Customs Duties - Lecture notes 1 PDF

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Dermot Cahill...

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Customs Duties       

Art 30 TFEU (formerly Arts 23-25 EC, and 9-17 EEC prior to that) EEC prohibits all customs duties and charges of equivalent effect (CEE's) Customs duties - charge imposed on goods when transported across borders Major limitation of national sovereignty once a country joins the EU, and customs duties cannot be levied by that state at the border Free movement of goods requires prohibition of customs duties Art 30 - M/S cannot impose customs duties on goods when they enter the state, or import duties to when they leave to another M/S Common external customs tariff?

From EEC (1957) to EU (2000) 1. Free trade area - area where a group of countries come together and decide to trade with each other on a tariff free basis o E.g. NAFTA - Canada, USA, Mexico - no customs duties between these countries o When goods come into each of these countries, each country has the unilateral power to decide what customs duties apply to the goods o M/S can levy customs duties to goods coming from non-member states 2. Customs union - subject to a common customs tariff, for goods coming from non-member states o European commission determines customs tariff for external goods, not individual countries o Is customs union better than a free trade area? o Once goods are inside the EU, they are European goods and can move around EU without customs duties within the M/S o If you set up a subsidiary (company controlled by a holding company) within the EU, goods do not have to pay customs tariff at all o Unilaterally set external customs duties 3. Common market - established in 1957 Treaty of Rome o 4 freedoms  Free movement of goods - no customs duties / quantitative restrictions / discriminatory internal taxation (countries have freedom to levy taxes but no freedom of customs duties)  Free movement of workers  Free movement of services and establishment - freedom corporations  Free movement of capital o What is the common market? It is the customs union, within which operate the 4 freedoms o After Brexit, Britain will no longer have the 4 freedoms, so all freedoms lost to business executives who want to work within the EU o Now M/S may be able to discriminate British corporations (subsidiaries) in the EU and make them pay higher tax o Some british corporations setting up subsidiaries in Eu to retain the advantages of the 4 freedoms and to avoid future taxes 4. Internal Market - Single European Act 1986

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Disparities in the M/S laws that inhibit the full realization of the 4 freedoms It is the customs union with the common market and the 4 freedoms and now a massive harmonization of relaying obstacles to the 4 freedoms

5. Economic and Monetary Union - Treaty of Maastricht 1991 o Deepened integration with treaty o Set up the European Central Bank, created euro currency o Strict laws of taking money out of countries, was illegal, so creation of euro o When a country joins the euro it has to maintain the fiscal discipline under european rules o Key rule - amount of deficit you have each year in a M/S's current account cannot be over 3% - this is to bring stability to the euro system o Ground work towards a federal Europe? o No appetite for further integration at the moment Van Gend En Loos 1963 o Company importing products to Netherlands - should be tariff free? o But it had to pay duty - challenged legality of duty o Basis was on Eu law not Dutch law, so government of Netherlands were breaching EU law o Should the judge enforce EU or national law? o Judgement - EU law is superior and so should be tariff free  Art 30 (23)(12) - prohibited imposition of customs duties on imports of M/S  EU has its own legal system/police/judge - makes EU unique How is EEC a new order in international law?  States limit their sovereign rights in certain fields upon joining the EEC  Community law imposes rights and obligations on citizens and M/S o National judges (courts/tribunals) obliged to ensure EU law is respected o Art 30 (23)(12) Comm v Italy 1968 o Levy on art exports, to make it more expensive for goods to leave the country o Cannot restrict, as it is quantitative restriction o Italy argues artifacts are not 'goods', however, courts say anything that has monetary value is goods o Italy looses case o Anti-circumvention device - the reason customs duties are prohibited is because they hinder trade, and make goods less competitive (no exceptions) SFBDV SA Ch. Brachfeld 1969 o Belgium tries to justify a levy imposed on the diamond imports o Belgium has not diamonds but it polishes imports before selling o Argued they are not protecting any industries because there are no domestic diamonds, so no discrimination

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The money from tax goes into a fund for treatment of sick diamond workers Court held - cannot justify customs duties even if it is a benign purpose, customs duties are prohibited independent of their purpose Customs duties - are any pecuniary charge that is imposed on goods on virtue of crossing the border The leviable event - crossing the border Allows us to distinguish whether the charge were looking at when assessing its legality, to assess its compatibility with EU law, it allows us to distinguish the test whether we are looking at a customs duty or an internal tax Customs duties are prohibited, internal taxation is allowed (unless it is discriminatory)

