can thus be resolved by determining whether the articles at issue are ‘prefabricated buildings’ within the meaning of heading 9406 since, if they are, they cannot fall under Chapter 39. It follows that the classification of the items at issue may proceed by reference to a process of elimination. If a ‘prefabricated building’ must enclose a space on all of its sides completely or must be large enough to allow persons of average height to enter or to stand in it upright, the calf hutches at issue will not fall under heading 9406 and must therefore come under heading 3926.

24.      The referring court observes that, in everyday language, buildings are usually expected to be covered structures but do not necessarily have walls on all sides that completely enclose the space within. Whilst most of the examples of buildings in Note 4 to Chapter 94 consist of spaces enclosed on all sides, as the applicant correctly points out, sheds may be constructed with one or more open sides. Since it is possible to fit doors as an option on some of the models, calf hutches may create an enclosed space.

25.      Under the general rules for the interpretation of the Combined Nomenclature, classification is to be determined, first, according to the terms of the headings and any relative section or chapter notes. Heading 9406 in the Combined Nomenclature employs the term ‘vorgefertigte Gebäude’ in German, ‘prefabricated buildings’ in English and ‘constructions préfabriqueés’ in French, which term falls to be construed in the light of the examples in Note 4 to Chapter 94.

26.      The minutes of the 227th meeting of the Customs Code Committee provide evidence of the difficulties associated with the classification of borderline cases. At that meeting, representatives of sixteen Member States were in favour of classifying a garden room consisting of a roof and three walls, constructed of an aluminium frame and glass, as a ‘prefabricated building’ under heading 9406, whilst the representatives of nine Member States supported its classification as an aluminium structure under heading 7610. The Customs Code Committee’s conclusions align with the applicant’s observations before the referring court that sheds can have one or more open sides. The Commission and the referring court share that appreciation.

27.      In the light of these submissions, I take the view that it is unnecessary for a ‘prefabricated building’ under heading 9406 to enclose a space on all of its sides. It follows that I agree with the conclusion of a majority of the Customs Code Committee that a building need not have four walls. Even if it is true that the buildings listed in Note 4 to Chapter 94 usually form spaces enclosed on all sides, that does not preclude a ‘prefabricated building’ that does not contain such an enclosed space from falling within the ambit of that term. In everyday language, a structure may constitute a building, notwithstanding that it does not contain an enclosed space. In the context of this reference for a preliminary ruling, hay sheds and sheds designed for air-drying timber are examples that immediately spring to mind.

28.      Turning to the question as to whether a ‘prefabricated building’ under heading 9406 must be of a minimum height, that concept falls to be considered in the light of the examples in Note 4 to Chapter 94. Taking the term ‘sheds’ on its own, it is arguable that certain sheds might not be of such a size that would allow a person of average height to enter them whilst upright, yet they would nonetheless constitute a building. The examples in Note 4 to Chapter 94 of housing or worksite accommodation, offices, schools, shops, garages and similar buildings tend to indicate that ‘prefabricated buildings’ are in the nature of structures that a person of average height can enter and move around in. It would appear to follow that, in order for ‘sheds’ to constitute ‘prefabricated buildings’ for the purposes of Note 4 to Chapter 94, they must be of such a size as would allow a person of average height to enter and to move about in them whilst upright.

29.      I have reached that conclusion without relying upon three submissions the Commission advanced. First, I am unconvinced by the argument that Regulation No 1655/2005’s exclusion of a mini-greenhouse from heading 9406 is indicative of a general approach with regard to the height requirements of a ‘prefabricated building’ that would otherwise fall under that heading. The dimensions of the item referenced therein were approximately 50 cm in length, 24 cm in width and 25 cm in height. As is clear from the photograph in the annex to that regulation provided for information purposes, that item is akin to a glass box or a container and could not be confused with a building.

30.      Second, the suggestion that a ‘prefabricated building’ under heading 9406 should be of a size that would enable a person of average height to enter it because the explanatory notes to the Combined Nomenclature so stipulate seems to be incorrect in circumstances where that statement appears in the context of a reference to polytunnels and thus was not designed to be of general application.

31.      Third, I am equally unconvinced by the Commission’s argument that, as a consequence of the indication that all the articles in Chapter 94 are intended for human use, animal sheds and other articles intended for animal use must fall under another heading of the Combined Nomenclature. While the titles of sections and chapters are provided for ease of reference only, as per the first rule in the general rules for the interpretation of the Combined Nomenclature, Chapter 94, which refers to, inter alia, furniture, bedding, cushions, illuminated signs and illuminated nameplates, falls under Section XX of the Combined Nomenclature, entitled ‘Miscellaneous Manufactured Articles’. Of its very nature, a section that consists of miscellaneous items contains all manner of items. It seems to me difficult, if not impossible, to deduce anything from a miscellany. In reaching that conclusion, I observe that, in 1977, the World Customs Organization classified under heading 9406 10 grain silos, of farm type, consisting of several circular sections, of decreasing diameter, made of fibreboard of wood, designed for assembly by being placed one on top of the other and held together by iron tubes, which were not fitted with mechanical or thermal equipment, as prefabricated buildings made of wood. (17)

32.      Subject to verification by the referring court, the description of the calf hutches in the order for reference raises the issue of their durability and stability which, as the Commission points out, are characteristics that ought to be taken into account in determining if structures are to be classified as ‘prefabricated buildings’.

