Free Movement of Goods (EU law) PDF

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revised notes on the free movement of good (EU law)...

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Free movement of goods

REVISED NOTES

INTRO- The principle of the free movement of goods is of fundamental importance to the establishment and maintenance of the internal market. It implies that unnecessary trade barriers must be removed by Member States and its status and importance as one of the four fundamental freedoms is set out in Article 26 TFEU.

Free trade area- removal of customs duties & quotas between Member States. Each Member State may impose their own quotas and customs duties Customs Union- agreement between Member States to impose a common level of duty on goods from non-member countries (plus a free trade area). Article 28 TFEU – The union shall comprise a customs union which shall cover all trade in goods and…the adoption of a common customs tariff in their relations with third countries. Article 31 TFEU - Common Customs Tariff (CCT) duties shall be fixed by the Council on a proposal from the Commission. Internal market/Common market- agreement between Member States to remove restrictions in the factors of production. Referred to as this free movement of goods, persons, services and capital (also introduces competition policy). Economic and monetary union- Common/internal market + unified monetary and fiscal policies e.g. single currency and common policies on interest rates

Article 18 TFEU- enshrines the principle of non-discrimination. Seeks to ensure that goods crossing borders are free from discriminatory internal rules. Applies to both direct and indirect discrimination. Direct discrimination- only justified under the Treaty-provided exceptions (but has to be necessary to achieve aim and proportional) Indirect discrimination- may also be justified by case law developments. Main Treaty Provisions: Article 30 TFEU - Tariff barriers- prohibition of customs duties and charges having equivalent effect (CEEs) Articles 34 (and 35) TFEU - Non-tariff barriers- prohibition of quantitative restrictions and measures having equivalent effect (MEQR’s)

Article 36 TFEU - Derogations to articles 34 and 35 (justifications to a measure) Article 110 TFEU - Prohibition of discriminatory national taxation

Meaning of ‘goods’ Commission v Italy (Case 7/68) - Products which can be valued in money and which are capable, as such, of forming the subject matter of commercial transactions - Wide definition

Article 30 TFEU ‘Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States.’ 2 elements considered to identify a customs duty - A pecuniary charge (monetary or financial charge) - Imposed by reason of the fact the goods have crossed a frontier (The ‘Diamonds Case’) Charges having an equivalent effect (CEE’s) WHY? - to only prohibit customs duties would not ensure elimination of tariff-based trade barriers Commission v Italy (Statistical Levy Case) defined CEE’s - ‘Any pecuniary charge 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 is a charge having equivalent effect’

The Treaty itself does not allow for exceptions but the Court of Justice has considered circumstances where charges can be justified if the constitute a charge for a service rendered. Charges for services rendered To justify charge Direct benefit to goods or traders AND must be proportionate to the services rendered Commission v Italy (Statistical Levy) (Case 24/68) - any advantage gained was so general and difficult to assess that the charge did not constitute consideration for ‘a specific benefit actually conferred’

Following requirements must apply for a charge for a service rendered: The service must be of direct benefit to the goods or traders concerned. Commission v Belgium (Customs Warehouses) (Case 132/82) - storage charge was imposed on goods whilst they awaited clearance for customs formalities. Commission said it was a CEE as the charge was connected only with the completion of customs formalities. - Belgium government argued it was not a CEE because it was imposed not by reason of crossing a frontier but instead for the use of storage facilities. - Court acceptant that this was a service rendered to the importer, also accepted that such a service may legally give rise to a payment in proportion with the service provided. - HOWEVER, in this case the charge applied whether or not use was made of the temporary storage facility meaning when payment is demanded solely in connection with the completion of customs formalities (and not storage use) then it could not be a charge for a service rendered. - Principle of a charge for a service rendered accepted, but on application of the facts it was not accepted as a permitted charge. - Service concerned must be of a DIRECT BENEFIT to the goods or traders concerned. - Difficult argument to sustain The charge must be proportionate to the services rendered It is not the amount of the charge but rather the extent to which the amount levied is commensurate (corresponding in size or degree; in proportion) with the service provided. Ford Espana SA v Estado espanol (Case 170/88) Charge imposed relating to operations incidental to customs clearance when carried out at premises or places not open to the public. In this case the charge could not be proportionate because it was based on the value of the imported goods rather than the costs related to the service – therefore it was a CEE. Commission v Belgium (Health Inspection Service) (Case 314/82) Charges for inspections were permitted under EU law however but they did not benefit for the importer. Just because a charge is permitted doesn’t mean that they escape classification as CEE’s- they still have to be of direct benefit and proportionate. Commission v Germany (Case 18/87) Involved fees for inspections carried out pursuant to a Council Directive. Such fee’s may not be classified as CEE’s if the following are satisfied;

