Judgment;Summary — ECLI:EU:C:2020:948
Date: 2020-11-19
Language of the case: German
Court formation: Tenth Chamber
Subject matter: Free movement of goods;Customs Union
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary C-775/19 — 1 
Case C-775/19 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
22 October 2019 
Referring court: 
Finanzgericht Baden-Württemberg (Finance Court of 
Baden-Württemberg, Germany) 
Date of the decision to refer: 
22 July 2019 
Applicant: 
5th AVENUE Products Trading GmbH 
Defendant: 
Hauptzollamt Singen (Singen Principal Customs Office) 
  
Subject matter of the main proceedings 
Import duties, customs valuation 
Subject matter and legal basis of the reference 
Interpretation of EU law, Article 267 TFEU 
Questions referred 
1. Are payments which the purchaser of a product makes in addition to the 
purchase price, depending on his sales revenues, once a year for four years, in 
order to be able to sell the product 
– in a particular territory, 
– for the very first time, 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-775/19 
 
2  
– exclusively and 
– permanently, 
royalties and licence fees within the meaning of Article 32(1)(c) of Council 
Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community 
Customs Code (CC) which are to be added to the price actually paid or payable 
for the imported goods under Article 32(5)(b) CC in conjunction with 
Article 157(2) of Commission Regulation (EEC) No 2454/93 of 2 July 1993 
laying down provisions for the implementation of the Customs Code (CCIR)? 
2. Are such payments, where appropriate, to be added to the price paid or 
payable for the imported goods only on a proportional basis and, if so, on the basis 
of which criterion? 
Cited legislation and case-law of the European Union 
Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the 
Community Customs Code (OJ 1992 L 302, p. 1) (‘the CC’), Article 32(1)(c), 
Article 32(2) and Article 32(5)(b) 
Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down 
provisions for the implementation of Council Regulation (EEC) No 2913/92 
establishing the Community Customs Code (OJ 1993 L 253, p. 1) (‘the CCIR’), 
specifically Article 157(1) and (2), Article 158, Article 160 and Article 161 
Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 
laying down detailed rules for implementing certain provisions of Regulation 
(EU) No 952/2013 of the European Parliament and of the Council laying down the 
Union Customs Code (OJ 2015 L 343, p. 558) (‘Implementing Regulation 
2015/2447’), first sentence of Article 136(1) and Article 136(4)(a) 
Agreement on Implementation of Article VII of the General Agreement on Tariffs 
and Trade 1994 (GATT Customs Valuation Code 1994) (OJ 1994, L 336, p. 119), 
Article 8(3) and notes thereto 
Judgment of the Court of Justice of 9 March 2017, GE Healthcare, С-173/15, 
EU:C:2017:195 
Brief summary of the facts and procedure 
1 The parties to the main proceedings are in dispute as to whether payments made 
by the applicant to its suppliers for a (sole) right of distribution are to be added to 
the price actually paid for the imported goods. 
5TH AVENUE 
 
3 
2 The object of the applicant’s undertaking is (wholesale) trade inter alia in Havana 
cigars. The applicant obtains Cuban cigars from Habanos S.A., the Cuban state-
owned export company for cigars. 
3 On 31 January 2012 the applicant and Habanos S.A. concluded an English-
language agreement described as an ‘Exclusive Distribution Agreement’ (‘the 
EDA’), according to which the applicant has the sole right of distribution for 
Habanos S.A. cigars for the German and Austrian market. 
4 In return for the granting of the sole right of distribution in Austria, the applicant 
undertook to make four annual payments, described as ‘compensation’, to 
Habanos S.A. of 25% of its revenues achieved from the sales to Austria. 
5 As agreed, the ‘compensation’ was invoiced annually to the applicant and also 
paid by the latter. The payments ended upon expiry of the contractually agreed 
term (27 February 2016). The applicant did not have to pay any corresponding 
‘compensation’ for the sole right of distribution in Germany. 
6 The cigars were not purchased through conclusion of a written purchase 
agreement, but in each case through ordering and order acceptance. The applicant 
received a price list on the basis of which the respective orders were made. The 
purchase prices were in this case independent of the country in which the cigars 
were resold by the applicant. If an order was placed by the applicant, Habanos 
S.A. issued an invoice and delivered the goods ordered. 
7 The applicant basically cleared the imports of the Cuban cigars via the type D 
customs warehouse for which it holds authorisation. The warehouse is located in 
the applicant’s domicile in Waldshut-Tiengen, Germany. The release for free 
circulation took place upon removal from the customs warehouse through the 
simplified discharge of the procedure, also covered in the authorisation, under 
Article 278(3) CCIR, that is to say through entry in the records and without 
further presentation. When cigars from the supplier Habanos S.A. were admitted 
into its type D customs warehouse, the applicant declared the purchase prices 
actually paid plus surcharges (freight, insurance, etc.), but without consideration 
of the payments described as ‘compensation’ as a basis for determining the 
customs value. This is because, at the time of admission into the warehouse, it was 
not yet established which of the cigars were being sold to Germany and which 
were being sold to Austria. 
8 Following a customs inspection of the applicant’s premises, the inspector 
expressed the opinion that the fee described as ‘compensation’ was a separate 
purchase price component which was to be taken into consideration in the customs 
valuation under Article 29(3)(a) CC. 
9 The defendant Principal Customs Office endorsed the inspector’s opinion and 
issued several import duty notifications, including the notification of 28 August 
2015 which is solely at issue here and by means of which it imposed import duties 
by way of post-clearance recovery. The applicant raised an objection to that 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-775/19 
 
