The Free Movement of Goods

Lecture Aims

• Introduction to the free movement of goods

• Examination of the relevant Treaty articles

• In particular an understanding of Article 28

• Follow on lecture

Lecture One

• The Treaty provisions relating to the free movement of goods

• Definition of goods

• Articles 23-25 and Article 90

• Concentrate on Article 28-quantitative restrictions on imports

• Exceptions to free movement of goods

The free movement of goods

• Cornerstone of the internal market

• one of the fundamental freedoms

• Art 14 ECThe internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.

FREE MOVEMENT OF GOODS

• Creation of a Customs Union- Arts 23-25 (ex 9-12)

• Prohibition of discriminatory taxation Art 90 (ex 95)

• prohibition of quantitative restrictions Arts 28-30 (ex 30-36)

GOODS?

• Commission v Italy Case 7/68• “products which can be valued in money, and

which are capable…of forming the subject of commercial transactions”

• Commission v Belgium Case C-2/90• Donckerwolke v Procureur de la

Republique Case 41/76

CUSTOMS UNION-ART 23(ex art 9)

“The Community shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.”

Common Customs Tariff

• Common customs tariff (CCT)

• applies to all goods imported into the European Union

• single tariff wall

• tariffs set by European Commission

ARTICLE 25 (ex Art 12)

• Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall apply to customs duties of a fiscal nature.

Customs duties

• What is a customs duty?

• Steinike & Weinleg Case 78/76

• A pecuniary charge imposed on goods because they are imported

CHARGES HAVING EQUIVALENT EFFECT

• Commission v Italy (Statistical Levy) Case 24/68– “any pecuniary charge, however small and whatever its designation

and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect [to a customs duty]”

• Sociaal Fonds voor de Diamanterbeiders Cases 2&3/69

Permissible charges

• Commission v Germany Case 18/87– Charges for services rendered to the

importer– The charge relates to an inspection carried

out by the MS in compliance with EC or international law

– The charge is part of a general system of internal taxation (in which case it does not fall under Art 25 but falls under Art 90)

CHARGES FOR SERVICES RENDERED

• The services must be of direct benefit to traders or to the goods-

Rewe-Zentralfinanz Case 39/73

• the amount charged must be commensurate with the service– Donner Case 39/82– Commission v Belgium Case 132/82

Charges for inspections

• A charge may be imposed for inspections which are mandatory under international or EC law providing the charges do not exceed the actual costs of the inspection

• Bauhuis Case

• State can not recover the costs of inspections that the state imposes irregardless of whether the inspection is in the wider public interest

CHARGES HAVING EQUIVALENT EFFECT

• Member State is required to repay the trader where the duty/charge is contrary to Article 25– San Giorgio Case 199/82– Dilexport

Article 90 ex Art 95)

No Member State shall impose directly or indirectly, on the products of other Member states any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Furthermore, no Member State shall impose on the products of other Member states any internal taxation of such nature as to afford indirect protection to other products

Article 90

• Supplements Articles 23-25 by aiming to prevent the objectives of those articles being undermined by discriminatory internal taxation

• Member States are free to establish their own system of internal taxation (for example such as VAT) provided there is no discrimination against imports or indirect protection of domestic goods

– see John Walker Case 243/84

A tax or a customs duty?

• May be difficult to distinguish

• Arts 25 and 90 are mutually exclusive so it is necessary to make the distinction

• Where a tax is genuine Art 25 does NOT apply (but Article 90 will apply)

• Commission v France (Reprographic Machines) Case 90/79– “a general system of internal dues applied systematically

and in accordance with the same criteria to domestic products and imported products alike”.

Art 90 (1)

• No Member State shall impose directly or indirectly, on the products of other Member states any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

– ‘Products of other Member States’-includes goods that are manufactured outside the EC but are in free circulation in the EC-Cooperativa co-Frutta Case 193/85

– direct or indirect discrimination– discrimination between imports and similar domestic

products

similar domestic products

• Need not be identical• Commission v Denmark Case 106/84

– first consider the objective characteristics of the the products (e.g.. Ingredients, raw materials, method of manufacture); and secondly whether they “meet the same needs from the point of view of the consumer… not according to whether they are strictly identical but whether their use is similar or comparable”

Similar products

• John Walker Case 243/83 (Danish tax higher for whiskey than on fruit liqueur wines-not similar)

• Commission v France Case 168/78 (higher tax on grain based spirits (Whiskey) than on fruit based sprits (Brandy))

Directly/Indirectly

• Direct discrimination is overt-it is clear that on the face of it that the taxation on imported goods is discriminatory

• Treaty recognises situations where the internal tax is prima facie non discriminatory but in fact indirectly

discriminates against imports – Humblot v Directeur des Services Fiscaux

Case 112/84– Commission v France (tobacco) Case C-

302/2000

ARTICLE 90(2)

• “No Member State shall impose on the products of other Member States any internal taxation of such nature as to afford indirect protection to other products”

• not necessary for the goods to be similar• Prohibits internal taxation giving indirect protection to

other products – Cooperativa co-Frutta Case 193/85 “all forms of indirect

protection in the case of products which, without being similar within the meaning of Article 90 (1), are nevertheless in competition, even partial, indirect or potential competition with each other”

Article 90 (2)

