C-233/97

KAPPAHL

OPINION OF ADVOCATE GENERAL COSMAS delivered on 9 July 1998 *

I — Introduction inafter 'the Treaty'), the activities of the Com­ munity include, inter alia:

1. The question referred to the Court in the present case by the Uudenmaan Lääninoikeus ' (a) the elimination, as between Member (Uusimaa Provincial Administrative Court) States, of customs duties and quantita­ relates to the interpretation of Article 99 of tive restrictions on the import and export the Act concerning the conditions of acces­ of goods, and of all other measures having sion of the Republic of Austria, the Republic equivalent effect; of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the 1 European Union is founded (hereinafter 'the Act of Accession'), as amended by the Deci­ sion of the Council of 1 January 1995 adjusting the instruments concerning the accession of 2 (b) ... new Member States to the European Union.

II — Legal background (c) an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of goods, persons, services and capital;

A — The relevant Community provisions

4. Article 9 of the Treaty states that:

6. In addition, Article 12 of the Treaty pro­ vides that: '1 . The Community shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a Common Customs Tariff in their relations with third countries. 'Member States shall refrain from introducing between themselves any new customs duties on imports or exports or any charges having equivalent effect, and from increasing those which they already apply in their trade with each other.'

2. The provisions of Chapter 1, Section 1, and of Chapter 2 of this Title shall apply to products originating in Member States and to products coming from third countries which are in free circulation in Member States.' 7. Article 13 of the Treaty provides that Member States are progressively to abolish during the transitional period both customs duties on imports and any charges having an equivalent effect to customs duties on imports, 3 in force between Member States. 5. Article 10(1) of the Treaty sets out the conditions under which products coming from a third country are considered to be in free 3 — Lastly, Article 16 of the Treaty provides that Member States circulation in a Member State. Specifically, are to abolish between themselves customs duties on exports and charges having equivalent effect by the end of the first that article states that: stage at the latest.

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KAPPAHL

8. Article 2 of the Act of Accession states -toms tariff applicable to third countries for that: the products referred to in Annex XI.

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OPINION OF MR COSMAS — CASE C-233/97

been levied under Council Regulation (EEC) 13. Paragraph 2 of that law states, inter alia, No 2658/87 of 23 July 1987 on the tariff and that the import of goods referred to in Para­ statistical nomenclature and on the Commons graph 1(2) must be declared to the customs 4 Customs Tariff, Paragraph 1 of the Finnish authorities under the procedures laid down in Law 1255/94 (Laki eräistä väliaikaisista tul­ detail by decree. leista) of 16 December 1994 on certain tem­ porary customs duties provides that:

14. Lastly, Paragraph 3 thereof states that:

'On the importation of goods mentioned in the schedule to this law other than Commu­ nity goods, customs duty shall be charged in accordance with that schedule.

'This law shall enter into force on a date to be laid down by decree and shall remain in force until the end of 1997. It shall not apply to goods which are in free circulation or ought to have been declared for customs clearance prior to its entry into force.' On the importation of goods from elsewhere in the European Community in respect of which customs duty has already been charged under Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Commons Customs Tariff and on their importation from a non-member country into 15. Law 1255/94 came into force on 1 January the customs territory of the European Com­ 1995 and was intended to remain in force munity, duty shall be charged at the rate of until the end of 1997. the difference between the duty specified in the schedule to this law and the duty levied on import into the Community.

17. KappAhl Oy, a company incorporated under Finnish law, imported into Finland from Sweden, from 29 March 1995 to 26 June 1996, textile and clothing products originating in countries outside the European Community. The appropriate customs duties payable under Regulation No 2658/87 were 21. In precise terms, KappAhl Oy contended levied on the products on import into Sweden that, as a provision introducing a derogation and they were in free circulation in Sweden. from the fundamental principle of the free movement of goods, Article 99 of the Act of Accession was to be interpreted narrowly. Neither the wording nor the purpose of that article allowed Finland to impose customs duties on goods in free circulation in the Community after being imported into another Member State. KappAhl Oy further con­ 18. On the import of those products into tended that, because Articles 9, 12 and 13 of Finland, the Lahden Tullikamari (Lahti Cus­ the Treaty have direct effect, the Finnish toms Office) determined that KappAhl Oy authorities are obliged to apply those primary was to pay the difference between the duty rules of law and, correlatively, not to apply referred to in the schedule to Law 1255/94 lower-ranking provisions conflicting with and the duty charged at the time of import them, such as those contained in Paragraph into the Community, in this case in Sweden. 1(2) of Law 1255/94. KappAhl Oy had declared the products to the customs authority.

