C-27/70

In Case 27/70

Reference to the Court under Article 177 of the EEC Treaty by the Finanzgericht Hamburg for a preliminary ruling in the action pending before that court between

C. W. Edding & Co., Hamburg

and

Hauptzollamt Hamburg-St. Annen

on the interpretation of various provisions of Regulation No 803/68 of the Council of 27 June 1968 (OJ Special Edition 1968, [I] p. 170)

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure established and was entrusted, under the authority of the Customs Cooperation The facts and procedure may be summarized Council, with drawing up explanatory notes as follows : and advising the parties, generally in the form of an opinion. 1. The Convention on the Valuation of Goods for Customs Purposes which was 2. Regulation (EEC) No 803/68 on the signed at Brussels on 15 December 1950 and valuation of goods for customs purposes to which all the Member States are defines this valuation in accordance with Contracting Parties states that: 'For the the provisions of the Brussels Convention: purposes of levying ad valorem customs Article 1 states: duties, the value of any goods imported 'For the purpose of applying the Com­ for home consumption shall be taken to mon Customs Tariff, the value for be the normal price, that is to say, the price customs purposes of the goods imported which they would fetch at the time when shall be taken to be the normal price, the duty becomes payable on a sale in the that is to say, the price which they would open market between a buyer and a seller fetch, at the time referred to in Article 5, independent of each other' (Annex I, on a sale in the open market between a Article 1). buyer and a seller independent of each The Convention also provides that the other.' Contracting Parties shall introduce this Article 1(2)(b) states that the normal price definition, which they may adapt within of such an article shall be determined, certain limits, into their domestic law inter alia, on the assumption 'that the seller (Article II) and that the Parties shall, in bears all costs, charges and expenses applying the definition, conform to the incidental to the sale and to the delivery provisions of the Interpretative Notes set of the goods at the place of introduction out in Annex II to the Convention. In which are hence included in the normal order to ensure a uniform interpretation price'. and implementation of a specific definition, Article 2 of this regulation defines the a Customs Valuation Committee was meaning of 'open market' and Article 7

provides that amongst the costs, charges freight must not be included in the and expenses in the normal price there shall "normal price" as components of the be included carriage and freight. cost if such inclusion would result in fixing a higher price than the normal 3. The plaintiff in the main action imports cif price prevailing on the market felt-tipped markers from Japan. taking into account the lower costs On 16 July 1968 it requested from the of ordinary transport, and which customs office at Hamburg Airport customs constitutes the price which would have clearance at the 'spot price' of 4 boxes been paid by any buyer at the place containing two thousand markers which it of importation?' had had delivered as an exception by air. The customs office calculated the value 6. In the statement of reasons for its order for customs purposes on the basis of the the Finanzgericht observes that from the amount on the invoice, namely DM 422, wording of Article 1(2)(b) of Regulation to which it added 94% of the air freight No 803/68, clarified inter alia by Article 6 between Kobe and Hamburg, namely of the same regulation, it may be deduced DM 650.07 and levied customs duties (16 %) that the actual costs of carriage and freight and turnover tax in respect of imports (11 %) are to be included in the normal price and on a total value of DM 1102.67. that there is some support in legal writing for this view in connexion with the interpre

validity. Article 13 of the Wertzollordnung gericht Hamburg. (Customs Valuation Regulations) gives examples the precise aim of which is to 5. The Finanzgericht found that the solu establish what constitutes the normal rule tion to the dispute depended on an interpre with regard to valuation for customs tation of Regulation No 803/68 and purposes, namely to take into consideration suspended proceedings; by an order of 12 the price which could be obtained at the May 1970 recorded in the Court Register place of importation, that is to say, the on 2 June 1970 it put the following questions price which could be fetched on the market. to the Court of Justice under Article 177 In Opinion XXX of the Valuation Com of the EEC Treaty: mittee, in accordance with this principle it was declared that with regard to air (1) Must it be considered that in principle transport it must be determined whether in order to determine the "normal it was possible to obtain 'a price including price", the carriage and freight, re the additional costs arising from the use ferred to in Article 7 of Regulation of air transport'. According to the national No 803/68 of the Council of the court Article 1 of Regulation No 803/68 European Communities of 27 June also provides that the normal price is an 1968 (OJ Special Edition 1968 [I], actual price, that is to say, a price which p. 170) are constituted by the carriage could be obtained on the market.