4  
notification on 23 September 2015, but that objection was only partly allowed by 
the Principal Customs Office. The Principal Customs Office rejected the 
remainder of the objection as unfounded. 
10 With its action brought on 6 December 2017, the applicant opposes the — in its 
view incorrect — addition of the payments described as ‘compensation’ to the 
customs value of the goods being valued. 
Brief summary of the basis for the reference 
11 In the opinion of the referring court, the present case concerns the question of 
whether only the purchase price paid by the applicant for the goods imported from 
a third country (cigars from the supplier Habanos S.A.) is to be taken as a basis as 
transaction value, in which case the action would have to be upheld, or whether 
the payments described as ‘compensation’ made by the applicant depending on 
the amount of its revenues concerning deliveries to Austria are also to be added to 
the customs value, in which case the action would have to be dismissed. 
First question referred 
12 The referring court assumes that the payment (‘compensation’) to be assessed is 
not a separate part of the purchase price under Article 29(3)(a) CC. 
13 As the ‘compensation’ is to be paid for the use of rights relating to the use or 
resale of the imported goods, under the third indent of Article 157(1) CCIR this is 
instead a royalty or licence fee within the meaning of Article 32(1)(c) CC. Such 
royalties or licence fees are to be added to the purchase price actually paid or 
payable for the imported goods under Article 32(1)(c) and Article 32(5)(b) CC in 
conjunction with Article 157(2) CCIR where three cumulative conditions are 
satisfied, namely that, first, the royalties or licence fees have not been included in 
the price actually paid or payable, second, they are related to the goods being 
valued and, third, the buyer is required to pay those royalties or licence fees as a 
condition of sale of the goods being valued (see judgment of the Court of Justice 
of 9 March 2017, GE Healthcare, C-173/15, EU:C:2017:195 relating to trade 
marks). 
14 With regard to the first condition, the referring court is of the opinion that it is 
apparent from the provisions of the licence agreement in question, that is to say 
the EDA, that the royalties or licence fees for the exclusive right to distribute the 
cigars in Austria were not included in the purchase price of the goods being 
valued. 
15 As regards the third condition, the referring court is of the opinion that the 
payment of the ‘compensation’ at issue also constitutes a condition of sale within 
the meaning of the second indent of Article 157(2) CCIR. The fact that the 
obligation expired after four years does not mean that the applicant would also 
have been granted the (exclusive) right to distribution in Austria without payment 
5TH AVENUE 
 
5 
of the royalty or licence fee. It is also irrelevant that the ‘compensation’ was not 
agreed in the respective purchase transactions, but in the EDA, since the existence 
of a framework licence agreement is sufficient if — as with the EDA to be 
assessed — it is apparent therefrom that all future single purchase agreements are 
to be dependent on the payment of a royalty or licence fee. It is therefore to be 
assumed that Habanos S.A. would not have supplied the goods intended for 
distribution in Austria, or at least not under the contractual terms agreed, without 
the payment of the fee that is the subject matter of the proceedings. 
16 However, the referring court has doubts with regard to the satisfaction of the 
second condition, that is to say whether the payment is related to the goods being 
valued within the meaning of the first indent of Article 157(2) CCIR. Whether a 
royalty or licence fee is related to the imported goods, that is to say whether 
goods-related services are compensated therewith, is to be assessed in the light of 
all the circumstances of the individual case, particularly in consideration of the 
licence fee agreement. The method of calculation is not decisive. If — as in the 
present case — account is taken of the proceeds from the resale of the imported 
goods for the calculation of the amount of the royalty or licence fee, this 
admittedly does not justify, under Article 161(1) CCIR, the assumption that the 
royalty or licence fee compensates goods-related services. On the other hand, as is 
apparent from Article 161(2) CCIR, such a method of calculation also does not 
rule out that the royalty or licence fee is related to the imported goods. 
17 In this respect, the referring court assumes that the applicant had to pay the 
‘compensation’ that is the subject matter of the proceedings both in order to be 
able to sell the imported goods on the Austrian market for the very first time 
(distribution right) and to have the exclusive right to distribute the cigars in 
Austria (territorial protection). 
18 In so far as the applicant had to pay the ‘compensation’ in order to be able to 
resell and distribute the imported cigars (for the first time) in Austria, the referring 
court is of the opinion that the royalty or licence fee paid is fundamentally related 
to the imported goods within the meaning of the first indent of Article 157(2) 
CCIR, because the right of distribution or resale is part of the procurement of the 
power of disposal when the imported goods are acquired. 
19 In so far as the applicant had to pay the ‘compensation’ in order to be able to 
exclusively sell the Havana cigars in Austria (territorial protection), that is to say 
for Habanos S.A. not to supply any other buyers, the relationship between the 
payments and the goods is, in contrast, questionable. 
20 The referring court is inclined to assume that payments made by the purchaser in 
addition to the purchase price of the imported goods solely in order to be able to 
exclusively sell the goods in a particular territory are not to be taken into 
consideration as a royalty or licence fee within the meaning of Article 32(5)(b) 
CC in conjunction with Article 157(2) CCIR when determining the customs value. 
This is because, while the right to be able to resell and distribute the goods 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-775/19 
 
