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2. Community customs law is contained in Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Commu- 'Decisions adopted by the customs author- nity Customs Code (hereinafter 'the Cus- ities in writing which either reject requests toms Code' or 'the Code'). 1 or are detrimental to the persons to whom they are addressed shall set out the grounds on which they are based. They shall refer to * Original language: English. the right of appeal provided for in Art- 1 — OJ 1992 L 302, p. 1. icle 243.'

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2. The customs authorities may, at the risk and expense of the person holding them, 2. Where circumstances so warrant, the have the goods in question transferred to a customs authorities may set a shorter special place, which is under their super- period or authorise an extension of the vision, until the situation of the goods is periods referred to in paragraph 1. Such regularised.' I - 11086

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7. Title VIII, comprising Articles 243 to (b) subsequently, before an independent 246, concerns appeals. Article 243 reads as body, which may be a judicial authority follows: or an equivalent specialised body, according to the provisions in force in the Member States.'

' 1 . Any person shall have the right to appeal against decisions taken by the customs authorities which relate to the application of customs legislation, and 8. Title II of the Sixth Council Directive which concern him directly and individu- 77/388/EEC of 17 May 1977 on the har- ally. monisation of the laws of the Member States relating to turnover taxes — Com- mon system of value added tax: uniform basis of assessment (hereinafter 'the Sixth VAT Directive')2 defines the scope of the Directive. Article 2, its sole provision, pro- Any person who has applied to the customs vides that: authorities for a decision relating to the application of customs legislation and has not obtained a ruling on that request within the period referred to in Article 6(2) shall also be entitled to exercise the right of appeal. 'The following shall be subject to value added tax:

The appeal must be lodged in the Member State where the decision has been taken or applied for. 1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

11. According to Article 638, these goods should be sold by public auction once the time-limits for fulfilment of all the legal obligations have elapsed.

5. States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or 12. Article 639 provides that the owners of transactions in which they engage as public such goods can still declare them if they authorities, even where they collect dues, apply to do so within a period of six fees, contributions or payments in connec- months following the time at which the tion with these activities or transactions. goods are made subject to compulsory sale. However, when they engage in such activ- Goods declared in accordance with this ities or transactions, they shall be consid- article shall be subject to the payment of all ered taxable persons in respect of these charges and levies due, increased by five per activities or transactions where treatment cent of the value thereof (hereinafter 'the as non-taxable persons would lead to overdue-clearance charge' or simply 'the significant distortions of competition. charge').

13. Article 675 states:

In any case, these bodies shall be consid- ered taxable persons in relation to the activities listed in Annex D, provided they 'The net proceeds of the auction shall be are not carried out on such a small scale as appropriated in accordance with the fol- to be negligible ... .' lowing order of priority: ... I - 11088

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In the case of goods not cleared within the toms office. The goods were declared to the statutory periods, or under the conditions Leixões customs office for customs ware- laid down in Article 638(3) and (4), the net housing on 15 September 1995 and they proceeds from the sale thereof, after deduc- were released in batches for free circulation tion of Community own resources, national and consumption between 19 September customs duties and other levies, shall be 1995 and 2 January 1996. On 9 May placed on deposit to the order of the State 1996, the Leixões customs office initiated to be incorporated in revenue if not claimed overdue-clearance proceedings in respect of within one month.' the goods.

15. According to the order for reference Mr de Andrade (hereinafter 'the applicant') 17. Considering that the case brought by imported seven palettes of cowhide into the the applicant raised questions of Commun- European Community where they arrived ity law on which a decision is necessary to on 11 June 1995. The applicant requested enable it to give judgment, the Tribunal an extension of the time-limit for specifying Fiscal Aduaneiro do Porto referred the a customs destination for the goods. A 45-day extension was granted by the cus- 4 — The Registry of tile Court has been informed that the Tribunal Fiscal Aduaneiro do Porto no longer exists following the adoption of Decree Law No 301 -A/99 of 5 August 1999 and that the present case has been trans- 3 — Case C-36/94 Siesse v Director da Alfândega de Alcântara ferred to the Tribunal Tributário tle Primeira Instância do (hereinafter 'Siesse') [1995] ECR I-3573. Porto (Tax Court of First Instance).

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following questions to the Court for a described above, does the national preliminary ruling pursuant to Art- customs administrative procedure icle 234 EC: infringe Article 6(3) of the Community Customs Code?

'1. Is the national administrative customs procedure, in so far as it means that, 4. Does the national customs administrat- automatically and without prior notice, ive procedure, by not making any goods remaining uncleared beyond the notification compulsory in the over- statutory periods are to be subject to due-clearance procedure, as provided the overdue-clearance procedure (sale), for in Article 638 et seq. of the Cus- compatible with Article 53 of the Cus- toms Regulations, infringe Article 243 toms Code, in particular Article 53(1)? of the Community Customs Code?

