C-218/83

o n t h e interpretation of t h e A g r e e m e n t between t h e E u r o p e a n E c o n o m i c C o m m u n i t y a n d t h e Swiss Confederation of 22 July 1972 a n d of P r o t o c o l N o 3 , annexed t o that a g r e e m e n t , concerning t h e definition of t h e concept of " o r i g i n a t i n g " products a n d m e t h o d s of administrative c o o p e r a t i o n ,

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

composed of: T . K o o p m a n s , President of C h a m b e r , K. Bahlmann, P. Pescatore, A. O'Keeffe a n d G . Bosco, J u d g e s ,

Advocate General : Sir G o r d o n Slynn Registrar: J. A. P o m p e , D e p u t y Registrar

gives the following

LES RAPIDES SAVOYARDS v DIRECTEUR DES DOUANES ET DROITS INDIRECTS

The facts of the case, the course of home use in France at the Annemasse the procedure and the observations sub- customs office. In support of that mitted pursuant to Article 20 of the declaration he submitted a EUR 1 Protocol on the Statute of the Court of movement certificate. Such certificates Justice of the EEC may be summarized are used in trade between the EEC and as follows: the countries of the European Free Trade Association (EFTA). In particular its use in trade with Switzerland is provided for in Decision N o 10/73 of the EEC/Switzerland Joint Committee I — Facts and written p r o c e d u r e of 12 December 1973 (Regulation (EEC) No 3600/73 of the Council of 27 December 1973, Official Journal 1973 L 365, p. 135) amending Protocol No 3 On 8 June 1977 Les Rapides Savoyards concerning the definition of the concept Sari, a transport undertaking and of "originating products" and methods customs agent, whose registered office is of administrative cooperation, annexed at Annemasse, Haute-Savoie, imported to the Agreement between the European into France from Switzerland, on behalf Economic Community and the Swiss of Diffusion Marketing International Confederation of 22 July 1972 (Regu- Sari, whose registered office is at Stains, lation (EEC) No 2840/72 of the Council Seine-Saint-Denis, 25 cartons containing of 19. 12. 1972, Official Journal, English a consignment of 13 170 ballpoint pens. Special Edition 1972 (31 December), p. 190). The certificate submitted by Mr Dejussel had been issued by the Swiss The ballpoint pens consisted inter alia of customs authorities. cartridges coming under heading 98.03 of the Common Customs Tariff, imported from the United States of America and put into free circulation in Goods accompanied by a EUR 1 France by Diffusion Marketing Inter- movement certificate qualify for the pref- national. That company had sub- erential import arrangements provided sequently re-exported those cartridges on for in the agreement between the EEC a temporary basis to Switzerland, to be and the Swiss Confederation, in this case fitted by a Swiss manufacturer with a rate of import duty of 2.6% instead of plastic or chrome clips, barrels and caps the general rate of 13% provided for by coming under the same tariff heading. the Common Customs Tariff. The barrels and clips originated in the United States and were imported directly into Switzerland. According to Article 2 of the Agreement between the European Economic Com- Roger Dejussel, a representative of Les munity and the Swiss Confederation, Rapides Savoyards, declared the pens for the agreement applies to products

originating in the Community or the components varied, depending on the Switzerland, subject to certain model concerned, from 6.04% to exceptions. Article 11 provides that the 23.68%. It therefore refused preferential rules of origin are laid down in Protocol treatment to the imported products in N o 3. According to Article 1 (2) of question. Protocol No 3, products originating in Switzerland within the meaning of the agreement are, on the one hand, Les Rapides Savoyards lodged an appeal products wholly obtained in Switzerland against that decision with the and, on the other, products obtained in Commission de Conciliation de d'Ex- Switzerland in the manufacture of which pertise Douanière [Customs Assessment products other than those wholly and Arbitration Board]; the appeal was obtained in Switzerland are used, rejected on 16 May 1978. provided that the said products have undergone sufficient working or pro- The customs authorities brought the cessing within the meaning of Article 5. matter before the Tribunal d'Instance Article 5 (1) provides inter alia that the [District Court], Saint-Julien-en-Gene- working or processing specified in List B vois, which by judgement of 19 June is to be regarded as "sufficient". That 1979 confirmed the decision of the arbi- list, which constitutes Annex III to the tration board. The Cour d'Appel [Court Protocol, as amended by Decision No of Appeal], Chambéry, upheld that 3/74 of the Joint Committee of decision by judgment of 11 May 1981. 31 October 1974 (Regulation (EEC) No 3288/74 of the Council of 2. 12. 1974, Official Journal 1974, L 352, p. 31), Les Rapides Savoyards Sari, its represen- provides that the incorporation of non- tative, Roger Dejussel, and Diffusion originating materials and parts in inter Marketing International Sári appealed to alia the products contained in heading the Cour de Cassation of the French 98.03 does not make such products lose Republic. their status of originating products, provided that the value of those products does not exceed 5 % of the value of the By judgment of 29 June 1983, the

