C-111/79

JUDGMENT OF 13. 3. 1980 — CASE 111/79

which Article 1 of that regulation than the relationship created by the refers. sale itself. T o determine whether such influence exists it is necessary to consider whether the buyer is 2. Article 1 of Regulation No 603/72 commercially independent of the under which the price paid or payable seller and whether the price agreed may be accepted as the value for between them is not appreciably lower customs purposes only if it has bee,n than the prices at which identical or made on a sale to a buyer established similar goods are freely sold at the in the customs territory of the same time to any buyer in the customs Community must be interpreted as territory of the Community at the meaning that he who has a genuine same commercial level. place of business in that territory must be considered as such a buyer. A company whose registered office is outside that territory meets the 4. The possibility allowed by Article 9 of requirement when it has inside that Regulation No 803/68 of accepting territory an establishment which the price paid or payable as the value carries on activities such as may be for customs purposes, subject to exercised by an independent under- certain adjustments, in no way taking in the same sector and has its precludes recourse to other methods own accounts allowing the customs of calculating the true value of the authorities to carry out the necessary imported goods. Thus it is in inspections and checks. accordance with that regulation, and in particular Articles 1 and 7 thereof, to calculate the value for customs 3. The price paid or payable within the purposes on the basis of the price at meaning of Article 9 of Regulation which the goods are resold in N o 803/68 corresponds, at the time it unaltered state after deduction of all is agreed upon, to prices on a sale in the costs incurred by the buyer- the open market only if the price is reseller in respect of transactions not influenced by commercial, within the customs territory of the financial or other relationships Community and if need be of an between the seller and buyer other appropriate profit margin.

T H E C O U R T (First C h a m b e r )

c o m p o s e d of: A. O'Keeffe, President of Chamber, G. Bosco and T . K o o p m a n s , Judges,

A d v o c a t e G e n e r a l : J.-P. W a r n e r Registrar: A. V a n H o u t t e

gives the following

JUDGMENT

Facts and Issues

Since what is involved is machinery The branch in Grimbergen does not have basically intended for civil engineering legal personality but it is regarded by the and earth moving (hydraulic buckets, Belgian revenue authorities as a wheeled and track-laying tractors, "branch" within the meaning of Article wheeled and track-laying loaders and 198 of the Consolidated Laws on levellers), that is machinery subject to Trading Companies and as a "per- considerable risks of destruction and manent establishment" the income of damage, the establishment of a supply which is taxable in Belgium (Article 148 centre for spare parts such as at Grim- (1) in conjunction with 140 (3) of the bergen is an essential factor in the Tax Code). It is under this head economic organization of the market in separately accountable as if it had the Caterpillar machinery. Since any separate personality. breakdown could bring a site to a complete standstill with all the resulting financial consequences it is necessary to obtain spare parts speedily. 2. The case between the plaintiff in the main action and the customs authorities relates to the valuation for customs purposes of the said spare parts, the Distribution operates as follows. The assessment of which is made on their plaintiff in the main action, Caterpillar leaving the warehouse. Overseas, orders parts from the American manufacturer, from one of its subsidiaries or from an undertaking outside the group through the branch in Grimbergen. The latter receives orders Previously the licence allowing the from buyers, executes them, delivers the branch to open a warehouse subject to goods and bills them. customs control provided that "the value liable to entry duties is the inter-company price", that is to say the price charged by suppliers of the parts to the branch in Grimbergen plus a percentage for Payments for the parts purchased are delivery charges. made into accounts in the name of Caterpillar Overseas on the basis of bills drawn up by Grimbergen and sent by that branch to the buyers. The amounts The system operated for eight years. In received by Caterpillar Overseas are 1974 the Customs authorities gave notice credited to Grimbergen and are included that the customs duties must be in the latter's receipts. calculated differently. It considered that the value for customs purposes to be taken into account must be either the "inter-company price" plus 20 % and an There is the same machinery in reverse amount equivalent to the usual delivery for purchasers of parts made by the costs or the price charged by the branch branch in Grimbergen: payments are to its own buyer-distributors, less the

