The Free Movement of Goods

1
The Free Movement of Goods
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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

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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

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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.

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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)

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GOODS?

• Commission v Italy Case 7/68
• products which can be valued in money, and which
  are capableof forming the subject of commercial
  transactions
• Commission v Belgium Case C-2/90
• Donckerwolke v Procureur de la Republique Case
  41/76

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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.

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Common Customs Tariff

• Common customs tariff (CCT)
• applies to all goods imported into the European
  Union
• single tariff wall
• tariffs set by European Commission

9
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.

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Customs duties

• What is a customs duty?
• Steinike Weinleg Case 78/76
• A pecuniary charge imposed on goods because they
  are imported

11
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
  23/69

12
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)

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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

14
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

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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

16
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

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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

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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.

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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

20
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

21
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))

22
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

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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

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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 rulethe tax policy of a Member
  State must not therefore crystallise given
  consumer habits so as to consolidate an advantage
  acquired by national industries

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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

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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

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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

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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)

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Article 28

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

30
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 explicitit therefore has direct effect and
  creates individual rights which national courts
  must protect

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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

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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 Traders 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)

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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

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Article 28-MEQRs

• 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

35
Dassonville Formula

• all trading rules (measures)
• enacted by Member States
• which are capable of hindering
• directly or indirectly
• actually or potentially,
• intra-Community trade

36
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

37
MEQRs

• 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

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MEQRS

• Import Licenses
• Commission v UK (UHT Milk) Case 124/81
• Sandoz BV Case 174/82

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MEQRS

• Hygiene/Health Inspections
• Rewe-Zentralfinanz eGmbH v Landwirtschaftskammer
  Case 4/75

40
MEQRS

• Origin Marking-
• Dassonville Case 8/74
• Commission v Ireland (Irish souvenirs) Case
  113/80

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MEQRs

• Buy National Campaigns
• Commission v Ireland (Buy Irish campaign) Case
  249/81
• Apple and Pear Development Council v Lewis Case
  222/82

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MEQRs

• 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

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MEQRs

• Packaging Requirements
• Mars Case C-470/93
• Prantl Case 16/83

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MEQRs

• 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

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MEQRs

• 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)

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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

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Article 29

• Relates to exports
• Dassonville formula not applicable
• Groenveld BV Case 15/79
• Bouhelier Case 53/76

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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