value of those components exceeded 5%. Confederation, Protocol No 3 thereto Annemasse customs office determined and the Community regulations be the value of the parts not originating in construed as meaning that, where the Switzerland, in accordance with Article values adopted in order to determine 35 (8) of the French Customs Code, on the customs value of a product are the basis of the exchange rate between expressed in a currency other than the dollar and the French franc that of the Member State in which the applicable on the day of importation evaluation is made, these must be and established that the value of converted at the official rate of

2. If not, how, according to Community law, must that rate of exchange be calculated? The plaintiffs in the main proceedings point out that their action is intended to establish which exchange rate is to be applied in order to determine the value The judgment of the Cour de Cassation both of the components imported was registered at the Court of Justice on directly from the United States into 29 September 1983. Switzerland and used to make up the finished product, and of the components In accordance with Article 20 of the imported from the United States into Protocol on the Statute of the Court of France, where they were in free circu- Justice of the EEC, written observations lation and from where they were re- were submitted on 6 December 1983 exported to Switzerland. by the Commission of the European Communities, represented by Edith Cristoyannopoulos and Jörgen Sack, The value of the goods used as members of its Legal Department, on 14 components of a product varies and December 1983 by the French customs depends on the rate of exchange authorities, represented by Mr Boré and applicable. In order to determine which Mr Xavier, of the Paris Bar, on 21 rate of exchange is applicable in this December 1983 by the plaintiffs in the instance it is necessary to interpret the main proceedings, represented by Paul- agreement between the EEC and François Ryziger of the Paris Bar, and Switzerland. on 27 December 1983 by the Government of the Italian Republic, represented by Arnaldo Squillante, head of the Department for Contentious That interpretation raises a problem of Diplomatic Affairs, Treaties and great importance. A relatively long Legislative Matters at the Ministy of period of time elapsed between the entry Foreign Affairs, assisted by Marcello into France of the cartridges, their Conti, Avvocato dello Stato. export to Switzerland and the re-entry into France of the manufactured pens. The proportion represented by the value Upon hearing the report of the Judge- of the cartridges inserted in the pens Rapporteur and the views of the varies according to whether reference is Advocate General, the Court decided to made to their value when they were open the oral procedure without any imported into France or when the pens preparatory inquiry. However it re- were re-imported into France, since in quested the parties to the main pro- the meantime the exchange rate of the ceedings and the Commission to reply in dollar against the French franc and the writing to a number of questions. The value of the French franc against the replies were submitted within the pres- Swiss franc had changed completely. cribed period.

That solution is in conformity with Article 6 (1) of Protocol N o 3, according to which : The method of determining the value of the different articles in question in the "Where the Lists A and B referred to in main proceedings is perfectly clear from Article 5 provide that goods obtained in Article 6 of Protocol No 3, from Ex- the Community or in Switzerland shall planatory Note 6 concerning that article be considered as originating therein only and from the administrative decision of if the value of the products worked or 23 March 1973, published in the Bulletin processed does not exceed a given Officiel des Douanes [official gazette percentage of the value of the goods of the customs authorities], No 2768 of obtained, the values to be taken into 23 March 1973. It is as follows: consideration for determining such percentage shall be :

on the one hand, For the cartridges coming from the United States, imported into France and as regards products whose importation then exported on a temporary basis to can be proved : their customs value at the Switzerland, the relevant value is the time of importation; customs value at the time of importation into the country in which the working was carried out (Switzerland);