C. Z: A branch of Y, established in Europe in a Member State of the 4. In carrying out its activities, Z is in Community, subject to the law of particular responsible for the that State in so far as it governs following at its place of business: the branches of companies which have their registered office and are established abroad and outside the Forecasting the requirements of all European Economic Community. its customers, including distributors,

JUDGMENT OF 13. 3. 1980 — CASE 111/79

5. Z is entered in the commercial, register in the Member State in which it is established and is a 'succursale' According to the plaintiff, it [branch] within the meaning of the corresponds at least to the prices company law of that country. It has normally paid for parts of the same all the characteristics of a permanent kind in sales organizations at the level establishment within the meaning of of similar central distribution that expression in the fiscal law of the establishments where they do not country in which it is established and form part of the same group as the in the double-taxation agreements of seller-suppliers.

CATERPILLAR OVERSEAS v BELGIUM

7. According to the plaintiff's argument, the provisions of Articles 1 to 8 of that the price increased by the costs of regulation? delivery to Z constitutes the value for customs purposes, whereas the More specific questions customs authorities contend that that amount should be increased by 20 % First question or, alternatively, that the value for customs purposes should be the price May the price invoiced by X (fob port of charged to Z's distributors, less the shipment) with no adjustment other than costs of delivery, warehousing and the costs of delivery to Z be treated as preserving the goods in the customs constituting the value for customs territory. purposes within the meaning of Article 9 of Regulation No 803/68, having regard to the condition laid down in Regulation General questions No 603/72, and in particular, is it First general question possible to consider that:

JUDGMENT OF 13. 3. 1980 — CASE 111/79

(c) an amount representing the trading 803/68 is based on the Convention on profit attributable to the activities of the Valuation of Goods for Customs the branch (Z) in the Community?" Purposes, which was signed at Brussels on 15 December 1950. Annex I to the Convention provides the Brussels "definition" of the value for customs The judgment making the reference was purposes and the Contracting States registered on 20 July 1979. undertook to introduce that definition into their domestic law. The contracting parties, including the Member States of Pursuant to Article 20 of the Protocol on the EEC, established a Customs Co- the Statute of the Court of Justice of the operation Council responsible for EEC written observations were submitted checking that the Convention was duly by Caterpillar Overseas, the plaintiff in implemented and applied uniformly. To the main action, represented by Pierre this end the Council drew up "Explan- Van Ommeslaghe, of the Brussels Bar, atory Notes" together with examples, the Belgian Government, the defendant different from "Interpretative Notes" in the main action, represented by Emile (Annex II to the Convention) in that Philippe, Regional Director of Customs they are not binding on the States to the and Excise, acting as Agent, and by same extent since they are not included the Commission of the European in the Convention or its annexes. The Communities, represented by Dieter Council also made "recommendations" Oldekop, a member of the Legal which have generally been followed by Department of the Commission, acting the contracting parties. as Agent, assisted by Francis Herbert, of the Brussels Bar.

(a) that the goods are delivered to contract or otherwise, between the buyer at the place of intro- the seller or any natural or legal duction into the customs person associated in business territory of the Community; with him and the buyer or any natural or legal person associated in business with him (other than the relationship (b) that the seller bears all costs, created by the sale itself); charges and expenses incidental to the sale and to the delivery of the goods at the place of introduction, which are hence (c) that no part of the proceeds of included in the normal price; any subsequent resale, other disposal or use of the goods will accrue, either directly or indirectly, to the seller or any (c) that the buyer bears any duties natural person or legal person or taxes applicable in the associated in business with him. customs territory of the Community, which are hence not included in the normal price". (2) Two persons shall be deemed to be associated in business with one another if, whether directly or indirectly, either of them has any interest in the business or property Article 2 of the same regulation defines of the other or both have a "a sale in the open market between a common interest in any business or buyer and seller independent of each property or some third person has other". It is worded as follows: an interest in the business or property of both of them".