22. The Finnish authorities, however, con­ 19. KappAhl Oy appealed against the cus­ tended in the national court that the wording toms decisions of the Lahden Tullikamari. It of Article 99 of the Act of Accession was asked for a total of 1 056 decisions by the unclear, if not to say unfortunate. They argued Lahti Customs Office, charging duty for the that customs duties do not apply to countries period 29 May 1995 to 9 July 1996, to be set but to goods and that the article could be aside. It also asked for duties totalling regarded as referring equally well to goods FIM 6 911 586 to be refunded with interest at imported from non-member countries as to the prescribed rate. goods originating in them.

27. KappAhl Oy asserts that, as a provision introducing a derogation to the fundamental principle of the free movement of goods, Article 99 of the Act of Accession is to be 25. The Finnish authorities replied that they interpreted narrowly. Neither the wording did not accept the Commission's point of nor the purpose of that article allowed Fin­ view but at the same time, however, for prac­ land to impose customs duties on goods in tical reasons, they had decided to repeal the free circulation in the Community when contested provision with effect from imported into another Member State. Kap­ 1 July 1996. pAhl Oy concludes that the contested provi-

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KAPPAHL

sion of Paragraph 1(2) of Law 1255/94 is con­ the Act of Accession does not concern goods trary to Articles 9, 12 and 13 of the Treaty from non-member countries that are already and Article 99 of the Act of Accession. in free circulation in the Community and are then imported into Finland.

28. The Finnish Government and the Com­ mission consider that the wording of Article 99 of the Act of Accession is unclear and so 31. The first point to note is that the Act of it is not possible to ascertain for certain Accession (Article 2) is based on the principle whether the derogation introduced relates that the provisions of Community law (pri­ equally to goods imported into Finland mary and secondary) apply ab initio and in directly from non-member countries as to toto to Finland, subject of course to the tran­ goods simply originating from non-member sitional provisions provided for elsewhere in 6 countries which are in free circulation in the that same Act of Accession. Community.

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these two elements in the light of which the extend beyond a period of three years after customs union is examined, as KappAhl Oy the accession of Finland to the Communities. rightly states.

33. The prohibition as between Member States 36. However, Article 99 provides for no dero­ of import and export duties and all charges gation from the principle of the prohibition having equivalent effect applies equally to on maintaining or introducing new customs products originating from Member States and duties as between the Member States. In other to products originating from non-member words, it does not concern the free move­ countries that are in free circulation in Member ment of goods within the internal market, States: in accordance with a consistent line of 8 that is, inside the customs territory of the decisions of the Court, the latter products Community. So essential a derogation from are 'definitively and wholly' assimilated to the principle — fundamental to the common products originating in Member States. market — of the prohibition as between the Member States of customs duties and charges of equivalent effect, a principle applicable to all products and goods, would have to be expressly and unambiguously laid down in the actual text of Article 99 of the Act of Accession and would have to be strictly inter­ 34. I believe that it is in the light of this fun­ preted. 9

damental principle that Article 99 of the Act of Accession should be interpreted.

35. In the first place, it is clear from the lit­ 37. Moreover, that is the conclusion reached eral interpretation of that article that it con­ if we apply the rules of interpretation already tains only a temporary derogation to applica­ laid down by the Court with regard to dero­ tion of the Common Customs Tariff in trade gations provided for in the Acts of Accession. between a Member State and non-member The case-law of the Court states that the 10 countries. The derogation only concerns cer­ derogations (a) must be expressly laid down, tain products originating in third countries, referred to in Annex XI, and also cannot

39. Since the provisions of the Act of Acces­ sion must be interpreted having regard to the foundations and the system of the Commu­ 13 42. A systematic interpretation of Article 99 nity, as established by the Treaty, I believe further confirms this conclusion. Thus I note that the wording of the provision is clear and that that provision is part of Chapter 4 of the that it should be strictly interpreted. Conse­ Act of Accession, entitled 'External relations quently, its scope should not be extended to including customs union' (Articles 97 to 105). products originating in non-member coun­ That chapter contains, inter alia, specific tries that are already in free circulation in the Community.

arrangements concerning the application by 44. The Finnish Government then puts for­ Finland of international agreements concluded ward a series of arguments based on a teleo- by the Community with third countries. logical interpretation of Article 99 of the Act of Accession. First of all it contends that the derogation laid down in Article 99 obtained by Finland was intended to facilitate the adap­ tation of sensitive industries during accession and to give Finland the opportunity to dis­ mantle its previous customs protection in 20 stages. That derogation would not protect those sensitive industries if customs duty could not be levied also on goods originating from third countries imported via another Member State. If by importing goods via another Member State it were possible to avoid the imposition by the Finnish authori­ 43. The only provision of Chapter 4 that does ties of the additional duty, clearly goods would not concern external relations is Article 101, never be imported into Finland directly from under which Finland may open a yearly duty third countries. 17 free tariff quota for styrene until 31 Decem­ ber 1999. However, as stated previously, in this instance this is a specific provision which, in contrast to Article 99, expressly lays down certain restrictions on application of the dero­ gation in order not to violate the principle of 18 the free movement of goods. There was also in this case a specific provision relating to the export of certain products from Fin­ 19 land to the other Member States.