7. If it were accepted, on the contrary, on 15 September 1995 and that they were that the said charge is not in the nature released for free circulation between of a penalty but in fact represents 19 September 1995 and 2 January 1996. remuneration for services provided by Thus when the customs office, on 9 May the customs authorities, would the 1996, initiated overdue-clearance proceed- levying of VAT be justified?' ings in respect of the applicant's goods, these goods were already in free circulation in the Community and removed from any premises owned by the customs office. Therefore there was never any possibility of the applicant's goods being sold by the customs authorities subsequent to initiation of the overdue-clearance proceedings in this case. For this reason, when considering IV — Observations and analysis compliance of the proceedings with the principle of proportionality and any possi- ble violations of the applicant's rights of defence, I will confine my analysis, except where otherwise indicated, to compatibility 18. Written observations were submitted to of the overdue-clearance charge with these the Court by the applicant, by the Portu- principles. My analysis is not intended to guese Republic, and by the Commission of cover the compulsory sale of an importer's the European Communities. goods, though some reference to that procedure is unavoidable.

19. The national court's questions cover four areas which I will deal with in turn; the proportionality of the sanction (part of Question 2 and Question 6), rights of the defence (Question 1, part of Question 2, (a) Compliance of the overdue-clearance Questions 3 and 4), free movement of charge with the principle of proportionality goods (part of Question 2), and VAT (Questions 5 and 7).

22. The applicant submits that the prin- is determined ad valorem, at 5% of the ciple of proportionality, as well as consti- customs value of the goods, it is dispropor- tuting a general principle of Community tionate. In addition, Portuguese law norm- law, is expressly included in Article 53 of ally makes allowance for the degree of fault the Customs Code, which speaks of 'all of the defendant when setting a sanction. measures necessary'. He argues that when Thus the overdue-clearance charge is not goods have not been declared within the levied under analogous conditions to proper time-limits, the Portuguese system equivalent national sanctions as the Court automatically puts them up for sale or has stipulated. 6 obliges the importer to pay the overdue- clearance charge. It is claimed that both of these options constitute violations of the property rights of the importer, who is never asked whether or not sale or imposi- tion of the charge is truly necessary. 25. Portugal argues that Article 53 of the Code leaves Member States a discretion as to how to regularise the situation of goods not cleared in time. Article 53 explicitly countenances sale of such goods as one way of achieving this. The Portuguese system is 23. The applicant contends that the pro- an effective response to the need to encour- portionality of the entire Portuguese legis- age the respecting of time-limits. Yet it does lation should be examined. He claims that provide some flexibility as it offers impor- the national courts which have upheld the ters the opportunity of making a late present system after the Siesse 5 case merely declaration so long as they pay the over- examined the proportionality of the over- due-clearance charge. due-clearance charge when this is com- pared with the compulsory sale of the importer's goods and the possible appro- priation of the proceeds of sale by the State. According to the applicant, a scheme which makes late declaration of goods conditional on payment of such a charge and which 26. Portugal further contends that the rea- includes sums that are not necessary to sonableness of the system is borne out by assure the objectives of the procedure is the possibility for an importer to request an disproportionate to this objective. extension of the deadline for assigning a customs-approved treatment or use.

28. The Commission agrees with the Por- 31. Lastly, the Commission considers that tuguese authorities that Article 53 gives the fact the sanction is calculated ad them a discretion as to what penalty they valorem does not necessarily mean it is may impose. Any penalty must none the disproportionate. In the present case the less be effective, dissuasive, and propor- application of such a sanction falls within tionate. 8 Member States are obliged, under the Member State's discretion. Moreover in Article 10 EC, to punish breaches of Com- Siesse, the Court did not rule that the 5% munity law. overdue-clearance charge was dispropor- tionate. The Commission remarks that the 5% charge represents the entire liability of the importer to the customs authorities and no additional charge is made to cover administrative expenses or interest. 29. However, the Commission does not believe that the Portuguese legislation is proportionate to the aims which it pursues. Whereas in Siesse the Court stated that sale of an importer's goods was a solution of last resort, the Portuguese system estab- lishes an absolute presumption that such 32. As I have already explained, my analy- sale is always necessary to regularise the sis is primarily, if not exclusively, confined situation of the goods in question. to compatibility of the overdue-clearance charge with the principle of proportional- ity.

30. The Commission also submits that a system of objective responsibility is in- appropriate as the breach of the law in question is not a serious one and there 33. The principle of proportionality is a should be a possibility for exoneration (e.g. fundamental principle of law whose observ- in the case of force majeure). Further, the ance must be assured by the Court. 9 To be proportionate to its objective, a measure must be necessary and appropriate to 7 — Tribunal Constitucional judgment of 29 June 1999, Siesse, achieving its purpose, this purpose must 940/88. 8 — Case C-177/95 Ebony Maritime and Loten Navigation v Prefetto della Provincia di Brindisi and Others [1997) ECR I-1111. 9 — Case 182/84 Mim [1985] ECR 3 7 3 1 , paragraph 14.