"(1) A sale in the open market between a buyer and a seller independent of each other presupposes: In the view of Caterpillar Overseas that article does not prevent a price charged between persons "associated in business" from constituting a normal price. It (a) that the price is the sole provides merely that the price is normal consideration; by consideration only if it is not influenced by relations is meant not only the fulfilment which could exist between persons of a legal or contractual associated in business and which would obligation but also any other make the price in fact abnormal. form of consideration;

(a) the contract of sale is executed " . . . the application of the Definition within the period specified in implies an inquiry into current prices at Article 10; the time of valuation. In practice, when imported goods are the subject of a bona fide sale, the price paid or payable on (b) the price corresponds, at the that sale can generally be considered as a time it is agreed upon, to prices valid indication of the normal price on a sale in the open market mentioned in the Definition. This being between a buyer and a seller so, the price paid or payable can independent of each other, and reasonably be used as a basis for valuation, and customs administrations are recommended to accept it as the value of the goods in question, subject: (c) that price is adjusted, if necessary, to take account of circumstances of the sale which differ from those on which the (a) to proper safeguards aimed at normal price is based. preventing evasion of duty by means of fictitious or colourable contracts or prices; and (2) Adjustments under paragraph (1) (c) may in particular be required with reference to: (b) to such adjustments of that price as may be considered on account of circumstances of the sale which differ from those envisaged in the (a) the costs, charges and expenses Definition of Value". mentioned in Article 1 (2);

(b) reductions in price granted in This is basically the issue in the present favour of sole agents or sole case. Caterpillar Overseas maintains that concessionnaires or any other the price in fact paid by the branch in person of rating in comparable Grimbergen for the import into the circumstances; Community of spare parts which are sold by the Caterpillar Tractor Company has all the characteristics necessary to (c) abnormal rebates and any other constitute a normal price and therefore it reduction from the ordinary is on that basis that the customs should competitive price". calculate the duties.

Article 9 of the regulation does not Caterpillar Overseas considers that the derogate from Article 1 but is intended customs office may not rely on an to facilitate its application. Far from the alleged discretionary power so as arbi- "price paid or payable" in Article 9 trarily to disregard Article 9 and the conflicting with the "normal price" in fixing of the value for customs purposes Article 1, it is intended to be the same. by reference to the price in fact paid on the ground that Article 9 of Regulation No 803/68 does not fix a value different Why the invoice price may, and not must, from that in Article 1. be accepted as the basis for the valuation is that "in practice, when imported goods are the subject of a bona fide sale, To summarize, the general principles are the price paid or payable on that sale can as follows: generally be considered as a valid indication of the normal price" (the aforementioned Interpretative Note 5). (a) The value for customs purposes is a theoretical value; it is the normal price defined in Article 1 with the amplification given in Article 2. It is however solely to the extent to which it may be regarded as repres- entative of the normal price that the (b) Nevertheless, the price in fact paid is "price paid or payable", adjusted if in principle regarded as representing necessary, may be accepted by the the normal price, subject to the customs office as being the "normal adjustments if necessary provided for price" constituting the value for customs by Article 9, in so far as the sale is to purposes of the imported goods. a buyer established in the customs territory of the Community. Such is the case, subject to the customs' Finally, the Belgian Government checking that the price includes observes that the factors which in a given nothing abnormal or is not fictitious, sale differ from the factors constituting even if the buyer and seller are the normal price and must be taken into associated in business. account in adjusting the price as

The Commission therefore proposes that the three "general" questions put by the Article 9 (cited above) of Regulation No Tribunal de Première Instance, Brussels, 803/68 specifies the conditions upon should be answered as follows: which the "price paid or payable" may be accepted as the value for customs purposes. The aim of those conditions is to ensure that the "price paid or payable" is representative of the "normal "The reference to the price paid or price". It is therefore a method which in payable in Article 9 of Regulation No certain circumstances allows the normal 803/68 does not give a definition of the price of the goods to be determined in value for customs purposes independent the same way as the price "which they of or different from the normal price to would fetch . . . on a sale in the open which Article 1 of that regulation refers. market between a buyer and a seller independent of each other", the price specified in Article 1 of Regulation No 803/68 (Case 38/77 Enka v Inspecteur der Invoerrechten en Accijnzen, [1977] The value for customs purposes is still 2203, at p. 2212, paragraph 14). the normal price which, in certain

