Judgment of the Court (Fifth Chamber) of 9 August 1994. - Klaus Thierschmidt GmbH v Hauptzollamt Essen. - Reference for a preliminary ruling: Finanzgericht Düsseldorf - Germany. - Value of goods for customs purposes - Inclusion of charges for "own" quotas issued free of charge - No separate declaration of quota charges excluded from customs value - Arrangements for imports of textile products from Taiwan. - Case C-340/93.



European Court reports 1994 Page I-03905



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

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1. Common Customs Tariff ° Customs value ° Quota charges paid by the buyer in respect of "own" quotas issued free of charge to the seller ° Included ° Quota charges in respect of third-party quotas or "own" quotas issued to the seller against payment ° Excluded ° Requirement that quota charges excluded from the customs value declaration be indicated separately ° No such requirement ° Requirement that the buyer should be able to provide proof of the type of quota charges

(Council Regulation No 1224/80)

2. Common Customs Tariff ° Customs value ° Importation of textile products from Taiwan ° Third-party quota charges ° Treated in the same way as imports from third countries generally

(Council Regulations Nos 1224/80, 4134/86 and 4136/86)

Summary

1. Regulation No 1224/80 on the valuation of goods for customs purposes, in particular Article 3(1) and (3) thereof, must be interpreted as meaning that quota charges paid by the buyer to the seller in respect of "own" quotas issued to the latter free of charge, as distinct from charges paid in respect of third-party quotas or "own" quotas issued to an exporter against payment, are included in the customs value of goods. Amounts invoiced in respect of "own" quotas issued free of charge to a seller represent fictitious quota charges which constitute in reality a disguised element of the price of the goods; their deduction from the invoiced price of the goods would entail an artificial reduction of the customs value.

Although quota charges not included in the customs value declaration need not be indicated separately, a buyer who wishes to exclude them must establish that they are third-party quotas or "own" quotas issued to the exporter against payment.

2. As regards the customs value of imports from Taiwan subject to Regulation No 4134/86 on the arrangements for imports of certain textile products originating in Taiwan, third-party quota charges must be treated in the same way as quota charges relating to imports subject to Regulation No 4136/86 on common rules for imports of certain textile products originating in third countries.

Parties

In Case C-340/93,

REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht Duesseldorf (Germany) for a preliminary ruling in the proceedings pending before that court between

Klaus Thierschmidt GmbH

and

Hauptzollamt Essen

on the interpretation of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes (OJ 1980 L 134, p. 1), as amended by Council Regulation (EEC) No 3193/80 of 8 December 1980 (OJ 1980 L 333, p. 1),

THE COURT (Fifth Chamber),

composed of: J.C. Moitinho de Almeida (Rapporteur), President of the Chamber, R. Joliet, G.C. Rodríguez Iglesias, F. Grévisse and M. Zuleeg, Judges,

Advocate General: C. Gulmann,

Registrar: H.A. Ruehl, Principal Administrator,

after considering the written observations submitted on behalf of:

° Klaus Thierschmidt GmbH, by Guenther Kroemer II, Rechtsanwalt, Duesseldorf,

° the United Kingdom, by Lucinda Hudson, of the Treasury Solicitor' s Department, and Sarah Lee, Barrister,

° the Commission of the European Communities, by Francisco de Sousa Fialho, of its Legal Service, acting as Agent, assisted by Hans-Juergen Rabe, Rechtsanwalt, of Schoen Nolte Finkelnburg & Clemm, Hamburg and Brussels,

having regard to the Report for the Hearing,

after hearing the oral observations of the defendant in the main proceedings and the Commission of the European Communities at the hearing on 24 March 1994,

after hearing the Opinion of the Advocate General at the sitting on 28 April 1994,

gives the following

Judgment

Grounds

1 By order of 18 May 1993, received at the Court on 1 July 1993, the Finanzgericht (Finance Court) Duesseldorf (Germany) referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty three questions on the interpretation of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes (OJ 1980 L 134, p. 1), as amended by Council Regulation (EEC) No 3193/80 of 8 December 1980 (OJ 1980 L 333, p. 1).