LES RAPIDES SAVOYARDS v DIRECTEUR DES DOUANES ET DROITS INDIRECTS

Les Rapides Savoyards cannot claim That follows from Article 35 (1) and (8) preferential treatment as regards ex- of the French Customs Code. Only the change rates, such as exists under the country into which the products are to European Monetary System, which be imported under the preferential applies exclusively in relations between arrangements is in a position to assess the Member States and entails ob- whether the conditions are satisfied. That ligations which Switzerland has not general rule has been adopted in agreed to accept. numerous international agreements such as the Convention on the Valuation of The Agreement with Switzerland deter- Goods for Customs Purposes, signed at mines the origin of a product on the Brussels on 15 December 1950, under basis of the value of the components the auspices of the Customs Cooperation making up the finished product. As a Council, in particular Annex II to that result, once that value has been Convention, Note 1. determined in accordance with the established rules of customs law, it The Agreement between the EEC and becomes necessary, at the date of the the Swiss Confederation does not importation of the finished product to derogate from the rule that the exchange convert the monetary unit in which the parity must be assessed by the authorities value was expressed into the monetary of the State into which the finished unit of the country importing the product is imported and at the date of finished product. However, legally, there the customs declaration. are two distinct questions, one concerning exclusively the value for customs purposes and the other involving Since in this case the Court is required to the monetary powers of the State interpret an agreement concluded with a importing the finished product. The non-member country, it is necessary to trade agreement contained no provisions refer to the rules on interpretation under excluding or even limiting the powers of international law such as those laid down the importing Member State of the EEC in the Vienna Convention on the Law of in monetary or exchange matters. Treaties, and not to those which are applied in the interpretation of The position adopted by Les Rapides Community acts. The provisions of inter- Savoyards is not only incompatible with

the Agreement between the EEC and the or in the provisions of the agreement Swiss Confederation and the rules of between the EEC and the Swiss international law, it is also contrary to Confederation. Indeed it would impose Community law itself. an unreasonable obligation on the auth- orities of the importing country as According to Article 9 (1) (a) of Council regards their authority over monetary Regulation (EEC) N o 1224/80 of 28 matters. May 1980 on the valuation of goods for customs purposes (Official Journal 1980 On a practical level the view advanced L 134, p. 1) "where factors used to by the plaintiffs in the main proceedings determine the value for customs purposes would lead to unacceptable conse- of goods are expressed in a currency quences. The fixing of parities retro- other than that of the Member State actively would encourage traders to where the valuation is made, the rate of speculate and the concept of origin in exchange to be used shall be that duly the strict sense would be rendered published by the competent authorities of meaningless. the Member State concerned.

exchange rate applicable. To adopt a method whereby the rate of exchange is The Government of the Italian Republic ascertained before the date of the import- submits observations essentially of a ation of the finished product, perhaps general nature on the interpretation of several months in advance, would lead to the provisions of the Agreement between an infringement of the rule which is a the EEC and Switzerland. corollary of the principle of non-retro- activity, that a provision, in this instance the measure fixing the parities, cannot The question how and to what extent continue to exist after it has been currency fluctuations must be taken into repealed. account in order to establish the pro- portion of non-Swiss products used in Moreover there is no basis for such a the manufacture of products imported method in the rules of Community law from Switzerland is a problem which