CATERPILLAR OVERSEAS v BELGIUM

If, in any of the above categories, the First specific question imported goods are presented to the Customs as being the subject of a sale to the person or firm acting as importer, it As regards the first part of the question has to be established whether the Caterpillar Overseas argues that the price transaction can be accepted as providing in fact paid by the particular companies a price suitable as a basis for valuation. If in their dealings between themselves may so, valuation can proceed on the lines constitute the value for customs purposes indicated in Chapter VI and VII, i. e. by where that price is not influenced by the use of the price paid or payable as a commercial relationships existing starting point". between them (Article 2 (1) (b) of Regu- lation No 803/68).

In the present case the customs authority This follows from Chapter VIII of the has omitted to carry out the necessary Explanatory Notes to the Convention: checking.

"(c) Transactions which by their nature may not establish prices acceptable Caterpillar Overseas maintains in the as bases for valuation. present case that the imports have been

JUDGMENT OF 13. 3. 1980 — CASE 111/79

In addition it is apparent from those reports that the sale price between the It also accords with the concept of companies in question must be regarded establishment (see, for example, the first as corresponding to the prices agreed in paragraph of Article 52 of the Treaty). a sale taking place between a buyer and a seller independent of each other. Caterpillar Overseas moreover refers to the judgment of 22 November 1978 in The second part of the first specific Case 33/78 Soma/er v Saar Ferngas question concerns the interpretation of [1978] ECR 2183 in which the Court Article 1 of Regulation No 603/72 of the defined the concept of branch within the Commission of 24 March 1972 (Official meaning of Article 5 of the Convention Journal, English Special Edition 1972 (I), of 27 September 1968 on Jurisdiction p. 156) which is worded as follows : and the Enforcement of Judgments in Civil and Commercial Matters as follows : "For the purposes of applying the provisions of Council Regulation (EEC) No 803/68 of 27 June 1968 on the "The concept of branch, agency or other valuation of goods for customs purposes, establishment implies a place of business and without prejudice to the other which has the appearance of conditions set out in that regulation, the permanency, such as the extension of a price paid or payable shall be accepted as parent body, has a management and is the value for customs purposes only if it materially equipped to negotiate business

CATERPILLAR OVERSEAS v BELGIUM

From the point of view of Belgian tax The Belgian Government considers that law the branch in Grimbergen is a "the price paid or payable" does not permanent establishment of the Swiss constitute the value for customs purposes company in Belgium. This concept is pursuant to Article 1 of Regulation No defined in Article 140 (3) of the Belgian 803/68 for the following reasons.

JUDGMENT OF 13. 3. 1980 — CASE 111/79

CATERPILLAR OVERSEAS v BELGIUM

relationship" has not influenced the price freely sold, at the same time and in (Article 2 (1) (b) of Regulation No the same quantities, by sellers in other 803/68). countries to any buyer in the country of importation at the same commercial level as the actual buyer. It further observes that for the "price paid or payable" where a sale is between associated companies to be acceptable, it is necessary to check whether there are The recommendation then stipulates the any adjustments to be made, if necessary, order in which the methods are to be in relation to transactions on which the applied. normal price is based (Article 9 (1) (b) and Article 2 of the same regulation). In this respect comparison with the prices charged for identical goods to In reply to the question put the independent buyers in the country of Commission refers to the Re- importation is the best basis for commendation of the Customs Co- determining the value for customs operation Council concerning the purposes; there can be comparison with application of the value for customs prices charged for similar goods in the purposes of 1 June 1965 which case of products of a well-known brand recommends recourse to several methods only where the goods in question are of of comparison, namely: a brand enjoying a similar reputation (Article 3 of Regulation No 803/68).