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market, namely to ensure that all traders have 48. I also consider that, in this case, there is the same conditions of competition. no infringement of the principle of the equality of treatment of traders by reason of the dif­ ference in treatment, with regard to customs duties, as between products from third coun­ tries imported directly into Finland and prod­ ucts already in free circulation in another Member State and then imported into Fin­ 46. With regard to that question, on the land. What we have in the present case is dif­ assumption that Article 99 of the Act of ferent treatment of different situations, which Accession does not concern goods originating is not forbidden under Community law. in third countries that are in free circulation in the Community and which are then imported into Finland, the Commission acknowledges that its proposed interpretation fits in with the logic of bringing the customs tariff imposed by Finland into line with that of the Community. It states that Article 99 laid down, for a transitional period, the max­ imum difference between the two tariffs that 49. The Finnish Government further attempts Finland was expected to apply from a cost- to support its viewpoint by means of an his­ benefit viewpoint. Slight differences between torical interpretation of Article 99. Thus, it the two tariffs are likely to prevent deflection contends that the interpretation that it advo­ of traffic, while protecting sensitive industries cates is supported by the negotiating history and encouraging them to adapt quickly to the of its accession to the Communities. When new legislative framework. negotiations with the Commission were started, Finland's aim was to have border controls maintained for a certain period. How­ ever, it did not succeed, and so the new Member States agreed to abolish border con­ trols with respect to the other Member States.

51. KappAhl Oy contends that the informa­ tion on the history of the accession negotia­ tions, the stances taken by the parties involved during those negotiations and the personal views of Commission officials on the matter, 54. The Commission informed the Court that as relied on by the Finnish Government, are during the negotiations the permanent repre­ sources that are available only to the Finnish sentation of Finland asked for the introduc­ Government. Therefore, as those elements are tion of a Community procedure to deal with not publicly available, they could not be the risk of deflection of traffic, but that no admissible for the purposes of interpreting such procedure had been introduced. Subse­ Article 99 of the Act of Accession as that quently, as Finland's request had not been would infringe the principle of 'equality of accepted, the Permanent Representation arms' in court proceedings, as enshrined in expressly asked to be allowed to levy a tax on Article 6 of the European Convention for the products originating in third countries Protection of Human Rights and Funda­ imported into Finland via the territory of mental Freedoms. another Member State equal to the difference between the national tariff and the Commu­ nity tariff. However, as the Commission rightly states, the existence of a different cus­ toms tariff would be inextricably linked to control systems and would necessarily be accompanied by the introduction of a safe­ 52. The arguments of the Finnish Govern­ guard mechanism. Yet the Community did ment cannot be accepted. not grant Finland such a wide-ranging dero­ gation.

56. On the other hand, in October 1993, the Community adopted the following common 2i position: 'The Community can agree to Finland maintaining for three years after acces­ 58. Moreover, in so far as the Community sion its customs duties for the products has expressly rejected the introduction of the referred to in the Annex, for which the rates Community control system proposed by Fin­ are higher than those resulting under the land during the accession negotiations, the CCT, provided that this does not involve any Commission concludes that the only real alter­ checks at internal frontiers. The Community native seems to be either to introduce con­ also asks Finland to consider the possibility trols at internal borders, a solution expressly of using the transitional period to carry out a rejected by the Community, or to risk deflec­ gradual alignment of the above rates on the tions of traffic. 24 CCT'.

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Community law of the free movement of of the Act of Accession cannot justify levying goods, as enshrined in the Treaty. or maintaining a customs duty such as that provided for under Finnish Law 1255/94 on goods originating from third countries that have been in free circulation in another Member State of the European Community 60. Therefore, interpreted in the light of Arti­ and are then imported into Finland. cles 9, 10, 12 and 13 of the Treaty, Article 99

VI — Conclusion

61. On the basis of the above analysis, it is suggested that the Court give the fol­ lowing answer to the question put by the Uudenmaan Lääninoikeus:

Article 99 of the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded, as amended by the Deci­ sion of the Council of 1 January 1995 adjusting the instruments concerning the accession of new Member States to the European Union, must be interpreted as not referring to goods originating in third countries which have been in free circulation in another Member State of the European Community and are imported from there into Finland.