Judgment summary
This is a request for a preliminary ruling from the Varhoven administrativen sad (Supreme Administrative Court, Bulgaria), transferred to the General Court, concerning the interpretation of headings 3921 and 4811 of the Combined Nomenclature (CN) set out in Annex I to Council Regulation (EEC) No 2658/87, as amended by Commission Implementing Regulation (EU) 2022/1998 (1).
The dispute arose between the Director of the Regional Customs Directorate of Ruse and „Kronospan Bulgaria“ EOOD over a decision imposing additional customs duties of BGN 4 229.67 (approximately EUR 2 120) and VAT of BGN 845.72 (approximately EUR 425), plus interest (2).
The General Court held that a composite good consisting of a layer of decorative paper impregnated with thermosetting resins, with two surface layers of pure resin not fully cured, used for coating boards in multi-layer and short-cycle hot presses, falls under heading 3921 of the CN, provided that plastics give that product its essential character, this being a factual matter for the referring court to verify (79).
Background
„Kronospan Bulgaria“ imported a good from Belarus, declared on 15 May 2023 as "paper impregnated with melamine", classified under TARIC code 4811 59 00 90, at a customs duty rate of 0% and VAT of BGN 13 014.36 (approximately EUR 6 500) (27).
A sample was analysed by the Tsentralna mitnicheska laboratoria (central customs laboratory, Bulgaria). Its expert report found the product resembled a brittle plastic sheet consisting of paper heavily impregnated with melamine-formaldehyde resin, the paper texture having disappeared and the essential character of paper having been lost. The laboratory recommended classification under Chapter 39 of the CN (29).
„Kronospan Bulgaria“ disagreed and submitted its own analysis from Greece. The central customs laboratory maintained its conclusion, confirming classification under heading 3921, subheading 3921 90 (30).
On 4 December 2023 the Director of Customs of Ruse refused the declared TARIC code 4811 59 00 90 and assigned TARIC code 3921 90 49 00, applying a customs duty rate of 6.5%, resulting in additional customs duties of BGN 4 229.67 and outstanding VAT of BGN 845.72 (31).
„Kronospan Bulgaria“ challenged this decision before the Administrativen sad Burgas, which ordered a chemical expert opinion. That opinion found the product to be a composite material with a middle layer of resin-impregnated paper and two surface layers of pure resin, and identified compositional differences between the two samples analysed (33-35). The Administrativen sad Burgas annulled the customs decision for breach of essential procedural requirements and held, based on the technical description and expert opinion, that the product had not lost its character as paper because the resin was not fully cured before use, so no change to the declared TARIC code was warranted (36-37).
The Director of Customs of Ruse appealed to the Varhoven administrativen sad (Supreme Administrative Court), the referring court, which referred a question on the interpretation of the CN to a preliminary ruling (38-41).
Core dispute
The dispute concerned whether a composite product, described by the manufacturer as decorative paper soaked (impregnated) with thermosetting resins which are not fully cured, used for coating boards in multi-layer and short-cycle hot presses, and consisting of a paper base impregnated with resin with two surface layers of pure resin, should be classified under CN heading 4811 (paper and paperboard coated, impregnated or covered with plastics) or under CN heading 3921 (other plates, sheets, film, foil and strip, of plastics) (41-42).
The referring court asked whether classification should follow rule 3(a) or rule 3(b) of the General rules for the interpretation of the CN, whether the HS Explanatory Notes to Chapters 39 and 48 were relevant, and whether the product's loss of paper character, its brittleness, composite nature and intended use as a water- and heat-resistant laminated coating were relevant criteria for determining the material giving it its essential character (39).
Court findings
The Court found that the product was a composite good consisting of paper impregnated with melamine resin, in principle classifiable under either heading 3921 or heading 4811 of the CN (46, 56).
Applying rule 3(a) of the General rules for the interpretation of the CN, the Court held that neither heading could be regarded as "the most specific" because each referred only to part of the materials in the composite good, so the headings were equally specific (58-60).
The Court therefore applied rule 3(b), under which composite goods are classified according to the material giving them their essential character. It noted that melamine resin was predominant by quantity, but that this factor alone was not decisive (63-64). It found that the hardness and brittleness of the product were characteristics of plastic rather than paper (65), and that the resin gave the product its impermeability and resistance to heat and radiation, which was of overriding importance for its intended use as a laminated coating for particle boards, whereas the paper's colour and aesthetic contribution were of secondary importance (66-68).
The Court concluded that plastics appeared to give the product its essential character and that the product appeared to have lost the essential character of paper, subject to verification by the referring court (69-71). It further held that note 2(g) to Chapter 48 of the CN, concerning paper-reinforced stratified sheeting or a single layer of paper coated with plastics, was not decisive because the product's structure was more complex, comprising a layer of impregnated paper plus two additional layers of plastics (73-76).
The Court also referred to WCO Classification Opinion No 3921.90/2 of 1986, which supported classifying similar melamine-impregnated paper sheets, brittle and having lost the essential character of paper, under HS subheading 3921 90 (77-78).
Outcome
The Court ruled that the CN must be interpreted as meaning that a composite good consisting of a layer of decorative paper impregnated with thermosetting resins and two surface layers of pure resin which is not fully cured, used for coating boards in multi-layer and short-cycle hot presses, falls under heading 3921 of the CN, provided that plastics give that product its essential character. The final factual determination was left to the referring court.
As the proceedings were a step in the action pending before the referring court, the decision on costs was reserved to that court, and costs incurred by other parties in submitting observations were held not recoverable (80).
Major issues / areas of contention
- Whether the imported product should be classified under CN heading 3921 (plastics) or heading 4811 (paper and paperboard).
- Application of rule 3(a) of the General rules for the interpretation of the CN, and whether either heading was 'most specific'.
- Application of rule 3(b) of the General rules for the interpretation of the CN to determine which material gave the product its essential character.
- Relevance of the product's brittleness, hardness and composite structure as objective characteristics for classification.
- Relevance of the product's intended use as a water- and heat-resistant laminated coating for particle boards.
- Whether note 2(g) to Chapter 48 of the CN applied to the product's more complex layered structure.
- Whether the product had lost its essential character as paper.
- The interpretative weight of the HS Explanatory Notes to Chapters 39 and 48 and of WCO Classification Opinion No 3921.90/2.