— Comparison of the prices of identical foods from the same seller available, As regards Question 1 (b) (as re-worded) at the same time and in the same the Commission argues that the quantities, to any buyer in the requirement that the buyer must be territory of importation at the same established in the customs territory of the commercial level as the actual buyer; Community involves two factors:

The necessity for uniform interpretation established in the customs territory of the of the Community provisions prevents an Community". That concept is however interpretation from being exclusively explained in the penultimate recital to determined by the legislation of a single the regulation: "a buyer should be so Member State. The fact referred to in regarded if he had his residence or place the judgment making the reference that of business therein", that is to say, an from the point of view of Belgian tax law establishment transacting business the branch of the plaintiff in the main capable of being carried on by an action is to be regarded as a "permanent independent undertaking in the same establishment" is therefore not decisive sector and having permanently available with regard to the concept of buyer the necessary documents and vouchers established in the customs territory of the for checking by the customs authorities. Community. That concept does not, therefore, include fictitious establishments or establishments acting as a simple extension of the commercial activities of The Commission considers that a branch the parent company the registered office without any legal personality can in any of which is outside the customs territory event not itself be regarded as a buyer of the Community. within the meaning of Article 1 of Regu- lation N o 603/72. Irrespective of the volume of business conducted by the branch established in Belgium all that The Commission observes that the takes place between the plaintiff in the definition of "branch" which the Court main action and the branch are transfers of Justice gave in its judgment of 22 of goods from one section to another of November 1978 (the aforementioned the same undertaking. Case 33/78 Somafer-Saar Ferngas [1978] ECR 2183) was given only in the context of Article 5 of the Convention of 1968. It is not capable of being applied to the T o adopt the words used by the Court of role of a branch in the customs Justice in its judgment of 22 November legislation of the Community. 1978 (the aforementioned Case 33/78) business may be transacted at the branch but any legal link will be with the parent body. If for the resale to the distributors In conclusion the Commission proposes the legal link is with the plaintiff in the that 1 (b) (as re-worded) of the specific main action it is not possible to see how, questions should be answered as follows: from the legal point of view, it can be the branch which acts as buyer of the goods intended for resale.

Since the warehousing and storage charges and other costs inherent in the 3. In such a case must the calculation activities of the branch in Grimbergen allow the deductions referred to in are transactions "prior" to the entry of the judgment making the reference? the goods into the customs territory of the Community, they must be deducted from that price.

It considers that the reference in Regu- lation No 803/68 to the price paid or The price charged to customers and payable as a possible basis for valuation concessionnaires incorporates in the view does not preclude the possibility of using of Caterpillar Overseas not only the other methods to calculate the value. costs of the transactions carried out by the branch in Grimbergen but also a profit margin. That margin should also be deducted. Recourse to the price charged to customers by the importer is had by the customs authorities both to fix the basis The Belgian Government maintains that of valuation and to check the basis for there is no alternative but to refer to the valuation proposed by the importer, for prices charged to the customers of example, between associated companies Caterpillar Overseas. to check to what extent links between the seller and buyer have influenced the terms of the transaction. The commercial status of the branch in Grimbergen is in fact that of Caterpillar Overseas itself. The warehouse in Grim- bergen is nothing other than the branch The principle of this so-called deductive and physical centre for the distribution. method is that the delivery charges

The fact referred to in the second Since the costs of warehousing and preser- specific question, namely that the vation are not part of the value for commercial level of the buyers may vary, customs purposes, they must be deducted affects the margin which is, if necessary, from the price invoiced to distributors to deducted from the price charged to the the extent to which they constitute a distributor. factor in that price (Article 10 (2) (d) of Directive No 69/74/EEC of 4 March 1969 (Official Journal, English Special Regarding the third specific question the Edition 1969 (I), p. 82), judgment of Commission maintains that the principle 23 November 1977 in the aforesaid Case of deduction must largely be looked for 38/77 Enka). in Article 1 (2) of Regulation No 803/68 from which it appears: Other expenses appertaining to the activities of the branch in the Member — that the goods are delivered to the State: this question is governed by buyer at the place of introduction Council Directive No 71/235/EEC of 21 into the customs territory of the June 1971 on harmonization of the Community; provisions laid down by law, regulation or administrative action relating to the usual forms of handling which may be — that the seller bears all costs, charges carried out in customs warehouses and in and expenses incidental to the sale free zones (Official Journal, English and to the delivery of the goods at Special Edition 1971 (II), p. 398), which the place of introduction, which are in Article 1 lists the usual forms of hence included in the normal price; handling needed to ensure preservation or to improve packaging or marketable quality. — that the buyer bears any duties or taxes applicable in the customs territory of the Community, which are hence not included in the normal The costs relating thereto are deductible price. to the extent provided for in Article 10 (2) (d) of the aforesaid Directive N o 69/74/EEC. The same principles must apply to the price paid or payable (Case 38/77 Enka [1977] ECR 2203, at p. 2214, paragraph Should the branch as described in the 27) as appears from the adjustment preamble to the questions not be able to provided for in Article 9 of Regulation make the parent body a buyer established No 803/68. within the customs territory of the Community, no profit margin connected with the activity of that branch should be The price charged to distributors or to deducted from the price invoiced to the certain other buyers must therefore be distributors or to the buyers.