6  
concerns the power of disposal in respect of the goods and is therefore embodied 
therein (also see, in this respect, the first sentence of Article 136(1) of 
Implementing Regulation 2015/2447), a sole right of distribution is an additional 
right going beyond the entitlement to procurement of the power of disposal in 
respect of the goods. Accordingly, the royalty or licence fee for a sole right of 
distribution is also not paid as consideration for the imported goods, but so that 
other persons in the contractual territory are not supplied by the seller. 
21 The above question in dispute can only remain open if — contrary to the view 
taken by the referring court — it is considered that payments to be made by the 
purchaser in addition to the purchase price of the goods (solely) for the granting of 
territorial protection are to be added to the price actually paid or payable for the 
imported goods as a royalty or licence fee under Article 32(5)(b) CC in 
conjunction with Article 157(2) CCIR. 
22 With regard to the statements of the Court of Justice in the judgment of 9 March 
2017, GE Healthcare, C-173/15, EU:C:2017:195, the referring court assumes, 
last, that it is irrelevant for the assessment of the relationship between the goods 
and the ‘compensation’ that is the subject matter of the proceedings that, in the 
present case, it was not yet established when the cigars that are the subject matter 
of the proceedings were sold for export whether they were being resold to 
customers of the applicant in Germany — in which case the applicant already had 
the distribution right regardless of the payment of the ‘compensation’ — or in 
Austria. 
Second question referred 
23 If payments to be made solely for the granting of territorial protection should not 
have to be added to the price actually paid or payable for the imported goods 
under Article 32(5)(b) CC in conjunction with Article 157(2) CCIR, in the case of 
payments which — as in the present case — are made in order for the purchaser of 
the goods both to be able to supply a particular territory for the very first time and 
to be exclusively granted this distribution right, this raises the further question of 
whether these royalties or licence fees are to be added overall to the purchase 
price of the imported goods, or whether they are then to be divided into a 
component that is to be added to the purchase price and a component that is 
irrelevant for customs valuation purposes. 
24 In the scope of Article 158(3) CCIR, the Court of Justice ruled that an addition 
under Article 32(1)(c) CC can be made even if royalties or licence fees are related 
partly to the imported goods and partly to services supplied after their importation. 
The adjustment then needed to be made on the basis of objective and quantifiable 
data capable of estimating the amount of the royalties or licence fees related to 
those goods (judgment of 9 March 2017, GE Healthcare, C-173/15, 
EU:C:2017:195, paragraph 52). 
5TH AVENUE 
 
7 
25 The first question which arises is whether these principles can be applied to the 
present case of the granting of a first-time distribution right connected with 
territorial protection and therefore the payment made by the applicant, in so far as 
this is for the first-time granting of the distribution right for Austria, is to be partly 
added to the price of the imported goods under Article 32(5)(b) CC in conjunction 
with Article 157(2) CCIR (see Agreement on Implementation of Article VII of the 
General Agreement on Tariffs and Trade 1994 [OJ 1994, L 336, p. 119], 
Article 8(3)). 
26 Should this be answered in the affirmative, this raises the further question of 
whether and, where appropriate, on the basis of which criterion the division of the 
royalty or licence fee has to take place if — as with the ‘compensation’ to be 
assessed — there are no objective and quantifiable data within the meaning of 
Article 32(2) CC and Article 158(3) CCIR which would make it possible to divide 
the amount of the royalties or licence fees into a component to be added to the 
price actually paid or payable for the imported goods and a component that is 
irrelevant for customs valuation purposes (also see, in this regard, Notes to 
Article 8(3) of the Agreement on Implementation of Article VII of the General 
Agreement on Tariffs and Trade 1994 in Annex I to that agreement, Annex 23 to 
the CCIR regarding Article 32(2) CC and Comment No 3 of the Customs Code 
Committee [customs value], point 7 and points 11 et seq.).