Comm v Italy 1969 o Italy collects statistics of goods at the border o Levy imposed by italy in order to collect statistics on flows of imports/exports o Importers have to declare ultimate customers on forms - form processing costs are covered by levy - is this a customs duty or a charge of equivalent effect o Court of justice - yes, this is a pecuniary charge because goods cross the border so it is an illegal customs duty o Italy says not discriminative, as it makes statistics available to all, and so helps the market and so it is not a customs duty o Court says cannot justify and pecuniary charge even if no discrimination o Statistical levy - no exceptions Exception #1 - any charge necessitated by mandatory EC requirements Criteria 1. Fee doesn’t exceed the actual cost of inspection - fee is left to M/S as cost varies 2. Inspection is obligatory in EC area 3. Inspection is prescribed by EC legislation 4. Inspection promotes free movement of goods Exception #2 - Fees for service which confers specific benefit on importer 'statistical levy'  M/S performing a service for the importer/exporter and not required to by Eu law but is unilaterally doing it and charging a fee to recover that cost  Is that fee a customs duty or exception Criteria 1. Fee must no exceed actual cost of inspection 2. M/S has to demonstrate that a specific benefit was conferred by the service on each individual cross border trader rather than the general body of cross border traders  Specific benefit justifies charge  Some people receive a benefit they do not require, but still have to pay - so it is a customs duty  If any importer can show they have no benefit, it is an illegal customs duty  Unilateral service fee exception

Bresciani v Italy 1976 - specific benefit to trade o Leather(raw cow hyde) subject to inspection at the border as it may carry diseases o Importer has to pay fee for inspection o Italy argues not a customs duty, said to promote interstate trade, as the value of the leather increases when stamped safe o Court disagrees - demonstrate specific benefit to each trader - only benefit to some not all o Why is there no benefit to some importers? The trader who has safe goods inspected from another country already knows its safe, so no benefit to them, so it is an illegal customs duty Comm v Italy 1969  No justifications of customs duties other than the exceptions, and even though argument of no discrimination  Customs duties are prohibited because they stop goods at the border or make is more difficult for them to come in at a more difficult price Exception #3 - fees imposed in furtherance of international conventions  Clashes between EC and international law  Netherlands v Bakker Hillegom o Old treaty, in order to have world wide trade in flowers and plants, countries will not trade with each other unless they are in the plant convention o This means that under this treaty you will inspect all plant and flowers for any infectious diseases o M/S were allowed to charge for carrying out inspections, no formula, they just determined what was appropriate for fee b/c not required a particular fee in the treaty o However, after these countries joined EU, who are also in plant convention, EU law didn’t allow customs duties, so, which treaty is superior? o Court decided - as long as M/S calculate the inspection fees in line with EU law on prohibition of the customs duties, then any such fees will be exempt from the prohibition of customs duties  Criteria - does the fee exceed the cost of the inspection Exception 4 - where fee is really an Art 110 TFEU (90 EC) (95 EEC) measure  Are we looking at a customs duty or a measure of internal taxation?  Once the goods pass into your border, you can put tax on it unless it is discriminatory  How do we know whether it is a customs duty to and internal taxation?  Test for internal taxation - applied systematically, in accordance with the same criteria, to domestic and imported products alike, at the same stage or marketing or production  If tax is taken from imported and domestic goods at different times within marketing and production, it is a disguised customs tax, and is illegal  They're mutually exclusive - cannot be customs duty and a legal tax Denkavit Loire v France 1979 - animal lard - read

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Taxation of French cows happen at their time of death at the abattoir, but France cannot tax Spanish and Belgian cows at that time because that event happens outside state French farmers - unfair that I have to pay tax when slaughtered, imports do not get this tax at this time, so France says we will tax at some event after it enters our borders, and the taxes will equalize the tax on imports and domestic products. So, is France's tax on imports a disguised customs duty? yes Court of justice says no - court asks whether the tax is levied on the French cow and foreign cow at the same time of it's life cycle? No - illegal

Internal taxation vs Customs duties  Art 30 TFEU (formerly 23-25 EC) prohibits all customs duties and charges of equivalent effect  Art 110 TFEU (formerly 90 EC, and prior to that 95 EEC) permits internal taxation provided it respects certain parameters  Tax is legal and applied after crossing borders, customs duties are illegal and applied at the border  The test of internal tax - a charge that a state imposes on goods is a tax if it relates to a system of internal dues(its part of the national tax system, written into tax legislation), whereby the same tax (sales tax, distribution tax, transport of goods tax) is imposed on comparable domestic product as on the import, at their same stage of marketing or production (taxable event same for both products) - passing of this test only means it is not a customs duty not whether its legal or not, b/c there maybe discrimination  Are the products similar or competing? Similar products  110(1) - taxes which impose heavier taxation on imports, that is imposed on "similar" domestic products are prohibited.  Implication - M/S are permitted to tax imports as long as the tax is not discriminatory Competing products  110(2) - taxes which afford a protective effect to domestic products over "competing" imports are prohibited  If we decide they are competing, we M/S may tax imports heavier than competing domestic products provided we don’t create a protective effect  Protective effect - at what point is the extra tax on the imported product going to reach a tipping point that is stops the consumer buying that product and turning to the domestic product o Not similar and not competing, we can tax the import irrespective of how we tax the domestic product Similar or competing?  Similar when goods have similar objective characteristics (when method of products and ingredients are the same), and fulfill same consumer needs Rewe-Zentrale v H.L.P 1976  Competing products can sometimes be substitutable - so can be taxed heavier, but not too heavy for it to have a protective effect  When the consumer turns to another product due to tax, it is illegal...