C-116/89

5. In the contracts between the plaintiff and the propagators, it is agreed that the 3. The plaintiff buys basic seed from plaintiff is first to sell the basic seed to the breeders established in the Federal Republic propagators, who are to produce certified of Germany. As part of the contract, it is harvest seed and sell it exclusively to the agreed that the plaintiff will resell that seed plaintiff. A price is agreed upon for both the to propagation undertakings outside the basic seed and the harvest seed, with a price Community for the purpose of propagating range for the harvest seed in order to enable the basic seed to produce harvest seed. The fluctuations in quality to be taken into account. The contractual terms governing * Original language: German. the method of payment for the basic seed 1 — Council Regulation (EEC) No 1224/80 of 28 May 1980 (OJ 1980 L 134, p. 1). vary.

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6. In one standard form of contract, there 7. In another form of contract, that alter- are two options, allowing for a choice of native is not available. It reads as follows: method of payment if the parties have not already settled for one option when concluding the contract. The relevant clause in the contract provides: 'Payment: Payment for the basic seed is made by the propagator after reception of the documents . . . by offset against 'Payment: deliveries of propagation seed from Poland'. 3

I. Net cash against documents, namely:

8. The defendant takes the view that the licence fees payable to the breeders form 1. . . . part of the value of the basic seed, which should be added to the transaction value of the goods when determining the customs valuation. The plaintiff, on the other hand, considers that that approach is not justified from any legal point of view. It therefore contested the decisions in which the customs authorities included the licence fees in the 6. . . . customs valuation of the imported harvest seed, and brought an action which gave rise to the main proceedings in this case.

13. For reasons of method which may be of importance for the decision on whether the 10. I refer to the Report for the Hearing licence fees are to be included in the for a fuller account of the facts of the case customs value, the provision under which and the arguments of the parties, which are the value of the basic seed is to be taken mentioned or discussed hereinafter only in into consideration must first be determined. so far as is necessary for my reasoning.

14. It must first be borne in mind that in the B — Opinion scheme of Regulation N o 1224/80 the customs value of goods is assessed on the basis of its transaction value. Article 3(1) provides : 11. Customs value is determined in accordance with the provisions of Regu- lation No 1224/80, in particular Article 3 thereof as amended by Regulation No 3193/80, 4 certain items being added in 'The customs value of imported goods certain circumstances in accordance with determined under this article shall be the Article 8. Valuation must be effected, transaction value, that is, the price actually moreover, in compliance with the provisions paid or payable for the goods when sold for of Regulation No 3158/83 5 on the export to the customs territory of the incidence of royalties and licence fees in Community, adjusted in accordance with customs value. Article 8 . . . '

12. It is essentially common ground that where the purchase price of the basic seed is 15. That provision is clarified by Article offset against the claim for the purchase 3(3)(a), which reads: price of the harvest seed the value of the basic seed is to be included in the customs value. The parties differ, however, as to what is the applicable legal basis. Either Article 3(3) of Regulation No 1224/80 or 'The price actually paid or payable is the total payment made or to be made by the 4 — Council Regulation (EEC) No 3193/80 of 8 December 1980 amending Regulation (EEC) No 1224/80 on the buyer to or for the benefit of the seller for valuation of goods for customs purposes (OJ 1980 L 333, the imported goods and includes all p. I). 5 — Commission Regulation (EEC) No 3158/83 of 9 payments made or to be made as a November 1983 (OJ 1983 L 309, p. 19). condition of sale of the imported goods by

16. Whether those criteria are met depends solely on the terms of the contracts between 18. The interpretation put forward here is the parties. There is no difficulty in deter- also confirmed by the invoicing practice mining the customs value of the harvest used. As shown in a report by the customs seed, as compared with the basic seed, authorities for the Munich tax district on an where the parties have agreed on the first of investigation concerning the plaintiff, 6 the the alternative methods of payment, 'net full amount is shown on the invoices issued cash against documents'. Because the sale of in the event of offset. Only in two cases had the basic seed is fully completed subject to the value of the basic seed been visibly that condition, there is no reason to take deducted from the amount invoiced, so that the value of the basic seed in any way into it could be included in the valuation without account when invoicing the harvest seed, so any difficulty. that the price of the harvest seed is the determining factor for the customs valuation — as provided, indeed, in the contracts. 19. Strictly speaking, payment for the basic seed determined by the ratio between the price of the certified seed and the price of the basic seed, made in kind on the return delivery of the first harvest, also constitutes 17. The calculation only poses a problem payment. In so far as it is deducted from the where there is offset, and even then only price actually payable, therefore, the value where there is payment 'determined by the of the basic seed forms part of the trans- ratio between the price of the certified seed action value determining the customs value. and the price of the basic seed, . . . made in Where that method of settling the amount kind'. Only in those circumstances may the due under the contract for the purchase of application of Article 8(1)(b) be considered, the basic seed is not a mere balancing out of because true offset merely involves (monetary) claims of the same kind, but balancing mutual claims for money and it is entails invoicing in respect of the harvest clear from the contracts what price is to be seed a single amount from which the value invoiced for the basic seed. Offset is thus of the basic seed has been deducted, the just one method of payment of the 'price value of the basic seed must be added for actually paid'. If, however, offset is not the purpose of calculating the customs value considered to meet the criterion of the in accordance with Article 8(1 )(b). Those 'price actually paid' within the meaning of are the only circumstances in which there Article 3 of the regulation on customs value, it must still be viewed as a part of the price 6 — The report is included in the procedural documents 'payable'. That interpretation is borne out forwarded to the Court of Justice