34. As the Commission has correctly sub- mitted, it is necessary that a procedure exist in order to regularise the situation of goods when an importer has failed to observe the prescribed customs formalities. Keeping goods in temporary deposit represents a 37. The Court has already had the oppor- cost for a Member State and there is a risk tunity of considering the Portuguese legis- that the goods will lose their commercial lation at issue in the present case. In Siesse, value or cause damage to the authorities' the Court decided that the predecessor to storage facilities. The imposition of a dead- the Customs Code, Council Regulation line for assigning a customs-approved (EEC) No 4151/88 of 21 December 1988 treatment or use is therefore a rule of good laying down the provisions applicable to administration which contributes to a more goods brought into the customs territory of effective handling and processing of goods the Community, 11 did not preclude the by the customs authorities. possibility that goods in respect of which the time-limits for clearance have not been obeyed, might have their situation regular- ised by acceptance of a declaration for free circulation. 12 As regards any sanctions (the overdue-clearance charge) that Member States might impose on traders who do not comply with the aforementioned time- limits, the Court decided that, while the 35. In addition, the Commission is right to Member States enjoy a discretion in this observe that sanctioning a failure to field, they must ensure that infringements observe these time-limits may be beneficial. of Community law are penalised in a It dissuades subsequent repetitions of the manner which is effective, proportionate, same failure by the importer, encourages and dissuasive.13 Further, such penalties general observance of time-limits, puts an must comply with the general principles of end to temporary storage or control of the Community law, in particular the principle goods by the customs authorities, and of proportionality, and be determined guarantees payment of customs duties if under conditions which are analogous to these have not been paid already.

39. In the present case, it appears from the 41. A calculation, ad valorem, has the order for reference that all customs duties merit of being proportional to the value owed in respect of the imported goods were of the goods. It is also objective and of a paid on their release for free circulation predictable amount. and, as I have already noted, this date preceded commencement of the overdue- clearance proceedings by the authorities. Therefore imposition of the overdue- clearance charge in the present case cannot 42. It appears from both the order for be said to pursue the aim of making sure reference and from the written observations that the importer settles any debt in the that the imposition of the overdue- form of customs duties on the goods. Its clearance charge is automatic in the sense imposition, as regards the relationship that there is no provision for any excep- between the applicant and the authorities tions. Naturally, if the national court were in respect of the goods in question, only to find that the customs authorities had made a mistake either in imposing the charge or in calculating its amount, the 14 — Paragraphs 20 and 24. 15 — Paragraph 25. importer would be, at least to the extent of 16 — Paragraph 2 3 . such error, exonerated from paying the 17 — Paragraph 27 of the Opinion of Advocate General Elmer. charge.

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(b) Compliance with rights of the defence of the Code, it must set out the grounds on which it is based and refer to the right of appeal contained in Article 243.

45. In Questions 1, 2 (as regards possible infringement of taxpayers' rights of defence), 3 and 4, the national court seeks, 48. Portugal, however, maintains that no in essence, to know if the fact that the decision is required to initiate the overdue- Portuguese overdue-clearance proceeding clearance proceedings. Their commence- operates automatically and without prior ment is a direct legal consequence of the notice infringes Articles 6(3), 53(1) or 243 breach of Article 49 of the Customs Code of the Customs Code. and, under Article 53 thereof, the author- ities are obliged to regularise the situation of goods. Therefore neither Article 6(3) nor Article 243 of the Code applies. In any event, it contends that the importer has the right to lodge appeals during the procedure and that Article 243 cannot therefore have been infringed.

46. The applicant reiterates that any pro- cedure initiated in respect of goods which have not been assigned a customs-approved treatment or use must be necessary. He considers that unless the importer is noti- fied on initiation of this procedure, he 49. The Commission submits that it is not cannot possibly show that sale or imposi- necessary to notify importers pursuant to tion of the overdue-clearance charge is Article 6(3) of the Code. The text of unnecessary in respect of his goods. The Article 53 of the Code obliges the customs absence of notification also results in him authorities to act 'without delay'. To being unable to exercise his fundamental impose an extra condition of notifying rights of defence. In his opinion such a importers would slow clown the procedure procedure must be adversarial. and postpone fulfilment of the authority's duty.