• Commission v UK Case 170/78• Is beer similar to wine? Are they in competition?• Will consumers substitute one for the other?• In measuring possible degree of substitution

should consider future consumer preferences.• Need to consider whether the present tax system

cements consumer preferences.– “in fact those habits which are essentially variable in time and

space, cannot be considered to be a fixed rule;the tax policy of a Member State must not therefore crystallise given consumer habits so as to consolidate an advantage acquired by national industries”

Art 90(2)

• If products are in competition with one another the ECJ will consider the ‘protective effect’ of the tax.– “the effect of the United Kingdom tax

system is to stamp wine with the hallmarks of a luxury product which, in view of the tax burden which it bears, can scarcely constitute in the eyes of the consumer a genuine alternative to the typically domestically produced beverage”

Article 90 (2)

• Commission v Italy Case 184/85• higher rate of tax on bananas than other

fruit such as apples/pears• products not similar because of different

characteristics• but products were in competition • the higher tax on bananas afforded

indirect protection to home-grown fruit

Free movement of goods

• Fiscal measures– Arts 23-25 deal with customs duties and charges having

equivalent effect– Art 90 deals with internal taxes

• Non-fiscal restrictions– Arts 28-30 Qualitative restrictions

Article 28

• Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States– Note-Article 29 provides exactly the same for exports– A national measure which contravenes Art 28 is prima facie

in breach of the Treaty-however there are exceptions– Article 30 provides exceptions/derogation's to Article 28– The ECJ has developed a line of case law restricting the

scope of Article 28 (known as the ‘rule of reason’ and also in relation to certain ‘selling arrangements)

Article 28

• Quantitative restrictions on imports

• and all measures having equivalent effect (to quantitative restrictions)

• shall be prohibited between Member States

Article 28

• Article 28 is directly effective• It confers rights on individuals• Ianelli & Volpi SpA v Meroni Case

74/76– “the prohibition …[in Article 28] is

mandatory and explicit…[it] therefore has direct effect and creates individual rights which national courts must protect”

Article 28

• Article 28 is addressed to Member States• However the ‘State’ has been given a very

wide meaning in the context of Art 28• Art 28 also applies to bodies for whose accts

the state is responsible

Article 28-the State

• Apple and Pear Development Council v KJ Lewis Ltd Case 222/82 (semi public bodies/quangos)

• R v Chief Constable of Sussex, ex parte International Trader’s Ferry Ltd [1998] (the police force)

• R v Pharmaceutical Society of GB, ex parte Association of Pharmaceutical Importers Cases 266 & 267/87 (professional regulatory bodies established under statutory authority)

ARTICLE 28

• Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States

• Case 2/73, Geddo– “ measures which amount to a total or partial

restraint of imports, exports or goods in transit”

• Case 34/79 R v Henn & Darby

Article 28-MEQR’s

• Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States

Dassonville 8/74 • “all trading rules which are capable of hindering

, directly or indirectly, actually or potentially, intra-Community trade”

Dassonville Formula

• all trading rules (measures)

• enacted by Member States

• which are capable of hindering

• directly or indirectly

• actually or potentially,

• intra-Community trade”

Dassonville

• Dassonville 8/74• Belgian legislation requiring certificate of origin in

respect of certain goods (including whiskey)D bought whiskey from France where the goods were in free circulation

• attempted to sell the whiskey in Belgium with forged certificate

• Held the requirement to have a certificate of origin was a MEQR

MEQR’s

• Some rules only apply to imported goods- these are known as distinctly applicable rules- such as import licenses

• However the majority of MEQRs considered so far relate equally to imported and domestic goods alike-these are known as indistinctly applicable rules-these are also capable of breaching Art 28 where they are capable of hindering intra community trade

MEQR’S

• Import Licenses

– Commission v UK (UHT Milk) Case 124/81 – Sandoz BV Case 174/82

MEQR’S

• Hygiene/Health Inspections

– Rewe-Zentralfinanz eGmbH v Landwirtschaftskammer Case 4/75

MEQR’S

• Origin Marking-– Dassonville Case 8/74– Commission v Ireland (Irish souvenirs)

Case 113/80

MEQR’s

• Buy National Campaigns– Commission v Ireland (Buy Irish

campaign) Case 249/81– Apple and Pear Development Council v

Lewis Case 222/82

MEQR’s

• Packaging Requirements

• rules are usually indistinctly applicable

• increase cost for manufacturers that have to comply with differing packaging requirements– Walter Rau v De Smedt Case 261/81

MEQR’s

• Packaging Requirements

– Mars Case C-470/93– Prantl Case 16/83

MEQR’s

• Contents and Ingredients restrictions– Commission v Germany (Beer Purity

case) Case 178/84– Cassis de Dijon Case 120/78– Commission v France Case C-24/00

MEQR’s

– Name restrictions– Clinique Laboratories & Estée Lauder

Case C-315/92– Commission v Italy Case C-14/00

(Chocolate)– See also - Deserbais Case 286/86 (Edam

cheese)

DASSONVILLE FORMULA

• Distinctly applicable measures

• only affect imported goods

• often protectionist

• Indistinctly applicable measures

• imposed on all products regardless of origin

• rules may be imposed in the general ‘good’

Article 29

• Relates to exports

• Dassonville formula not applicable

• Groenveld BV Case 15/79

• Bouhelier Case 53/76

Conclusion

• Free movement provisions are the cornerstone of the internal market

• Arts 23-25 prohibit customs duties and charges having equivalent effect

• Article 90 prohibits discriminatory internal taxation• Art 28 prohibits quantitative restrictions on imports

and measures having equivalent effect• Broadly interpreted by the ECJ • Follow on lecture