necessarily requires a uniform solution ments resulting from the 1973 to 1979 irrespective of the Member State into trade negotiations, Official Journal 1980, which the products are imported. L 71, pp. 1 and 107) applies. That article Otherwise trade will be deflected and provides that: competition distorted in a manner incompatible with the objectives pursued by the Community in concluding the " 1 . Where the conversion of currency is Agreement. necessary for the determination of the customs value, the rate of exchange to be used shall be that duly published by the competent On the basis of the provisions of authorities of the country of import- Protocol No 3, it is possible to formulate ation concerned and shall reflect as a uniform general rule applicable in each effectively as possible, in respect of case. the period, covered by each such document of publication, the current value of such currency in com- According to Title II of Protocol No 3 mercial transactions in terms of the (Articles 8 et seq.), the fact the products currency of the country of impor- which are the subject of commercial tation. transactions between the EEC and Switzerland are "originating products" is to be attested by a movement certificate 2. The conversion rate to be used shall issued by the customs authority of the be that in effect at the time of expor- exporting country. The value of the tation or the time of importation, as components which are not "originating provided by each Party." products" must be determined by the exporting country, in this case Switzerland. The same principles applied before the amendment of Explanatory Note 6 to Protocol No 3 by Joint Committee Article 6 of Protocol No 3 requires that Decision No 2 / 8 1 , in application of reference be made to the customs value Note 4 concerning Article 1 of Annex II of the components at the time of their to the Brussels Convention of 15 importation into the country where the December 1950 on the Valuation of finished product wil be manufactured Goods for Customs Purposes. and from where that product will be exported. The second subparagraph of Explanatory Note 6 to Article 6 as In the circumstances of this case, the amended by Joint Committee Decision conversion should therefore be carried No 2/81 of 1 June 1981 (Council Regu- out by applying the official rate of lation (EEC) No 2452/81 of 27. 7. 1981, exchange published by Switzerland, the Official Journal 1981, L 247, p. 27) country which imports the parts and states that customs value must be components of the finished product and understood as meaning the customs exports the finished product to France. value as determined in accordance with Once the proportion of the total value the Agreement on implementation of which can be attributed to components Article VII of the General Agreement on which are not "originating products" has Tariffs and Trade done at Geneva on been determined on the basis of that 12 April 1979. It follows that Article 9 conversion, that proportion, which is of that Agreement (Council Decision intended to establish whether the 80/271/EEC of 10. 12. 1979 concerning finished product is "an originating the conclusion of the Multilateral Agree- product", should remain fixed and

The Commission takes the view that it is not possible to separate the problem of It is open to the importing Member State the exchange rate from the prior to contest the validity of the EUR 1 question, as to which authority has certificate. Article 16 of Protocol No 3 jurisdiction to determine the value of imposes the obligation on Member States products which are not originating and Switzerland to assist each other in products and which are incorporated in checking the authenticity and accuracy the goods obtained in Switzerland. of certificates. Article 17, as amended by Joint Committee Decision No 1/77 of 14 December 1977 (Council Regulation (EEC) No 2933/77 of 20. 12. 1977, Official Journal 1977, L 342, p. 27) In view of the fact that, in accordance provides that subsequent verifications of with Articles 8, 9 and 10 of Protocol EUR 1 certificates are to be carried out No 3, as amended by Joint Committee whenever the customs authorities of the Decision No 10/73, the EUR 1 certifi- importing State have reasonable doubt as cate is issued by the Swiss authorities for to the accuracy of the information products exported from Switzerland to regarding the true origin of the goods in the Community, importation within the question. In this case, if the French meaning of Article 6 of the Protocol can, customs authority had any doubts as to in this instance, refer only to the import- the Swiss origin of the products in ation of parts which do not originate in question, the proper procedure would Switzerland. It was therefore for the have been to ask the Swiss authorities to Swiss authorities to calculate the carry out a subsequent verification of different values, in accordance with the the EUR 1 certificates issued. In the rules of Swiss law concerning customs meantime they could have decided to valuation and exchange rates. suspend the application of the provisions

The plaintiffs in the main proceedings Those provisions are in the interest of stated in particular that, in the alterna- not only exporters in non-member tive, they were prepared to accept the countries but also Community exporters. argument and the system proposed by The Community expects the authorities the Commission. of EFTA countries to follow the same procedure as for certificates issued by the customs authorities of the Member The French customs authorities stressed States. that the replies given by the Court must be strictly confined to the questions, referred to it and that it was necessary to distinguish between two operations The following reply should be given to having different objects and involving the questions raised by the Cour de different methods: the customs operation Cassation: determining the origin of a product and the customs operation determining the customs value of the product. In For the purposes of the issue of a EUR 1 connection with the second operation, certificate, the value of products not the exporting country, in this instance originating in Switzerland which are Switzerland, could not be allowed to fix incorporated in products originating in in a unilateral and absolute manner, that country and exported to the by issuing the European movement

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certificate, the customs procedure and value of the product, expressed in exchange rate, applicable to the goods in foreign currency, must be carried out in the importing country. It was clearly for accordance with the latest exchange rate the importing country, by virtue of its of the importing country, at the time sovereignty over its own customs when the valuation was made, that is to territory, to fix the basis for the say, on the date of importation. assessment of customs duty. Protocol No The Commission clarified its written 3 in no way precluded the importing observations. country from checking the origin and the value of products. The conversion into The Advocate General delivered his national currency of the elements of the opinion at the sitting on 19 June 1984.