JUDGMENT OF 10. 12. 1970 — CASE 27/70

inquiry. The Commission of the European Com — the price which would be fetched munities, the Federal Republic of Germany, the Hauptzollamt Hamburg-Jonas which — on a sale in the open market on the abolition of the Hauptzollamt Hamburg-St. Annen took over the latter's — between a buyer and a seller inde rights, and the Edding undertaking sub pendent of each other. mitted their oral observations at the hearing on 10 November 1970.

It is clear that, especially if the buyer creates particularly unusual obligations for the seller, for example A — Observations submitted by the Com transport by air, that factor must be taken mission of the European Communities into consideration. In such a case the normal price is not the usual market price for the goods carried by the usual means of 1. The Commission observes that the value transport, but that which is considered for customs purposes is the normal price normal for goods transported by another as defined by Regulation No 803/68. This means putting them more swiftly at the normal price, which, according to the disposal of the buyer.

EDDING v HAUPTZOLLAMT HAMBURG

4. According to the Commission, the the value for customs purposes. Various interpretation which it suggests accords exceptions are expressly provided in completely with that implied by the Article 8(4) and in the second sub Brussels Convention. According to that paragraph of paragraph (1) thereof. Convention, the actual transport costs The conclusion is consequently reached constitute a factor in the normal price that Regulation No 803/68 is exhaustive which is used to determine the value of the and that the sole exceptions admissible

schedule of freight rates normally exception was laid down, inter alia, by applied for the same mode of transport Article 13 of the Wertzollordnung. This is to the place of introduction. no longer the case under Regulation No 803/68 since the Community authorities (e) Finally, the same principle is confirmed considered that they were not obliged to by Article 9(l)(c) which provides that employ the power which the Convention the price paid or payable may be made available to them in this matter — a accepted as the value for customs power which on the contrary had been used purposes if it is adjusted to take account in the system before that of the Community. inter alia of the transport costs.

(1) In determining the normal price the Article 1 of the same regulation, since carriage and freight referred to in Article 7 merely clarifies it. Article 7 of Regulation No 803/68 of the According to Article 1, the normal price Council of the European Communities is to be determined on the assumption that of 27 June 1968 (OJ Special Edition the seller bears all the costs, charges and 1968 [I], p. 170) are constituted by the expenses incidental to the sale and to the carriage and freight actually paid for delivery of the goods at the place of the import in question. introduction into the customs territory. Article 7 states that amongst such costs, (2) It does not follow from Article 1(1) of charges and expenses are borne by the buyer Regulation No 803/68 that the normal and not by the seller (for example in the price must be the same as the 'normal case of sale ex-factory) they must none the cif price' prevailing on the market less be included in the normal price for taking into account the usual (and calculating the ad valorem duty (Article lower) transport costs; the normal price 1(2)). comprises the actual carriage and Since the price to be determined is the freight to the place of introduction into normal price of the goods actually presented the Community even if their inclusion to the customs for importation it follows results in a price higher than the price that the costs of delivery to be taken into which any buyer at the place of intro­ consideration are always the actual costs duction would be prepared to pay for of delivering the goods to the place of goods carried by other means of introduction, that is to say, the costs of the transport. means of transport actually employed and the actual amount of the price paid in the particular case. B — Observations of the Hauptzollamt This interpretation, which follows from the Hamburg-St. Annen, of the Haupt­ wording of Articles 1 and 7 of Regulation zöllamt Hamburg-Jonas and of the No 803/68, is in accordance with paragraph Federal Republic of Germany 1 of Opinion VIII of the Customs Valuation Committee according to which: 'The costs of transporting goods by air or by any other The Hauptzollamt Hamburg-Jonas, which means ensuring rapid delivery constitute a was substituted for the Hauptzollamt part of the normal price referred to in the Hamburg-St. Annen, and the Federal definition'. Such an interpretation also Republic of Germany declared in the course accords with the established case-law of the of the oral procedure that they adopted the German courts. contents of the observations submitted in The normal price is undoubtedly a theoreti­ the course of the written procedure by the cal price, in the sense that it is worked out Hauptzollamt Hamburg-St. Annen. on the basis of specific factors through legal These observations, both oral and written, rules, but it may not be entirely detached may be summarized as follows : from the facts peculiar to each individual case.

