C-248/80

In C a s e 2 4 8 / 8 0

R E F E R E N C E t o t h e C o u r t u n d e r Article 177 of t h e E E C T r e a t y b y t h e F i n a n z g e r i c h t [Finance C o u r t ] H a m b u r g for a preliminary ruling in t h e case p e n d i n g before that c o u r t between

KOMMANDITGESELLSCHAFT IN FIRMA GEBRÜDER G L U N Z [ G l u n z B r o t h e r s , limited partnership], H a m b u r g ,

1 — Language of the Case: German.

JUDGMENT OF 3. 2. 1982 — CASE 248/80

and

JUDGMENT

Facts and Issues

The facts of the case, the procedure and Section I of the Annex to Regulation No the observations submitted pursuant to 950/68 of the Council of 28 June 1968 Article 20 of the Protocol on the Statute on the Common Customs Tariff (Official of the Court of Justice of the EEC may Journal, English Special Edition 1968 (I), be summarized as follows: p. 275) reads as follows:

"The unit of account (u.a.) by reference I — Facts and written p r o c e d u r e to which certain specific customs duties are expressed or the scope of certain General Rule C.3, applicable both to headings or subheadings is defined has a nomenclature and to duties, in Part I, value of 0.88867088 grams of fine gold.

GLUNZ v HAUPTZOLLAMT HAMBURG-WALTERSHOF

International Monetary Fund in respect of these currencies." As the rate communicated to the IMF by the Federal Republic of Germany for the amount of fine gold referred to in The only change in the text of Regu- General Rule C.3 was D M 3.66, 70 u. a. lation No 2500/77 amending Regulation was equivalent to D M 256.20. On the N o 950/68 is that currencies of Member basis of this exchange rate the result was States which acceded to the Community a liability to customs duty of D M on 1 January 1973 are added to those of 72 045.59 on the gross weight of the the original Member States. imported goods, namely 28 128.20 kg. On the basis of an 1 1 % rate, the amount By Regulation No 2800/78 of 27 of duty would have been only D M November 1978 (Official Journal L 335, 18 386.19. Accordingly the rate of 70 u.a. p. 1) amending Regulation No 950/68, per 100 kg was to be applied. the Council replaced Rule C.3 by a rule which fixed the value of the European unit of account (EUA) in each national Glunz lodged an objection against the

candlestick. Glunz declared the statuettes main action submitted before the Finanz- as porcelain Christmas angels with gericht that a reduction of customs duty candles under tariff heading 97.05 of the to the amount applicable in the case of Common Customs Tariff (Christmas tree importation into the Member State with decorations and similar articles for the weakest currency was out of the Christmas festivities; rate of customs question. duty 10%). The principal customs office of Hamburg-Waltershof cleared the The Finanzgericht Hamburg did not goods for customs purposes on the basis accept Glunz's first argument relating to of that declaration by notices of the exact tariff classification of the goods assessment which it described as pro-

JUDGMENT OF 3. 2. 1982 — CASE 248/80

or number. Consequently the customs of the Annex to Council Regulation union prohibits differing rates of customs (EEC) N o 2500/77 of 7 November 1977 duty expressed in the currencies of the in its application to tariff heading Member States. 69.13 B of the Common Customs Tariff invalid in so far as, in the case of the importation of goods into a Member State with a strong currency, it would lead to a higher incidence of customs At the same time the varying incidence duty than in the case of importation into of customs duty amounts to discrimi- the Member State whose currency has nation in breach of the general principle most depreciated in relation to the parity of equality. To the extent to which

recognized by any provision of the Treaty as a decisive criterion for calcu- The Finanzgericht bases its legal lating the amount of customs duty. assessment mainly on the following Similarly, the existence of a specific considerations: minimum rate of customs duty does not justify a varying incidence of duty. T h e purpose of specific minimum rates of duty is to prevent tariff protection from "The differing incidence of customs duty dropping below a minimum amount in the various Member States is when world market prices are low or incompatible with the fundamental falling. But if that effect is in fact conception of customs union. The produced in a Member State with a weak customs union is the foundation of the currency the legislature is obliged, in Communtiy; a crucial aspect of the conformity with the fundamental idea of customs union is the introduction of the the customs union together with the