2 The questions were raised in proceedings between Klaus Thierschmidt GmbH and the Hauptzollamt (Principal Customs Office) Essen, following the latter' s decision to include in the customs value of goods charges invoiced by the exporter in respect of quotas used for the export of textile products from non-member countries with which the Community had concluded agreements limiting exports.

3 The file shows that between 1987 and 1989 Thierschmidt had arranged to have manufactured in Hong Kong and Taiwan women' s clothing which it then imported into the Community. The import duties for that period were the subject of an investigation carried out by the Betriebspruefungsstelle Zoll fuer den Oberfinanzbezirk Duesseldorf (Customs Audit Office for the Duesseldorf tax region).

4 On completion of the investigation, the Audit Office officials found that with regard to imports from Hong Kong the quota charges invoiced by the exporter, J. Wong & Co. had not been indicated in the declaration of customs value and that it was impossible to establish for the different categories of textiles whether the sums paid related to the use of J. Wong & Co.' s own export licences ("own quotas") or charges incurred by J. Wong & Co. in the acquisition of a third party' s export quotas ("third-party quotas"). The Audit Office officials also found that quota charges had not been declared in respect of the imports from Taiwan.

5 The Hauptzollamt considered that the quota charges ought to be included in the valuation of goods for customs purposes and sent Thierschmidt a revised assessment and demand, dated 15 July 1991, for payment of customs duties of DM 813 162.54 and turnover tax on imports of DM 159.99.

6 The objection lodged by Thierschmidt against that decision was dismissed by the Hauptzollamt, which considered that own-quota charges could not be treated in the same way as third-party quota charges. It pointed out in this connection that J. Wong & Co. had its own quotas and Thierschmidt should have shown that the quota charges invoiced by that company were third-party quota acquisition charges, the only quota charges not included in the customs value. Furthermore, the Hauptzollamt pointed out that there was no lawful trade in quotas in Taiwan, so that quota charges had to be part of the purchase price.

7 Thierschmidt brought an action in the Finanzgericht Duesseldorf. It claimed that, according to the case-law of the Court of Justice, quota charges for imports from Hong Kong do not increase the customs value. According to Thierschmidt, the question whether or not those charges should be included in the customs value should not depend on whether they were indicated in the declaration concerning the valuation of goods for customs purposes. Moreover the quota charges invoiced were for third-party quotas, since J. Wong & Co. did not have its own quotas save in isolated instances. Lastly, an exchange of letters between Thierschmidt and the Taiwan Textile Federation (the organization responsible for administering export licences in Taiwan) proved that there was a lawful trade in quotas in Taiwan.

8 In view of those circumstances, the Finanzgericht Duesseldorf stayed proceedings and referred the following questions to the Court:

"1. Are payments by the buyer to the seller for export licences allocated to the seller (export quotas) part of the customs value?

2. Must quota charges be 'distinguished' ?

3. Are quota charges which have been incurred on the basis of the Community rules in Regulation (EEC) No 4134/86 to be treated in the same way as quota charges arising under Regulation (EEC) No 4136/86?"

Question 1

9 As the file shows, own quotas are issued to the seller by the competent authorities for payment or free of charge depending on the exporting country concerned.

10 The Finanzgericht' s commentary regarding its first question shows that it relates solely to own quotas issued free of charge to the seller.

11 The Finanzgericht notes that the reasons given by the Court in its judgments in Case 7/83 Ospig v Hauptzollamt Bremen-Ost [1984] ECR 609 and Case C-219/88 Malt v Hauptzollamt Duesseldorf [1990] ECR I-1481 in favour of the non-inclusion in the customs value of goods of third-party quota charges could be extended to own quotas and would permit charges relating thereto also to be excluded from the customs value. First, Article 8 of Regulation No 1224/80, which lists the additional charges included in the customs value, mentions neither third-party quotas nor own quotas. Secondly, own-quota charges, as an advantage calculable in monetary terms for the export of goods, should not form part of the customs value, since they result solely from the Community rules for limiting and monitoring imports. Those charges are not directly related to the goods and own quotas may be traded independently of goods.

12 According to the Finanzgericht, it would be difficult to prove that payments made related to own quotas and not to what were claimed to be third-party quotas, since the competent officials of the Member States could not undertake the investigations needed for that purpose. Moreover, it might give rise to fraud, consisting of an exchange of own quotas between related undertakings selling the same goods, thus enabling those undertakings to invoice for third-party quotas, and the customs authorities of the Member States would not be in a position to detect those facts.