and casings obtained in Switzerland itself and with barrels and, for certain pens, clips imported into Switzerland directly from the United States of America. The finished product, bearing the trade-mark of the Swiss manu- facturer (Lindy), was declared, on importation into France, as a product originating in Switzerland, at the ex-works price expressed in Swiss francs. The plaintiffs in the main proceedings requested the application of the pref- erential customs rate of 2.6 °/o of the customs value, which applied at that time between Switzerland and the Community.

JUDGMENT OF 12. 7. 1984 — CASE 218/83

6 It appears from the documents before the Court and from the single ground of appeal cited in the order for reference that the dispute before the French courts concerns, in the first place, the rate of exchange applied by the French customs authorities in assessing the different elements of value taken into account in order to determine the origin of the product in question and, more particularly, the relevant time for the purpose of defining the exchange rate relations between the various currencies involved. The plaintiffs in the main proceedings consider that the exchange rate applicable must be that prevailing at the time when the various components were imported, either into France or into Switzerland. The customs authorities, on the other hand, take the view that all those values are to be determined at the time prescribed by Article 35 (8) of the French Customs Code, namely the time of the impor- tation of the finished product into France. The plaintiffs in the main proceedings consider that that method is incompatible with the provisions of Protocol N o 3 because of the uncertainty which it creates as to the origin of a product following changes in the exchange rates which may occur between the time of the importation of the component parts and the time of the importation of the finished product.

7 It also appears from the documents before the Court that in the proceedings prior to the appeal to the Cour de Cassation and in the formulation of the ground on which that appeal was based, the plaintiffs in the main proceedings did not contest the French customs authorities' power to reassess, at the time of the importation of the finished product, the elements to be taken into consideration in determining the origin. Discussion was confined to the question whether it was compatible with the free-trade Agreement and any Community regulations which might be relevant to apply the exchange rates prevailing at the time of the importation of the finished product to the assessment of the components previously imported into Switzerland.

n The Commission and the Italian Government state that according to Articles 6, 8 and 10 of Protocol No 3, it is for the Swiss customs authorities to establish the origin of products exported to the Community and, in the case of products incorporating elements imported from a third country, to determine whether or not the value of those elements exceeds the 5 % limit provided for in the Protocol. Where that limit is not exceeded, the Swiss origin of the product is certified by the issue of a EUR 1 movement certi- ficate, as laid down in the Protocol.

i2 The Commission and the Italian Government also state that the Community customs authorities are not entitled to substitute their own calculations for the assessment of the elements of value taken into consideration by the auth- orities of the exporting State in order to determine origin. They are therefore

JUDGMENT OF 12. 7. 1984 — CASE 218/83

under an obligation to apply the preferential treatment provided for by the Agreement to goods whose Swiss origin is duly certified. The Commission emphasizes that it is important that the decisions taken by the Swiss customs authorities concerning origin are respected in the Community in view ot the fact that the Community, for its part, must be able to expect that such decisions taken by the customs authorities of the Member States are also recognized in Switzerland.

n The Commission and the Italian Government consider that only that method is capable of ensuring that the determination of origin is the same in all the Member States of the Community, since the application of national rules such as the French Customs Code might lead to conflicting determinations ot the origin of the same product depending on the fluctuations ot the ditterent national currencies. Such differences of determination would in turn lead to deflections of trade and distortions of competition.

LES RAPIDES SAVOYARDS v DIRECTEUR DES DOUANES ET DROITS INDIRECTS

i6 The French customs authorities raised two objections to the arguments advanced by the Commission and the Italian Government. In the first place they maintain that the question as formulated by the Commission and the Italian Government was not submitted by the Cour de Cassation and that the Court of Justice should confine itself to replying to the questions which have been referred to it for a preliminary ruling. They further state that it would be incompatible with the sovereignty of Member States in customs matters to impose on them determinations made by foreign customs authorities and therefore it is not possible to restrict the application of the rules of the French Customs Code solely to the assessment of the customs value of the finished product at the time of its importation with a view to determining the basis for the assessment of the customs duty payable. The customs authorities must also assess the value of the component parts of a finished product with a view to establishing its origin and, in consequence, to decide whether it qualifies for the preferential treatment under the free-trade Agreement or whether it must be subject to the general rules of the Common Customs Tariff.