33.      The applicant also refers to the Harmonized Tariff Schedule of the United States. Heading 9406, dealing with prefabricated buildings, contains a specific sub-heading for ‘Animal sheds of plastic’. Given that its Note 4 is almost identical (18) to that in the harmonised system and in the Combined Nomenclature, I am satisfied that it supports the submission that animal sheds made of plastic do not come within heading 9406 in accordance with that note and that a specific entry would be required for them to come within Chapter 94. The express inclusion in the US nomenclature of animal sheds of plastic as a subheading under heading 9406 merely demonstrates the existence of a divergence in the EU and US approaches to this issue. (19)

V.      Conclusion

34.      In the light of the foregoing, I propose that the Court answer the questions referred by the Bundesfinanzhof (Federal Finance Court, Germany) as follows:

The Combined Nomenclature set out in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, in the version resulting from Commission Implementing Regulation (EU) No 1101/2014 of 16 October 2014,

must be interpreted as meaning that a prefabricated building under heading 9406 thereof:

–        need not completely enclose a space on all sides;

–        must be large enough for a person of average height to be able to enter it and to have at least one area that such a person can enter in an upright position; and

–        must be durable and stable.

1      Original language: English.

2      OJ 1987 L 256, p. 1.

3      United Nations Treaty Series, Vol. 1503. p. 4, No 25910 (1988); OJ 1987 L 198, p. 3.

4      OJ 2014 L 312, p. 1.

5      In accordance with Article 12 of Regulation No 2658/87, the Commission adopts each year, by means of a regulation, a complete updated version of the Combined Nomenclature, together with the corresponding autonomous and conventional rates of duty of the Common Customs Tariff, as it results from measures adopted by the Council or by the Commission.

6      In accordance with the Court’s case-law: see, for example, judgment of 2 May 2019, Onlineshop (C‑268/18, EU:C:2019:353, paragraph 22).

7      The Commission refers to the 2022 explanatory notes on the basis that the codes under the harmonised system have not undergone any material change since the time of the facts in the main proceedings.

8      See, for example, judgment of 6 September 2018, Kreyenhop & Kluge (C‑471/17, EU:C:2018:681, paragraph 39).

9      Minutes of the 227th meeting of the Customs Code Committee, p. 10.

10      Commission Regulation of 10 October 2005 concerning the classification of certain goods in the Combined Nomenclature (OJ 2005 L 266, p. 50).

11      OJ 2019 C 119, p 1.

12      See, for example, the judgment of 20 October 2022, Mikrotīkls (C‑542/21, EU:C:2022:814, paragraph 21 and the case-law cited).

13      Ibid.

14      See, for example, Opinion of Advocate General Kokott in Uroplasty (C‑514/04, EU:C:2006:56, point 45).

15      See, for example, the judgment of 28 April 2022, PRODEX, (C‑72/21, EU:C:2022:312, paragraph 28).

16      Ibid. paragraph 29.

17      This information on a classification opinion is available in the World Customs Organization’s harmonised system commodity database. See https://www.wcotradetools.org/en/harmonized-system. Classification opinions enjoy the same status as the explanatory notes, the difference being that the former refer to specific products. In its judgment of 19 November 1975, Douaneagent der Nederlandse Spoorwegen (38/75, EU:C:1975:154, paragraph 24), the Court observed as follows: ‘It is true that … classification opinions of the [World Customs Organization] do not bind the Contracting Parties but they have a bearing on interpretation which is all the more decisive because they emanate from an authority entrusted by the Contracting Parties with ensuring uniformity in the interpretation and application of the nomenclature’.

18      The 2015 and 2023 US versions provide that: ‘For the purposes of heading 9406, the expression “prefabricated buildings” means buildings which are finished in the factory or put up as elements, entered together, to be assembled on site, such as housing or worksite accommodation, offices, schools, shops, sheds, garages or similar buildings.’ In the US text the words ‘entered together’ replace the words ‘presented together’ in the harmonised system and in the Combined Nomenclature.

19      In that context, I recall the words of Advocate General Jacobs in his Opinion of 28 October 1999 in Peacock, (C‑339/98, EU:C:1999:540, point 37): ‘[The] Court is a court of law, specifically of Community law. Its role clearly includes the task of interpreting, as a matter of law, the terms of the [Combined Nomenclature]. It is not a technical body qualified to settle disputes on purely technical matters, nor should it intervene in any way in a process of technical negotiation concerning the content of various [harmonised system] headings, in which those with the appropriate expert knowledge will be seeking international agreement on what is clearly a vexed and highly technical question. That process may involve amendments clarifying the wording of the [harmonised system] and is the most appropriate means of achieving a long-term settlement of the differences of opinion involved. The Court, may, however, contribute by stating how the relevant terms of the [Combined Nomenclature] are to be interpreted, at a given moment, as a matter of Community law’.