port or place of despatch, the freight transport or when the products are or transport costs outside the port or delivered free. In such a case, it may be place of despatch. conceded that a buyer pays no more in the Consequently the Hauptzollamt and the case of air freight than in the case of sea Federal Republic of Germany suggest that freight and that the normal price does not the reply to the first question should be as include the higher costs of air freight. follows:

transport. The affirmative reply to the first question The Hauptzollamt and the Federal Repub necessitates a reply to the second question. lic of Germany suggest that the following The Finanzgericht asks whether the rule reply should be given to the second following from the affirmative reply to the question : first question also applies even if taking the 'The transport costs relating to a usual carriage and freight into account specific import must be included as items would, on the market for the product in of the cost in the normal price within question, result in a normal cif price lower the meaning of Article 1 of Regulation than that arrived at in this case owing to the No 803/63 even if such inclusion would employment of a more expensive means of result in fixing a higher price than the transport. normal cif price prevailing on the market, According to the Hauptzollamt and the taking into account the usual (and lower) Federal Republic of Germany, the normal transport costs involved in the use of price does not relate to a normal cif price another means of transport'. (which furthermore did not exist at all in the present case in which there was a sale C — Observations of the Edding undertaking on cost and insurance terms only.

The A different interpretation of the concept normal price must comprise like factors and of a normal price would result in imposing it would be contradictory to make it up, on the customs authorities the unbearable on the one hand from normal (and therefore burden of requiring them to investigate the abstract) elements, and on the other from normal transport costs in each case. factual elements (which may not be typical The Hauptzollamt and the Federal Republic by reason of their being quite exceptional). of Germany furthermore consider in Although the Finanzgericht has brought addition that none of the exceptional the problem before the Court it has done situations which allow for the exclusion of so for historical reasons.

JUDGMENT OF 10. 12. 1970 — CASE 27/70

actual specific case. If the invoice price 4. No other legislative provision weakens includes transport costs actually paid this argument. Article 6 of Regulation No the concept of 'normal price' is con 803/68 gives details of the place of intro sistent only with that of'normal freight'. duction into the customs territory of the Community in terms of the means of (b) Since Article 1(2) states that transport transport but gives no decision with regard costs shall be included in the normal to the different cost of the means of trans price it indicates in repeating the port when, as in the present case, the place concept of the normal price that the of introduction is the same whatever the transport costs are also to be conceived means of transport (air or sea).

goods in general. Definition is quite as abstract as Regulation No 803/68 and clearly (c) Article 7 is also abstract as it simply indicates that it does not relate to a deals with 'the costs, . . . of carriage and specific import. freight'. As opposed to this the corres ponding provision of German law — The first paragraph of Interpretative relates to 'the costs of carriage and Note 5 to Article 1 of the definition freight of the item of goods whose value emphasizes the importance of the normal is to be determined'. situation. Paragraphs 2(b) and 3 empha

EDDING v HAUPTZOLLAMT HAMBURG

— The fourth paragraph of Opinion VILT — Opinion XXX relating to a specific case states that the additional costs arising also expresses the view that the ad­ from air transport shall not form part ditional sum occasioned by air transport of the value for customs purposes if 'the does not form part of the value for use of air transport is fortuitous or does customs purposes. not increase the value of the item of goods transported'. The Opinion adds 6. The Edding undertaking observes finally that 'regard shall be had only to the that an interpretation based on the concept corresponding costs of transport by of the actual costs would have an un­ land or sea since the means of transport favourable effect on the expansion of air to be taken into consideration is that traffic by penalizing those who availed usually employed'. themselves of it.