principle of equality, to adopt 'measures II — S u m m a r y of t h e written having equivalent effect' for Member observations submitted to States with strong currencies. The the Court difficulties described in the observations of the Council and the Commission in Case 135/79 caused by the transition from the unit of account to the system of the European unit of account (based on a basket of currencies) in force from 1 Glunz considers that in submitting its January 1979 do not provide any justi- question for a preliminary ruling the fication for the failure to adjust the arith- Finanzgericht is asking the Court to metical value used in Regulation (EEC) accept the consequences of the judgment No 2500/77 to the altered exchange given on 3 June 1980 in Case 135/79 rates, as required by the basic idea of the (Gedelfi Großeinkauf GmbH & Co KG v

However, the be considered acceptable." Court arrived at the same result from an economic point of view. It ruled that Article 2 of Council Regulation N o 516/77 in conjunction with Annex I to Glunz, represented by J. Gündisch of the that regulation should be interpreted as Hamburg Bar, the Council of the meaning that a levy was not chargeable European Communities, represented by in respect of added sugar on the import- its Legal Adviser, A. Sacchettini, acting ation of orange juice into a Member as Agent, and the Commission of the State if it was established that the same European Communities, represented by orange juice was exempt from the levy in its Legal Adviser, P. Gilsdorf, acting other Member States. as Agent, assisted by M. Schäfers, submitted written observations in

That statement on its own was

sufficient to show clearly that it followed those arguments was that they dealt from the judgment in the Gedelfi case mainly with the prohibition against that the applicable provisions should be discrimination and only dealt inade- interpreted in the present case also as quately with the spirit and the aims of meaning that the duty charged to the the customs union, which was intended importer in one Member State may not to establish equal conditions of be higher than that which is charged in competition in all Member States and another Member State. would be infringed by a scheme which imposed grossly unequal customs duties according to whether the importation was carried out in one or other of the The Advocate General for his part had Member States. It was for this reason stated in his opinion that the solution that the Advocate General expressed his depended above all upon the purpose of opinion in the Gedelfi case that the the customs union and had referred in Council did "not enjoy a discretion to this context to the judgment given on 13 ignore the fundamental principles laid December 1973 in Joined Cases 37 and down in the Treaty, such as those of the 38/73 Sociaal Fonds voor de Diamant- customs union". arbeiders v Indiamex [1973] ECR 1609, according to which "the Common Tariff is intended to achieve an equalization of customs charges levied at the frontiers of the Community on products imported The problem raised in the present case from third countries, in order to avoid affects 37 tariff subheadings, of which 15 any deflection of trade in relations with relate to agricultural products. All in all those countries and any distortion of free that constitutes a substantial proportion internal circulation or of competitive of the goods covered by the Common conditions." Customs Tariff. Moreover, the goods in question are subject to real competition, since Glunz, which imports from the Far East, is in competition with similar firms Glunz considers that the differences in all the other countries of the between the facts of the two cases should Community. The difference in customs not lead to a different result. Indeed, duty means, for example, that Italian different external duties would also have importers could import the consignment the result of altering the pattern of trade of statuettes in question for a price about in a way likely to bring about distortions D M 43 000 lower than that paid by of competition and consequently hinder Glunz. If such differences in customs the development of the Community. This duty persist, they would certainly result is particularly apparent in the present in a deflection of imports away from the case where the customs duties in the Federal Republic of Germany towards Federal Republic of Germany are more Member States with a weaker currency. than twice as high as those in Italy.

normal functioning of all the Community adoption of Regulation N o 2779/78, mechanisms based on the device of the which had declared the European unit of unit of account, including General Rule account applicable to acts adopted in the C.3. The Community was however customs sphere. The fact that that regu- unable to exert any control on those lation came into effect on 1 January disruptions, which arose from events 1979 instead of 1 January 1978, the date beyond its jurisdiction. Those disruptions proposed by the Commission, was also were subsequent to the introduction of due to the desire to adhere to the Rule C.3 which remained unchanged in guidelines laid down in the Council all the regulations amending the basic resolution of 27 June 1974 for the Regulation N o 950/68 which brought in adoption of tariff measures. the rule. The Council therefore considers that it cannot be criticized for having used its powers in such a way as to The Commission believes that the produce "different customs duties in the Finanzgericht Hamburg construes various Member States incompatible with General Rule C.3 as meaning that, the fundamental idea of the customs whenever monetary fluctuations could union". Consequently, nor could the entail differences in customs duty in Council be accused of discrimination Member States, the rule must be adapted infringing the general principle of at the administrative level in accordance equality. with the following criteria:

JUDGMENT OF 3. 2. 1982 — CASE 248/80

Although it would prefer a frontier of his State of residence in the system of half-yearly fixing the hope of benefiting from lower customs Commission considers that a system of duties. yearly fixing is legally defensible in principle. Any discrepancies between customs duties which may result from fluctuations of currencies in the snake may be explained by the force of circumstances and, in the final analysis, are due to the Community legislature's lack of jurisdiction in the monetary field. The Council had expressly contemplated The interpretation envisaged by the a special adjustment independent of the Finanzgericht would have unacceptable annual cycle in a declaration included in consequences in the new system of the the minutes when the regulation on the

Even if, in such an devalue) and, secondly, the margins for event, the Court confined its decision fluctuation within the framework of the European Monetary System (EMS). strictly to the former system of the unit Nevertheless, whilst in theory the of account, considerable legal uncer- maximum margin of fluctuation between tainty would follow over the question two currencies is 4.5%, in practice the whether and, if so, above what level of bilateral margins of fluctuation are lower discrepancy in customs duty, provision than that percentage when the two for adjustments should also be made in currencies concerned have remained in the new EUA system and whether such

adjustments should also be made simply tariff headings, which has the effect of by means of administrative measures on classifying goods either under a taxable the part of the customs authorities. heading or under a non-taxable heading without any intermediate position. From this point of view it could even be said that in a case such as the present one the legal validity of the provision should be judged according to less strict criteria than those used in Gedelfi and similar As far as the former system of the unit of cases. account is concerned, in the Gedelfi case, which dealt with the validity of General Rule C.3 in so far as it referred to the unit of account for the definition of the scope of the tariff classification of goods covered by an agricultural market organization (orange juice), the Court It would only be possible to support an founded its judgment exclusively on the allegation of discrimination if the basis of the objectives of the market Community legislature had been under a organization and based its interpretation legal obligation between 1972 and 1978 essentially on the requirements of the to adopt rules precluding differences in Community's common trading system. liability to customs duty according to the On the other hand, the Court did not currency by reference to which the duty consider the wider question of what legal was calculated. The Commission recalls influence monetary fluctuations and the that it was only as from 1974 that resulting discrepancies between customs monetary developments in Member duties charged at the Community's States had brought about appreciable external frontiers have in general on the and easily detected inequalities in validity of General Rule C.3 and more Member States in the application of the particularly on its application for the customs regulations.

In the present case the results of the new unit of reference unit of account as a direct factor of would be satisfactory in the long term. It calculation would result, depending on was no coincidence that the Commission the influence exerted by national had only submitted a proposal for a monetary fluctuations, in a gradual scale regulation on the EUA in October 1976, of discrepancies in customs duty and its after the Interim Committee of the IMF general effect would therefore probably had paved the way for the reform of the be to keep individual discrepancies international monetary system following within narrower limits than when the the Kingston Conference in January unit of account is applied as a factor 1976. The amendments to the IMF governing the definition of the scope of statutes had come into force on 1 April