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The fees were a payment for a service and didn’t exceed the cost of the inspections The inspections were mandatory and uniform for all the products in the Community [Union] They were provided in the interests of the Community [Union] They promoted the free movement of goods by neutralizing obstacles which may have resulted from unilateral inspections.

Required by EU law. Amount being charged has to be proportionate to the service being provided. Article 110 TFEU Article 30 TFEU is concerned with the elimination of fiscal barriers (financial barriers to trade) when goods are crossing national borders. Article 110 TFEU aims to ensure that the internal taxation system of a Member State does not discriminate directly or indirectly against products from other Member States. Denkavit v France (Case 132/78) Defined internal taxation as ‘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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Different to CEE’s and customs duties because their charges are levied on goods by reason of importation

Deutschmann v Germany (Case10/65) Article 110 and 30 TFEU are complementary yet mutually exclusive

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A charge on goods cannot be both a tax and a CEE/customs duty. Important to distinguish because if it’s a CEE/customs duty it may be unlawful under Article 30 TFEU but if it’s a tax it may be permissible if it complies with Article 110 TFEU.

Article 110(1) TFEU (similar products) 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. Prohibits unequal taxation of similar products Breach= the Member State must equalise taxation Article 110(2) TFEU (competing 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. Prohibits internal taxation which indirectly protects domestic products (although not similar to imported products, are nevertheless in competition with them) Breach= the Member State must remove the competitive effect of the tax regulation

Article 110 (1)TFEU – ‘similar’ products Commission v France (French Taxation of Spirits) (Case 168/78) Provides an example with the Court of Justice considering differential tax rates for fruit based and non-fruit based spirits. Non-fruit spirits were similar products to fruit spirits such as brandy, Armagnac, calvados because they have similar characteristics and meet the same needs from the point of view of consumers (Important).

John Walker v Ministeriet for Skatter (Case 243/84) - issue was whether Whisky and fruit liqueur wine were similar. It is obvious that they are both alcoholic drinks but the court decided they were not similar because they had different characteristics. The process used to make them was different and they had significant differences in terms of alcohol content. Held: the term ‘similar products’ should be interpreted widely to encompass similar characteristics and comparable use. Looked at their origin, method of manufacture, organoleptic properties (taste and alcohol content), whether or not they meet the same needs from the point of view of consumers. Direct and Indirect discriminatory taxation Article 110(1) TFEU Direct discrimination- taxation which openly treats domestic and imported products differently (a bit like customs duty). Rarely seen because it is so easily identifiable.  Lutticke (Alfons) GmbH v Hauptzollamt Saarlouis (Case 57/65) Internal tax levied on imported dried milk but not on domestically produced dried milk. Held to be a directly discriminatory tax under what is now Article 110(1).  Haahr Petroleum [1997[ (Case C-90/94) Certain Danish ports subjected unloaded to goods to a shipping tax but when imported goods were unloaded they were subject to an additional 40% surcharge. Breach Article 110 TFEU. Methods of tax collection and the basis of assessment In some cases, the discrimination is not down to the rate of taxation levied- but the rules relating to collection, or the basis of assessment.  Commission v Ireland (Exercise Payments) (Case 55/79) The tax rate was equal, but the legislation was in breach because importers had to pay the tax immediately on importation whereas domestic producers were given several weeks to pay. Indirect discrimination- taxation which appears (in law) not to discriminate between imported and domestic goods/appears neutral but nevertheless has a discriminatory effect in reality – against imported products  Humblot v Directeur des Services Fiscaux (Case 112/ 84) French annual tax on cars differentiated between cars below 16hp and above 16hp (size of their engines). French manufacturers did not produce cars about 16hp. Humblot purchased a Mercedes in France and challenged the French taxation measure. The COJ held the French law was protectionist and discriminatory in respect of cars imported from other member states. Objective Justification No express defences to Article 110 TFEU in the Treaty. Directly discriminatory taxation can never be justified and always breaches Article 110 Indirectly discriminatory taxation may be objectively justified if there exists some objective policy reason which is acceptable in the EU  Chemical Farmaceutici SpA v DAF SpA (Case 140/79)-