Grounds of judgment

1 By an order of 12 May 1970, which was received at the Court Registry on 12 June 1970, the Finanzgericht Hamburg put to the Court of Justice two questions, under Article 177 of the Treaty establishing the European Community, on the inter­ pretation of Articles 1 and 7 of Regulation No 803/68 of the Council of 27 June 1968 (OJ Special Edition 1968 [I] p. 170).

2 In the first question the Court is asked to rule whether, in determining the normal price forming the basis of the value for customs purposes for the application of the Common Customs Tariff, the carriage and freight referred to in Article 7 of Regula­ tion No 803/68 consist in principle of the carriage and freight actually paid for the import in question.

8 In principle the price actually fetched by a specific item of goods sold under those conditions is the best guide to the normal price forming the basis of the value for customs purposes. This remains the position, without its being necessary to distinguish between the various means of transport, even if the choice of one of them may appear unusual with regard to the item of goods in question. In fact, the buyer may have good commercial reasons for preferring an unusual and more expensive method of transport because it is swifter or safer. By choosing such a method of transport the buyer suggests that owing to the exceptional circumstances of the transaction he had an interest in paying this price and that any other buyer in the same circumstances would do the same.

9 Consequently the carriage and freight referred to in Article 7, apart from exceptions expressly laid down but inapplicable to cases such as the present one, are the costs actually incurred by the buyer, even when they result in fixing a 'normal price' higher than the cif price for the same item of goods transported by a more usual means of transport.

10 This interpretation is confirmed by Article 6 of Regulation No 803/68 which, by defining the place of introduction of the item of goods into the Community in a different manner according to the different means of transport, implies that the actual means of transport is to be taken into consideration. It is also confirmed by Article 8 of the same regulation, in particular by paragraph (3) thereof which provides that even where transport is free the transport costs to be included in the value for customs purposes are those of the normal mode of transport.

Upon reading the pleadings ; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the parties ; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 9 and 177; Having regard to Regulation No 803/68 of the Council; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities,

THE COURT

in answer to the question referred to it by the Finanzgericht Hamburg, by the judgment of that court of 12 May 1970, hereby rules:

The costs actually paid for a more expensive mode of transport than the usual mode of transport for the same item of goods are, save where exceptions are

OPINION OF MR ROEMER — CASE 27/70

expressly provided, to be taken into account in determining the normal price as the basis for the value for customs purposes, even if that price as a result exceeds the cif price of the item of goods transported by the usual mode of transport.

Mr President, was requesting customs clearance at the Members of the Court, normal price, in accordance with Article 1 of Regulation No 803/68 of the Council. The request for a preliminary ruling before It based its calculation of the value for the Court today relates to the interpretation customs purposes not only on the Japanese of Regulation No 803/68 of the Council supplier's invoice (which gave the figure of 27 June 1968 on the valuation of goods of DM 422 carriage and insurance Kobe) for customs purposes (OJ Special Edition but in accordance with a decree of the 1968 [TJ, p. 170), more precisely to the Federal Minister for Finance on the question whether the normal price which determination of transport costs for air determines the value for customs purposes traffic it added 94% of the air freight paid of imported goods is calculated by taking by the plaintiff for transport from Kobe into account the actual transport costs or to Hamburg. The customs office thus on the basis of the normal costs paid on arrived at a value for customs purposes the importation of such goods. of DM 1102.67 which it took as the basis This is an important question for the for its subsequent calculations issued in plaintiff in the main action which is an an assessment on 16 July 1968 of the import undertaking in Hamburg. It appears customs duties and import turnover tax, that it usually imports felt-tipped markers namely a total of DM 321.69. from Japan by sea but in July 1968 its However, the Edding undertaking was urgent needs obliged it to import a certain unwilling to accept this. In its opinion the quantity of those goods by air. It requested concept of normal price includes only the customs clearance from the customs office normal freight as opposed to the air freight at Hamburg Airport for those goods at the paid in exceptional cases. The calculation spot price (which the company required to of the value for customs purposes should declare the value for customs purposes thus be based on the market price for goods had indicated as DM 422). The customs which the Edding undertaking considered office rightly understood that the plaintiff at its marketing stage was DM 444 cif