13 The Finanzgericht also sets out a number of arguments in favour of the inclusion of own-quota charges in the customs value. First, according to the interpretation of Article 3(3)(a) of Regulation No 1224/80 adopted by the Bundesfinanzhof in its decision of 24 April 1990 (Az. VII R 55/89 ZfZ 1990, p. 357), own-quota charges ought to be included in the customs value because they are directly connected with the sale transaction and do not constitute payment for rights acquired elsewhere. Secondly, if own-quota charges were not to be included in the customs value, the parties to a sales transaction could influence the customs value and hence the customs duties payable when determining the purchase price and the charges for the use of quotas allocated free of charge to the seller. The possibility that the purchase price could be independently arranged in that way cannot be reconciled with the objective pursued by the Agreement on implementation of Article VII on the General Agreement on Tariffs and Trade signed in Geneva on 12 April 1979, which was approved by Council Decision 80/271/EEC of 10 December 1979 concerning the conclusion of the Multilateral Agreements resulting from the 1973 to 1979 trade negotiations (OJ 1980 L 71, p. 1, and, for the text of the Agreement, p. 107, hereinafter the "Agreement on implementation of Article VII of GATT") and by Regulation No 1224/80 ° that objective consisting in establishing a fair, uniform and neutral system for the valuation of goods for customs purposes for the application of the Common Customs Tariff. Moreover, the customs value would no longer be determined on the basis of simple criteria, namely the total amount paid by the buyer to the seller.

14 Lastly, the Finanzgericht emphasizes that Article 3(1) of Regulation No 1224/80 defines the customs value as the transaction value, that is, the price actually paid or payable for the goods when sold for export, and that that definition is consistent with the definition contained in Article 1(1) of the Agreement on Implementation of Article VII of GATT on the basis of which other States which have signed the Agreement include quota charges in the customs value.

15 It should first be noted that under Article 3(1) of Regulation No 1224/80,

"The customs value of imported goods determined under this Article shall be the transaction value, that is, the price actually paid or payable for the goods when sold for export to the customs territory of the Community, adjusted in accordance with Article 8 ...".

16 Article 3(3)(a) of Regulation No 1224/80, as amended by Regulation No 3193/80, cited above, provides:

"The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods and includes all payments made or to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller. The payment need not necessarily take the form of a transfer of money. Payment may be made by way of letters of credit or negotiable instruments and may be made directly or indirectly."

17 It thus follows from the combined provisions of Article 3(1) and Article 3(3)(a) of Regulation No 1224/80 that the customs value includes all payments made or to be made as a condition of the sale of imported goods by the buyer to the seller or by the buyer to a third-party to satisfy an obligation of the seller.

18 Moreover, Article 8 of Regulation No 1224/80, to which Article 3(1) refers, provides that there should be added to the "price actually paid or payable" various ancillary charges. The list of those charges is exhaustive, according to Article 8(3).

19 Although quotas allocated free of charge may have a commercial value for the seller, they entail no charges for him. Thus amounts invoiced in respect of those quotas relate, as the Commission rightly points out, to notional quota charges, which in reality constitute a disguised element of the price of the goods. If such notional amounts fell to be deducted from the price invoiced for the goods, the customs value would be artificially reduced, contrary to Article 2(4)(g) of Regulation No 1224/80.

20 Since they are in the nature of an element of the price, the amounts in question are covered by Article 3(3)(a) of that regulation. They fall outside the scope of Article 8 thereof, and hence Article 8(3) does not apply to them.

21 Contrary to Thierschmidt' s argument, the grounds set out by the Court in paragraphs 13 and 14 of the Ospig judgment, cited above, based on the difference between the objectives pursued by the Community rules aimed at monitoring the quantities of textile products imported from certain non-member countries and by Regulation No 1224/80 are not applicable to charges in respect of own quotas allocated to the exporter free of charge. In that case, the quota system does not entail any expense for the seller.

22 The reply to the Finanzgericht' s first question must therefore be that quota charges paid by the buyer to the seller in respect of own quotas issued to the latter free of charge are included in the customs value of goods.