Decision

1 By j u d g m e n t of 29 J u n e 1979, received at the C o u r t on 20 July 1979, the Tribunal de Première Instance, Brussels, referred to the C o u r t u n d e r Article 177 of the E E C T r e a t y six questions on the interpretation of Regulation N o 8 0 3 / 6 8 of the Council of 27 J u n e 1968 o n the valuation of g o o d s for customs purposes (Official J o u r n a l , English Special Edition 1968 (I), p. 170) and Regulation N o 6 0 3 / 7 2 of the Commission of 24 M a r c h 1972 on the buyer to be taken into consideration w h e n determining the value of g o o d s for customs purposes (Official J o u r n a l , English Special Edition 1972 (I), p. 156).

JUDGMľ.NT O F 13. 3. 1980 — CASE 111/79

2 Those questions have been raised in an action brought by Caterpillar Overseas, a Swiss company, against the Belgian State for an order that the latter refund the customs duties which it is alleged to have levied wrongly on the import into the customs territory of the Community of spare parts for Caterpillar machines and which the plaintiff in the main action paid under protest to avoid legal proceedings.

"In so far as Article 9 of Regulation N o 803/68 provides that 'the price paid or payable may be accepted' (on certain conditions) 'as the value for customs purposes', does it give a definition of the value for customs purposes that is independent of or different from the definition given in Article 1 as 'the normal price', or does it derogate from Article 1 ?"

CATKRPIIJ.AR OVERSEAS v BELGIUM

5 The aim of Regulation N o 803/68 is to ensure the uniform application of the Common Customs Tariff. To this end its provisions aim to avoid arbitrary or fictitious values and to base the value for customs purposes of imported goods on their real value. Article 1 of the regulation translates that idea by providing that the value for customs purposes shall be the normal price, that is to say, the price which the goods imported would fetch on a sale in the open market between a buyer and a seller independent of each other.

6 The main aim of the concept of normal price is to allow the customs auth- orities to establish, in the interests of the proper levying of customs duties, the true prices of goods where the terms of the transactions to which they relate have been influenced by factors affecting the terms obtaining between contracting parties in the open market.

; Although Article 9 of Regulation N o 803/68 provides that the price paid or payable may be accepted as the value for customs purposes, it is merely accepting a method for calculating the normal price of the goods. It is apparent from Article 9 (1) that the price paid or payable may be accepted only if it corresponds, at the time it is agreed upon, to prices on a sale in the open market between a buyer and a seller independent of each other, and that price is to be adjusted, if necessary, to take account of circumstances of the sale which differ from those on which the normal price is based.

10 The Tribunal de Première Instance is seeking in the first question referred to as "more specific" clarification on the calculation of the value for customs purposes on the basis of the price paid or payable. Thus the question at (b), which the Court will examine first, asks for an interpretation of Article 1 of Regulation N o 603/72, according to which the price paid or payable shall be accepted as the value for customs purposes only if it has been made on a sale to a buyer established in the customs territory of the Community. The court wishes in particular to know whether there is such a sale where the sale is between two companies established outside the customs territory of the Community but where the buyer, a subsidiary of the seller, has a branch established in that territory responsible for ordering the goods from the seller, managing the stock and distributing the goods to customers and in particular to distributors of the goods sold under the trade-mark of the parent body.