1978. Eight months after that, on 1 currency of the non-member country January 1979, the EUA was made concerned, such as weight or quantity. applicable in the customs sphere. However, the attachment of specific duties to certain intra-Community reference values, whether they be units of account or EUAs, again limits their neutrality within the Community because of the fluctuations to which equivalents in national currency are liable in relation The legal proposition that the legislature to the unit of account. However, a should be allowed sufficient time to reduction in the protective function of eliminate any inequalities found to exist, specific duties at certain points of the particularly in the complex area of the external frontier of the Community due law relating to customs duties, should to the depreciation of certain currencies not be regarded as a feature peculiar to is always compensated by equivalent Community law. Similar rules were increases due to a tendency to re- applied under the legal systems of the evaluation at other points of the external various Member States of the frontier. This corrective function of the Community. For example, according to unit of account would be put in jeopardy the Bundesverfassungsgericht [German if, where discrepancies arose in customs constitutional court], when factual duty owing to monetary shifts within the circumstances have changed over a long Community, the weakest currency of period of evolution discrepancies cannot Member States had to be taken on each be eliminated by a simple, swiftly occasion as the decisive factor of calcu- effected adjustment. lation. That would lead to the same result as if the Community legislature, instead of choosing the unit of account, had linked the rates of specific duties to a national currency known to be weak or to the currency whose quotation was the lowest at the time of importation. The result would be seriously to undermine On the second point (the lowest basis of the effectiveness of ' the external calculation) the Commission considers protection afforded by specific customs that in a period where there is a general duties. inflationary trend the effectiveness of the protective function of customs duties is limited by the fact that those duties are normally calculated on the basis of the value of the goods originating in a non- member country and that where the currency of the non-member country On the third point, the Commission depreciates, the customs duty is submits that an administrative adjustment calculated on a base value reduced in involving calculation of the units of proportion. This impairment of the account by reference to the exchange function of protection against the rate, fluctuating daily, of the weakest exterior ascribed to ad valorem customs currency of the other Member States, in duties requires to be offset by means of this case the Italian lira, would be the permanent adjustments. The problem is complete opposite of the method of in principle avoided in the case of specific customs duties tied to neutral calculation provided for by the general values, that is to say values which are rule and could not be reconciled either independent of fluctuations in the with the wording of that provision or with the working requirements of the

unit of account. Moreover, such a situation of the plaintiff in the main method would obliterate in an unac- action or of importers who are in a ceptable way the division between comparable situation, for example legislative and executive powers. Apart because this method would not really from that, the practical problems which allow the legitimate interests of those the customs authorities of Member States concerned to be taken into account, the would face would be considerable. Court could hold that the retroactive effect should be limited to Glunz and to If the Court should come to the comparable cases.

Commission. The Commission considers in what manner and from what level of that it would be reasonable in that case discrepancy between the nine customs not to link the required corrections to duties to be compared are the national the greatest depreciation of a currency in customs authorities to apply such a relation to the parity declared to the correction? IMF but to an average value which would take account in a balanced way of If the Court should decide that the trends to appreciate or depreciate of all general rule is invalid without any

European Communities. The Advocate General delivered his Should the Court consider that it would opinion at the sitting on 16 September be excessive to exclude any retroactive effect of the nullity with regard to the 1981.

4 That provision, in its 1968 version, provides:

"The unit of account (u.a.) by reference to which certain specific customs duties are expressed or the scope of certain headings or subheadings is defined has a value of 0.88867088 grams of fine gold. The exchange rate to be used in converting the unit of account into Belgian francs, Dutch guilders, French francs, German marks, Italian lire or Luxembourg francs shall be that

GLUNZ v HAUPTZOLLAMT HAMBURG-WALTERSHOF

corresponding to the par value communicated to and recognized by the International Monetary Fund in respect of these currencies."

"Is General Rule C.3 in Part I, Section I, of the Annex to Council Regu- lation (EEC) N o 2500/77 of 7 November 1977 in its application to tariff heading 69.13 B of the Common Customs Tariff invalid in so far as, in the case of the inportation of goods into a Member State with a strong currency, it would lead to a higher incidence of customs duty than in the case of importation into the Member State whose currency has most depreciated in relation to the parity notified to the International Monetary Fund, or is the

JUDGMENT OF 3. 2. 1982 — CASE 248/80

said rule to be interpreted in such a way that customs duty is to be charged only on the level at which it would have been charged in the case of importation into the Member State with the weakest currency?"