Question 2

23 In its second question, the Finanzgericht asks whether quota charges not included in the customs value must be "distinguished" in the declaration.

24 The Finanzgericht points out that the customs legislation in force does not contain any rule expressly providing that charges which are not to be included in the customs value should be distinguished. Nor do the judgments in Ospig and Malt, cited above, contain any indication in that connection. However, it must be concluded from the judgment in Malt (at paragraph 13) that charges incurred in acquiring export licences are not material to the price to be taken into account under the rules on customs value and accordingly they are not relevant to the declaration of customs value either. The separate indication of quota charges would, however, appear desirable from a practical point of view. Officials may, pursuant to Article 10 of Regulation No 1224/80, require the importer to provide incontrovertible proof of the quota charges claimed.

25 It should be noted that third-party quota charges, like own-quota charges when quotas have been issued to the exporter against payment, need not be indicated separately on the declaration of customs value.

26 It follows from Article 3(4) and Article 15 of Regulation No 1224/80 that certain charges not included in the customs value should be distinguished. Quota charges are not, however, mentioned in those two provisions. Accordingly, since Regulation No 1224/80 is silent on the matter, importers cannot be required to indicate separately charges for third-party quotas and charges for own quotas granted to the exporter against payment.

27 As the United Kingdom and the Commission have rightly pointed out, however, a buyer who wishes to exclude quota charges from customs value must establish that they are third-party quotas or own quotas granted to the exporter against payment.

28 The reply to the second question should therefore be that quota charges not included in the customs value do not need to be indicated separately in the declaration of customs value.

Question 3

29 In its third question the Finanzgericht Duesseldorf asks, with regard to the customs value of imports from Taiwan subject to Council Regulation (EEC) No 4134/86 of 22 December 1986 on the arrangements for imports of certain textile products originating in Taiwan (OJ 1986 L 386, p. 1), whether third-party quota charges must be treated in the same way as quota charges relating to imports subject to Council Regulation (EEC) No 4136/86 of 22 December 1986 on common rules for imports of certain textile products originating in third countries (OJ 1986 L 387, p. 42).

30 The Finanzgericht points out that the system laid down in Regulation No 4134/86 is not the same as that laid down in Regulation No 4136/86. The latter establishes a system of double controls on export licences which Regulation No 4134/86 does not do. The Finanzgericht asks whether such a difference may, from the point of view of customs value, justify a difference in the treatment of quota charges under Regulation No 4134/86.

31 Thierschmidt maintains that it follows from the letter of the Bundesminister fuer Wirtschaft (Federal Minister for the Economy) of 10 March 1993 that the system of double controls introduced in Regulation No 4136/86 applies by analogy to quotas for imports from Taiwan and that the costs of acquiring the corresponding quotas must be treated exactly like charges for quotas under the system of Regulation No 4136/86.

32 It is not necessary to examine whether the system of double controls of export licences is applicable to imports of textile products originating in Taiwan since it suffices to point out that any difference in the monitoring systems can have no effect on the treatment of quota charges with regard to customs value, as the Commission has rightly stated.

33 The reply to the third question must therefore be that, as regards the customs value of imports from Taiwan subject to Regulation No 4134/86, third-party quota charges must be treated in the same way as quota charges relating to imports subject to Regulation No 4136/86.

Decision on costs

Costs

34 The costs incurred by the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Finanzgericht Duesseldorf by order of 18 May 1993, hereby rules:

Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes, as amended by Council Regulation (EEC) No 3193/80 of 8 December 1980, must be interpreted as meaning that:

(1) Quota charges paid by the buyer to the seller in respect of own quotas issued to the latter free of charge are included in the customs value of goods;

(2) Quota charges not included in the customs value of goods do not need to be indicated separately in the declaration of customs value;

(3) As regards the customs value of imports from Taiwan subject to Council Regulation (EEC) No 4134/86 of 22 December 1986 on the arrangements for imports of certain textile products originating in Taiwan, third-party quota charges must be treated in the same way as quota charges relating to imports subject to Council Regulation (EEC) No 4136/86 of 22 December 1986 on common rules for imports of certain textile products originating in third countries.