25. If the obligation to pay the licence fees is not a statutory obligation, it is governed 21. It may also be pointed out, for the sake solely by the terms of the contract between of completeness, that supplies of basic seed the parties to the transaction. It must at a reduced price also give rise to an therefore first be determined whether the addition in accordance with Article 8(1)(b). 7 law itself gives any entitlement to the payment of licence fees. Such an entitlement might arise in Germany under the Sorten- schutzgesetz (Law on the Protection of Plant Varieties), on which the details and extent of the protection afforded to seed 22. Doubt arises as to whether the licence varieties are based. That law does not, fees payable by the plaintiff to the breeders however, regulate the factual circumstances should be included in the customs valuation. in which licence rights may be enforced; it That might be the case if they were to be is up to the owner of the protected variety regarded as a component part of the value to decide whether and how to make use of of the basic seed. They would then have to his right. He must therefore exercise and be added to the price of the basic seed and enforce his right consistently with the right to be taken into account as an increase in of freedom to contract. the customs value in accordance with Article 8(1)(b).

26. Nor do there appear to be any inde- pendent grounds in Community law for a claim to the payment of licence fees under 23. But inclusion of the licence fees in the national law governing the protection of customs value might also be possible in a plant varieties. situation in which, whatever the legal grounds, the propagators were obliged to pay the licence fees and the plaintiff in fact

on that point — no protection is afforded to 31. No licence obligations are laid down or plant varieties in Poland or Czechoslovakia, transferred in the contracts between the which is of significance with regard to the plaintiff and the propagators for the sale question whether the propagators may be and propagation of the seed. On the under any independent obligation to pay contrary, the contract stipulates, with regard licence fees. Since that is not the case under to the description of the quality of the the legal rules in force in the countries of harvest seed: propagation, the basis for the licence fees payable in connection with the transaction is to be sought only in the context of the legal relationships governing the business dealings 'If, according to Czechoslovakian analyses, between the parties. the seed grown does not meet the quality agreed upon in this contract, the seed shall remain free of charge in the CSSR without there being any obligation to pay the supplier any licence fees or charges 28. Those legal relationships are governed whatever'. 10 by the separate contractual relationships between the plaintiff and the breeders, on the one hand, and between the plaintiff and the propagators on the other. The view that 32. Since the propagators are under no the contract terms are the sole determining obligation to pay licence fees on return factor finds further support in the method delivery in compliance with the contract by which customs value is calculated, since either, that means that they are never under the transaction value is the price fixed by such an obligation in any circumstances. contract. Particulars of how the licence rights come into existence and when they may be enforced must therefore be sought in the terms of the contracts between the plaintiff and the German breeders. In the standard 29. That view is buttressed by the forms of contract, the clause concerning Commentary by the Customs Valuation licence fees reads as follows: Committee on Regulation No 3158/83 on the incidence of royalties and licence fees in customs value. 8 In several places, 9 that Commentary refers, with regard to resolving 'The propagation firm (in this case BayWa possible points of dispute, to the form and AG) shall pay a licence fee in respect of interpretation of the contracts, whether the each decitonne of seed qualifying for auth- licence agreements or the contracts of sale. orization or certification produced in the country of propagation. That licence fee shall be of the same amount as for seed of the same variety produced in the home country, and is to be paid when the propa- 30. The origin of the licence fees in issue in gation firm has marketed in Poland, the present proceedings and the grounds for Germany or another country the seed their payment are to be found, therefore, in produced in Poland. The licence fees must the contracts. be paid by 31 May in the year following the

36. It may be concluded from those factors that the circumstances giving rise to the licence fee have materialized when the seed is marketed. The date on which payment falls due is thereby deferred until later. That 39. The exclusion provided for in Article interpretation is in line with the plaintiff's 3(4)(b) is not applicable, since licence fees submission that the obligation to pay licence are neither customs duties nor taxes. fees arises under a marketing licence. It is further borne out by the fact that in the contracts the plaintiff is given the right to market the harvest seed directly from the country of propagation — albeit only with the breeders' consent. 12 40. The rules in Article 8 of Regulation No 11 — Contracts included in the documents relating to the case; 1224/80 governing the items to be added to emphasis added. the price require closer consideration. The 12 — The clause in the contract between BayWa and one breeder (Süddeutsche Saatzucht- und Saatbaugenos- first circumstances in which additions might senschaft e.G.) reads: 'The propagation firm may import be made are those set out in Article this seed into Germany; it shall not leave any or all of the seed in (name of country) and market it there or from 8(l)(b)(i) and (iii). They could only apply if there into another country without the breeders consent. the value given in the payment of the licence The right to market the seed does not extend to the following countries: . . . '. fees were comprised in the basic seed and

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42. At first sight, that provision appears — constitutes a condition of sale of those applicable. A careful reading, however, goods.' reveals that the licence fees must be payable 'as a condition of sale', which is, precisely, not the case here. Furthermore, the licence fees are in fact payable not in respect of the imported goods but in respect of their distri- bution, so that Article 8(5)(b) applies. Under 44. For licence fees to be included in that provision, without prejudice to Article customs valuation under that provision, 8(1)(c), payments made by the buyer for the those conditions must both be met. That is right to distribute or resell the imported not the case here, since the licence fees are goods are not to be added to the price not a condition of sale. Furthermore, Article actually paid or payable if such payments 1(2) must be read in conjunction with are not a condition of the sale for export to Article 4 of Regulation No 3158/83, which the Community of the goods. It has already states:

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'When the buyer pays royalties or licence value of those payments is not to be fees to a third party, the conditions included in the customs valuation. provided for in Article 1(2) shall not be considered as met unless the seller or a person related to him requires the buyer to Costs make that payment.' 46. These proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national 45. Since the propagators have not the court. The decision on costs is a matter for slightest influence on the licence fee that court. The costs incurred by the payments, there can be no doubt that the Commission are not recoverable.