10 The Common Customs Tariff includes ad valorem duties and specific or minimum customs duties chargeable under certain headings or subheading. As regards ad valorem customs duties, Regulation (EEC) No 803/68 of the Council of 27 June 1968 (Official Journal, English Special Edition 1968 (I), p. 170) established rules for the valuation of goods for customs purposes in

GLUNZ v HAUPTZOLLAMT HAMBURG-WALTERSHOF

order to ensure that the value for customs purposes is determined in a uniform manner in Member States so that the level of protection given by the Common Customs Tariff is the same throughout the Community and any deflection of trade and activities and any distortion of competition which might arise from differences between national provisions is thereby prevented, and that equal treatment of importers as regards the collection of Common Customs Tariff duties is ensured. Specific duties are expressed in units of account. General Rule C.3 states that the exchange rates to be used in converting the unit of account into national currencies shall be those corresponding to the par value communicated to the International Monetary Fund in respect of these currencies. Regulation N o 950/68 was adopted in the context of the system of fixed parities in force at that time, so that General Rule C.3 was intended to ensure the uniform application of specific customs duties in all member States and for several years it did indeed have such an effect. Over the years that regulation has had to be supplemented and adapted by a series of subsequent regulations but General Rule C.3 has not been altered.

1 4 Between 1968 and 1978 the Council annually adopted a Common Customs Tariff with certain amendments, of which the only one affecting General Rule C.3 concerned the addition at the end of 1972 of a reference to the national currencies of the new Member States at the time of the accession of Denmark, Ireland and the United Kingdom as from 1 January 1973.

15 The question raised divides into two parts: the first part relates to the validity of General Rule C.3, the other to its interpretation. It is necessary to deal with the second part first since the validity of the provision is only challenged if the interpretation advocated is rejected.

T h e i n t e r p r e t a t i o n of G e n e r a l R u l e C.3

16 The Court is asked whether the provision in question may be interpreted, in the light of the circumstances set forth above, in such a way that, in order to determine the level of the specific duties throughout the Community, account should be taken only of the relationship which General Rule C.3 has maintained as regards the weakest currency, at the time the Italian lira, whilst in the other Member States specific duties should be calculated by converting at the real exchange rate the amount thus determined from Italian lire into the relevant national currency.

17 Whilst it is of fundamental importance for the free movement of goods and the establishment of the customs union that a Common Customs Tariff be adopted laying down uniform rates of duty on the entry of goods into the Community irrespective of the geographical location of their point of entry, the interpretation advocated cannot be accepted.

22 At the present stage of integration, where Member States essentially retain their powers in monetary matters, recourse to the mechanism of specific duties in the Common Customs Tariff will inevitably lead to certain differences in the incidence of the duties charged.

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23 It is conceivable that if the Council deliberately maintained monetary situations incompatible with the customs union and the principle of equality of treatment, it would be in breach of the principles invoked by the applicant if it were established that the means of finding a balanced solution were within its power.

24 It is not clear from the evidence before the Court that such a proposition can be established in respect of the period from 1974 to 1978, a period characterized by uncertainties as to subsequent monetary developments. In those circumstances, the reluctance of the Council to adapt Community provisions to the new situation may be explained by the difficulty in laying down, not only in the sphere of customs but also in other spheres, criteria enabling stable rates of exchange to be fixed.

25 It should be rememberd that nearly seven years were required before it was possible to reform the Bretton Woods monetary system on 1 April 1978, and that in view of the GATT rules any unilateral change by the Community of the monetary parities to be used in converting specific customs duties risked creating difficulties with the Community's trading partners, in the absence of new parities established within the International Monetary Fund.

T H E COURT,

in answer to the question referred to it by the Finanzgericht Hamburg by order of 15 October 1980, hereby rules:

Consideration of General Rule C.3 in Part I, Section I, of the Annex to Council Regulation (EEC) No 2500/77 of 7 November 1977 (Official Journal 1977, L 289, p. 1) has disclosed no factor of such a kind as to affect its validity, and the rule must be applied in such a way that in the case of an importation into a Member State having a strong currency customs duties expressed in units of account must be converted, in conformity with the rule, into the national currency of the Member State where the importation took place and must not be limited to the amount which would have been charged in the case of importation into the Member State having the weakest currency.

Mertens de Wilmars Bosco Touffait Due Pescatore Mackenzie Stuart O'Keeffe Koopmans Everling Chloros Grévisse

Delivered in open court in Luxembourg on 3 February 1982.

A. Van Houtte J. Mertens de Wilmars Registrar President