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Italian taxation of synthetic ethyl alcohol was 6 times higher than taxation of fermented ethyl alcohol. The products were interchangeable in use and chemically identical. Italians said that the higher taxation of synthetic alcohol (which Italy produced very little of) constituted a legitimate choice of economic policy aimed to encourage production using a different raw material (agricultural products), leaving the existing raw material (petroleum ingredients) for more important uses. o Italian govt. were allowed to tax this because it promoted agriculture/reserve petrol for other important uses Commission v Greece (Case C-132/88) COJ considered an environmental justification for a car tax system with rates based on power rating. Once over 1.8L engine the tax rose steeply however Greece did not produce cars with engines above 1.6L. Held: tax measure would escape Article 110 TFEU in spite of the fact that all higher taxed cars were imported because the taxation did not discourage Greeks from purchasing foreign cars- tax was motivated by other considerations (to protect the environment) and there was no visible protective effect.

Article 110(2) TFEU Imported and domestic goods not similar but are in competition with each other.  Commission v United Kingdom (Excise duties on wine) (Case 170/78) Looked at differential taxation of beer and wine. The Commission argued that the difference in tax amounted to discrimination against imported wine and encouraged customers to buy beer (the domestic product). They argued that beer and wine could be substituted and met the same purposes as thirst-quenching and mealaccompanying beverages. The UK argued that the products had entirely different manufacturing processes, alcoholic content and pricing structures. o The ECJ held that the UK had imposed a higher duty on wine to give protection to beer. Beer was generally a domestic product whilst wine was generally imported. As the tax favoured the domestic product, Article 110(2) TFEU had been breached.

Articles 34 and 35 TFEU

NON-TARIFF BARRIERS TO TRADE

Article 34 TFEU - Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States. Article 35 TFEU- Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States- (just extends Article 34 to exports aswell) Interpreted widely to include measures adopted by public and semi-public bodies and private bodies where significant state involvement- R v. Royal Pharmaceutical Society of GB Article 34 applies also to measures applied to only part of a Member State’s territory.

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Ditle Bluhme (Case C-67/97) - Involved the prohibition of keeping a certain type of bee on a certain Danish Island. Essentially amounted to the prohibition of importation of bees and was an MEQR despite the fact the measure only applied to part of the national territory.