11 In the preamble to the questions the court stresses that it is assuming that the branch is established in the customs territory of the Community and has a large measure of independence in its operations; that it is entered in the commercial register in the Member State in which it is established and constitutes a branch within the meaning of the company law of that country; that it has all the characteristics of a permanent establishment within the meaning of the fiscal law of the country where it is established and the double taxation agreements of the O E C D type. It is moreover treated as a permanent establishment by that country, which levies direct taxation on the income arising from its activities as a branch. For that reason it keeps separate accounts as if it had separate personality.

T h e i n t e r p r e t a t i o n of A r t i c l e 9 of R e g u l a t i o n N o 8 0 3 / 6 8

i6 The national court asks in the first specific question at (a) in what circum- stances the price paid or payable, to which Article 9 of Regulation No

JUDGMENT O F 13. 3. 1980 — CASE 111/79

803/68 refers, corresponds, at the time it is agreed upon, to the price on a sale in the open market between a buyer and a seller independent of each other.

i7 According to the plaintiff in the main action a sale to an importer of goods or to its branch by a supplier with which that importer and its branch are associated must be treated as a sale in the open market in every case in which the importer or its branch is acting as an independent trader by reason of the fact that it is not enjoying any financial or commercial advantage in relation to a fully independent buyer because of its association with the supplier.

20 It is necessary, therefore, to answer the first specific question at (a) to the effect that the price paid or payable within the meaning of Article 9 of Regu- lation No 803/68 corresponds, at the time it is agreed upon, to prices on a sale in the open market only if the price is not influenced by commercial, financial or other relationships between the seller and buyer other than the relationship created by the sale itself. To determine whether such influence exists it is necessary to consider whether the buyer is commercially independent of the seller and whether the price agreed between them is not appreciably lower than the prices at which identical or similar goods are freely sold at the same time to any buyer in the customs territory of the Community at the same commercial level.

The so-called deductive method

2i The second and third specific questions are put by the court in the event of its declining to base the value for customs purposes of the Caterpillar spare parts on the price paid or payable. They concern possible recourse to another method of calculation and they ask in substance whether the value for customs purposes may be determined on the basis of the prices charged to distributors or to certain other customers, it being understood that those prices may vary according to the commercial level of the buyers, and if so whether it is necessary to take into consideration with a view to their possible deduction from such prices as may be fixed upon in accordance with that method:

(a) the costs of warehousing and of preserving the goods;

25 For the same reason an amount representing the profit margin attributable to the activities of the buyer-reseller may be deducted where the buyer has a certain commercial independence of the seller and where the profit margin corresponds to the average profit margin observed at the same commercial level in the same trade.

26 T h e r e f o r e the second a n d third specific questions p u t by the national court call for an answer t o the effect that it is in accordance with Regulation N o 803/68 to calculate the value for customs purposes on the basis of the price at which the g o o d s are resold in unaltered state after deduction of all the costs incurred by the buyer-reseller in respect of transactions within the customs territory of the Community a n d , w h e r e necessary, an appropriate profit margin.

CATERPILLAR OVERSEAS v BELGIUM

Costs

27 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable and as the proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

commercial, financial or other relationships between the seller and the buyer other than the relationship created by the sale itself. To determine whether such influence exists it is necessary to consider whether the buyer is commercially independent of the seller and whether the price agreed between them is not appreciably lower than the prices at which identical or similar goods are freely sold at the same time to any buyer in the customs territory of the Community at the same commercial level.

4. It is in accordance with Regulation No 803/68 to calculate the value for customs purposes on the basis of the price at which the goods are resold in unaltered state after deduction of all the costs incurred by the buyer-reseller in respect of transactions within the customs territory of the Community and, where necessary, an appropriate profit margin.

O'Keeffe Bosco Koopmans

Delivered in open court in Luxembourg on 13 March 1980.

For the Registrar A. O'Keeffe

J. A. Pompe President of the First Chamber Deputy Registrar