52. It must be borne in mind that obser- vance of the rights of the defence is a fundamental principle of Community law, according to which addressees of decisions of public authorities which, as in this case, perceptibly affect their interests must be enabled to express their views effectively. 21 51. Concerning the right of appeal con- tained in Article 243 of the Code, the Commission distinguishes between imposi- tion of the overdue-clearance charge and the compulsory sale of goods. It is not necessary to inform importers of imposi- tion of a fine as they will discover this when payment thereof is sought. As regards sale of the goods, the Commission believes that 53. The Customs Code makes provision for when sale is urgent importers need not be the exercise of this right to a fair hearing in informed immediately but that, even in this Article 6(3) and Article 243. Article 243 case, they should be informed as soon as does not itself stipulate that an importer possible. The obligations incumbent on the be informed of his right to appeal. On the authorities are somewhat alleviated by the other hand, Article 6(3) does provide that compulsory publication, under Article 659 an importer be notified both of the reasons of the Portuguese customs law, of a list of for which a decision has been taken and of the goods placed for sale pursuant to his right to appeal. The applicability of overdue-clearance proceedings. Otherwise Article 6(3) is subject to certain conditions; the Commission draws a further distinction first a 'decision' (as defined in Article 4(5) according to whether or not the importer is of the Code) must have been taken, second known to the authorities: if importers are unknown it may be very costly to locate them so no notification will be required but 21 — Case 17/74 Transocean Marine Paint v Commission [1974] ECR 1063, paragraph 15 and Case T-122/99 The where they are known, they should be Procter 8c Gamble Company v Office for Harmonisation in the Internal Market (Trade Marks and Designs) [2000] informed of their right to appeal. If impor- ECR II-269, paragraph 42.

56. In Portugal, as soon as the importer exercises his right to make a late declara- 58. Since I do not believe that any 'deci- tion under Article 639 of the Customs sion' was taken in the present case, the authorities were not under an obligation to notify the applicant or to mention the 22 — Case 24/62 Germany v Commission [1963] ECR 63, at possibility of an appeal under Article 243 p. 69. of the Customs Code. However, the applic-

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59. I think, however, it appropriate to give two examples of situations in which I feel a 'decision' within the meaning of Art- icle 4(5) of the Customs Code would have been taken so that Article 6(3) would be applicable. First, there is little doubt that when, under Article 49 of the Code, a customs authority decides to set a shorter period for assignment of a customs- (c) Free movement of goods approved treatment or use or decides not to extend the deadline when this has been requested, it thereby exercises a discretion and thus takes a 'decision'. Secondly, I believe that when a compulsory sale of the importer's goods is organised pursuant to Article 638 of the Portuguese Customs Regulation, this likewise constitutes a deci- sion. A sale pursuant to Article 638 is based on Article 53 of the Code, under 60. In Question 2 the national court asks if which, however, it is not obligatory. Reli- the levying of the overdue-clearance charge ance on the option contained in Article 53 is constitutive of an obstacle to the free involves exercise of discretion or judgment movement of goods. by the customs authorities. They must, in particular, judge that sale of the goods, as 23 — Case 44/79 Hauer v Land Rheinland-Pfalz [1979] distinct from any other remedy, is neces- ECR 3727, paragraph 17.

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61. The overdue-clearance charge is cer- (d) VAT tainly not a measure of equivalent effect to a customs duty under Article 25 EC as it is only applied to goods originating outside the Community.24 64. In Questions 5 and 7, the national court asks if the customs authorities may impose VAT on the amount of the overdue- clearance charge.

63. The Commission agrees that since the establishment of the Common Customs 66. The Commission is correct to state that Tariff Member States cannot unilaterally no distortion of competition can arise when introduce new customs duties on goods the customs authorities exercise this power imported from third countries nor raise of sanction. The authorities have no poten- existing ones. 2S However, it also observes, tial competitors in this area and thus the and I agree, that the overdue-clearance important VAT principle of neutrality can- charge is not applied across the board to all not be infringed. importers but only to those who have failed to respect the time-limits for assigning a customs-approved treatment or use. There- fore, the charge is not an obstacle to the free movement of goods. 26 67. If, in the alternative, a warehousing service was provided by the customs 24 — Stesse, cited at footnote 3 above, paragraph 17. 25 — Ibid., paragraph 17 and Joined Cases 37/73 and 38/73 Diamantarbeiders v Indiamex [1973) UCR 1609, para- graph 22. 27 — Casc C-202/90 Ayuntamiento ¡le Seiniin 119911 26 — Ibid., paragraph 18. FCR I-4247, paragraph 18.

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authorities, it could be subject to VAT. such authorities would constitute 'taxable Warehousing is listed in point 9 of persons' once the service they provide is Annex D to the Sixth VAT Directive so 'not carried out on such a small scale as to according to the third indent of Article 4(5) be negligible'.

V — Conclusion

68. I am accordingly of the opinion that the questions submitted by the Tribunal Fiscal Aduaneiro do Porto should be answered as follows:

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