Quantitative Restrictions Measures which limit the import of export of goods by reference to an amount or value Case law definition- Geddo v Ente Nazionale Risi (Case 2/73). “.... measures which amount to a total or partial restraint of, according to the circumstances, imports, exports, or goods in transit”  Quite a wide definition, incorporates both partial restrictions (quotas) and total restrictions (bans) In R v Henn and Darby (Case 34/79) a ban on the importation of pornographic material amounted to a quantitative restriction under Article 34 TFEU Measures having equivalent effect (MEQR’s) Defined by the Dassonville formula in Procurer du Roi v Dassonville (Case 8/74) “All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-community trade are to be considered as measures having an effect equivalent to quantitative restrictions”  Wide definition, even covers measures which are merely capable of hindering trade. Directive 70/50 Transitional measure introduced at a time when the common market was becoming established to provide guidance and is not therefore formally applicable, but it does indicate the Commission’s view of MEQRs. Distinctly applicable measures- do not apply equally to domestic and imported products, non-exhaustive list in Article 2 (1 or 3- check) of the Directive. International Fruit Company v Produktschap voor Groenten en Fruit (No. 2) (Cases 51-54/71) - The requirement for an import or export licence amounted to an MEQR applying Dassonville. - Impacts in 3 ways o Goods are effectively banned pending process of application o Potential for rejection o Additional paperwork will result in additional costs which will need to be accounted for in determining the price of goods - Distinctly applicable because it doesn’t apply equally too domestic or imported products

Indistinctly applicable measures- equally applicable to domestic and imported products, non- exhaustive list in Article 3 of the Directive. Walter Rau Lebensmittelwerke v de Smedt PvbA (Case 261/81) - Belgian requirement that all margarine for sale should be in cube shaped form or cube shaped packaging. - Problem was that importers would have to adapt their packaging processes to comply with a requirement not imposed upon them at home - Indistinctly applicable because it applies to ALL margarine

Obligation of Member States to ensure free movement of goods Article 34 TFEU also applies where a Member State fails to adopt the necessary measures in order to ensure the FMG. Commission v France (Case C-265/95) - Court held that Art 34 requires Member States to take all necessary and appropriate measures to ensure free movement of goods - French farmers were violently protesting against the import of agricultural products from other Member States. This included blocking lorries, destroying cargos, threatening retailers selling imported goods and violence against lorry drivers. - By abstaining from taking action, the Member State is just as likely to obstruct intracommunity trade. - The Court held that France was in breach of Treaty obligations requiring Member States to take all necessary measures to ensure fulfilment of obligations arising out of the Treaty by failing to prevent the protests. This clearly included facilitating the free movement of goods.

Cassis de Dijon Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (‘Cassis de Dijon’) (Case 120/78) German legislation required certain spirits to have a minimum alcohol content of 25% if marketed lawfully in Germany. French Cassis did not satisfy this (was between 15-20%) and thus could not sell in the German market. It was argued that this was an MEQR. The case established two important principles. 1. The principle of mutual recognition Where goods have been lawfully produced and marketed in one Member State, there is no reason why they should not be introduced into another Member State The principle acts as a presumption Prantl [1984] (Case 16/83)– Italian wine was imported in bottles of a distinctive bulbous shape similar to a German bottle used for a particular quality wine. The ECJ held that bulbous wine bottles had been manufactured in Italy for over a hundred years and that ‘in accordance with a fair and traditional practice’ meant that they could not be excluded from Germany.

2. The rule of reason (Justifications for indistinctly applicable MEQR’s)    

The effectiveness of fiscal supervision The protection of public health The fairness of commercial transaction The defence of the consumer

CASSIS CONCLUSION In Cassis de Dijon they argued protection of public health- because the measure avoided low alcoholic content drinks being on the market and would prevent increased tolerance to higher content drinks. Also they argued the measure protected the fairness of commercial transactions as lower alcohol content drinks were cheaper, putting the imported products at an advantage, saying it would force down alcohol rates and quality of drinks. Court = unconvinced. Measure was an indirect ban and was in breach of Article 34 TFEU

Commission v Ireland (Re Restrictions on Importation of Souvenirs) (Case 113/80) o Here, Irish legislation required Irish souvenirs not manufactured in Ireland to bear the label ‘foreign’. o The Commission argued this breached [Article 34] on the basis that the measure had the effect of lowering the value of an imported product by causing a reduction in value or increase in costs. o The Irish argued that it was justified on the basis of consumer protection. However, as the measure only applied to imported products, it was a distinctly ...