i7 Regardless of the views put forward by the various parties concerning the factors to be taken into consideration in order to determine the customs treatment of products imported from Switzerland into the Community, the reply to the questions submitted by the Cour de Cassation must be given in the light of the whole system established by the free-trade Agreement and Protocol No 3. Thus it is necessary first to refer to the relevant provisions of those instruments, particularly because the Protocol was amended after the entry into force of the Agreement.

20 Under Article 5 (1), inter alia, "(b) working or processing specified in List B" is to be considered as "sufficient". List B, which constitutes Annex III to the Protocol, includes at the top of the third column, a rule concerning, inter alia, ballpoint pens coming under tariff heading 98.03. That rule, as amended and supplemented by Decision N o 3/74 of the Joint Committee of 31 October 1974, implemented in the Community by Regulation (EEC) N o 3288/74 of the Council of 2 December 1974 (Official Journal 1974, L 352, p. 31), states as follows: "Incorporation of non-originating materials and p a r t s . . . in the products contained in heading (No) . . . 98.03 does not make such products lose their status of originating products, provided that the value of these products does not exceed 5 % of the value of the finished product."

2i The determination of the elements of value which are to be taken into account in calculating the 5 % value limit is governed by the following provisions of the Protocol.

22 Article 6 (1) of the Protocol provides in that connection as follows:

"Where the Lists A and B referred to in Article 5 provide that goods obtained in the Community or in Switzerland shall be considered as orig- inating therein only if the value of the products worked or processed does not exceed a given percentage of the value of the goods obtained, the values to be taken into consideration for determining such percentage shall be:

LES RAPIDES SAVOYARDS v DIRECTEUR DES DOUANES ET DROITS INDIRECTS

on the one hand,

25 Finally Articles 16 and 17 of the Protocol afford the Community customs authorities the widest scope for resolving, in cooperation with the Swiss customs authorities, any problems that may be caused by the determination of origin and the issue of movement certificates.

26 It follows from all those provisions that the determination of the origin of goods according to Protocol No 3 is based on a division of powers between the customs authorities of the parties to the free-trade Agreement inasmuch as origin is established by the authorities of the exporting country and the proper working of that system is monitored jointly by the authorities

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. concerned on both sides. That system is justified by the fact that the auth- orities of the exporting State are in the best position to verify directly the facts which determine origin; moreover, it has the advantage of producing certain and uniform results regarding the identification of the origin of goods and of thereby avoiding deflections of trade and distortions of competition in trade.

27 However, that mechanism can function only if the customs authorities of the importing country accept the determinations legally made by the authorities of the exporting country. Recognition of such decisions by the customs auth- orities of the Member States is necessary in order that the Community can, in turn, demand that the authorities of other countries with which it has concluded free-trade agreements accept the decisions taken by the customs authorities of the Member States concerning the origin of products exported from the Community to those non-member countries.

3i In the light of the provisions of Protocol N o 3, the country importing such a product has the power only to assess, at the time of importation, the customs value of the finished product, for the purposes of applying the preferential treatment provided for in the free-trade Agreement.

32 In reply to the questions submitted by the French Cour de Cassation, it must therefore be stated that the Agreement concluded between the European Economic Community and the Swiss Confederation of 22 July 1972 and, more particularly, Protocol No 3 thereto must be interpreted as meaning that the assessment of the elements used in determining the origin of a product and, accordingly, in determining whether it is eligible for the preferential treatment provided for by the Agreement is the responsibility of the customs authorities of the State exporting the finished product which applies to components imported from third countries, at the time of their importation, its own rules on customs value and exchange.

Costs

33 The costs incurred by the Government of the Italian Republic and the Commission of the European Communities, which have submitted obser- vations to the Court, are not recoverable.

34 As these 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, costs are a matter for that court.

JUDGMENT OF 12. 7. 1984 — CASE 218/83

Delivered in open court in Luxembourg on 12 July 1984.

For the Registrar H . A. Rühi T. Koopmanns Principal Administrator President of the Fourth Chamber