Judgment of the Court (First Chamber) of 17 December 1992. - Wacker Werke GmbH & Co. KG v Hauptzollamt München-West. - Reference for a preliminary ruling: Finanzgericht München - Germany. - Outward processing - Total or partial relief from import duty - Determination of the value of compensating products and of temporary export goods. - Case C-16/91.



European Court reports 1992 Page I-06821



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

Free movement of goods ° Trade with non-member countries ° Outward processing relief arrangements ° Total or partial relief from import duty applied to compensating products ° Methods of calculation ° Determination of duty theoretically payable ° Transaction value of compensating products ° Determination of duty actually payable ° Determination of the value of temporary export goods

(Council Regulations No 1224/80, Arts 3 and 8(1)(b)(i), and No 2473/86, Art. 13)

Summary

Regulation No 2473/86 on outward processing relief arrangements and the standard exchange system is to be interpreted as meaning that, in calculating the total or partial relief from import duty on the compensating products, the calculation of import duty theoretically payable on those products must in principle be based on their transaction value, while the value of the temporary export goods, which is required in order to determine the duty actually payable, must be calculated using one of the two methods set out in the second subparagraph of Article 13(2) of that regulation. If the value of the compensating products has been determined without any adjustment for the purposes of Article 8(1)(b)(i) of Regulation No 1224/80 on the valuation of goods for customs purposes, the value of the temporary export goods corresponds to the difference between the customs value of the compensating products and the processing costs determined by reasonable means, such as taking account of the transaction value of the temporary export goods.

Parties

In Case C-16/91,

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

Wacker Werke GmbH & Co. KG

and

Hauptzollamt Muenchen-West

on the interpretation of Article 13(1) and (2) of Council Regulation (EEC) No 2473/86 of 24 July 1986 on outward processing relief arrangements and the standard exchange system (OJ 1986 L 212, p. 1) and Articles 3 and 8 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 1055/85 of 23 April 1985 (OJ 1985 L 112, p. 50),

THE COURT (First Chamber),

composed of: C.G. Rodríguez Iglesias, President of the Chamber, R. Joliet and D.A.O. Edward, Judges,

Advocate General: G. Tesauro,

Registrar: H.A. Ruehl, Principal Administrator,

after considering the written observations submitted on behalf of:

° the German Government, by Ernst Roeder, Ministerialrat in the Federal Ministry of Economic Affairs, and J. Karl, Regierungsdirektor in the same Ministry, acting as Agents,

° the Commission of the European Communities, by B. Rodriguez, of its Legal Service, acting as Agent, assisted by R. Hayder, an official from the Federal Ministry of Economic Affairs of the Federal Republic of Germany seconded to the Legal Service of the Commission under the exchange programme for national officials,

having regard to the Report for the Hearing,

after hearing the oral observations of the Federal Republic of Germany and the Commission at the hearing on 26 March 1992,

after hearing the Opinion of the Advocate General at the sitting on 13 May 1992,

gives the following

Judgment

Grounds

1 By order of 20 December 1990, which was received at the Court Registry on 18 January 1991, the Finanzgericht Muenchen referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty three questions concerning the interpretation of Council Regulation (EEC) No 2473/86 of 24 July 1986 on outward processing relief arrangements and the standard exchange system (OJ 1986 L 212, p. 1, hereinafter "the regulation on outward processing") and 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, hereinafter "the regulation on customs value").

2 Those questions arose in proceedings between Wacker Werke and the Hauptzollamt Muenchen-West (hereinafter "the Hauptzollamt") relating to the value for customs purposes of certain products imported by Wacker Werke between 1986 and 1988 which it had purchased from Wacker Corporation, a company established in the United States of America with which the applicant has financial links.

3 Wacker Werke manufactures petrol engines and purchases diesel engines from other undertakings in Germany. It sells these two types of engine to Wacker Corporation. The engines are exported as temporary export goods under an authorization issued on the basis of the regulation on outward processing.

4 When Wacker Werke sells to Wacker Corporation, it adds, by way of general expenses and profit margin 25% to the cost of manufacturing its petrol engines and 5% to the purchase price of the diesel engines which it purchases from other German undertakings.

5 Wacker Corporation incorporates the engines purchased from Wacker Werke into vibration plates, vibro-compacters and hydraulic pumps. These products are then sold by Wacker Corporation, partly on the American and European markets direct and partly to Wacker Werke, which reimports them into the Community as compensating products under the outward processing relief arrangements. Wacker Werke buys these compensating products from Wacker Corporation at the prices shown in the latter company' s price lists for the American market less a reduction of 45%.

6 The national court states that there is no evidence that the prices charged by Wacker Werke for the temporary export goods or those charged by Wacker Corporation for the compensating products were influenced by the links between the two companies.

7 The dispute between Wacker Werke and the Hauptzollamt concerns the value of the temporary export goods and that of the compensating products used in calculating the amount of import duty to be paid by Wacker Werke on compensating products imported into Germany between February 1986 and December 1988 under the outward processing relief arrangements.

8 In completing the customs formalities for the compensating products imported by Wacker Werke, the Hauptzollamt used the transaction values in order to determine the customs value of those products and that of the temporary export goods. Subsequently the Hauptzollamt considered that whereas the compensating products should indeed be valued on the basis of their transaction value, the temporary export goods should, in accordance with Article 8(1)(b)(i) of the regulation on customs value, be valued on the basis of the cost of manufacture or the purchase price paid for the engines by Wacker Werke without taking account of the 25% or 5% supplements added by the latter company. Accordingly, it sought to recover a posteriori the amount of DM 36 057.20 by way of customs duty on goods imported between February 1986 and December 1988.

9 Wacker Werke brought an action against that decision before the Finanzgericht Muenchen (hereinafter "the Finanzgericht"). It maintains essentially that the selling price of the temporary export goods should have been subtracted from the purchase price of the compensating products in order to arrive at the processing costs and that the Hauptzollamt was not entitled to apply Article 8(1)(b)(i) of the regulation on customs value because the engines in question had undeniably been supplied for valuable consideration. The Finanzgericht decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

"1. Must Article 13(1) of Council Regulation No 2473/86 of 24 July 1986 on outward processing relief arrangements and the standard exchange system (OJ 1986 L 212, p. 1) be interpreted as meaning that for the calculation of import duty the customs value of the compensating products and of the temporary export goods must in principle be based on their transaction value in accordance with Article 3(1) 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 last amended by Council Regulation (EEC) No 1055/85 of 23 April 1985 (OJ 1985 L 112, p. 50)?

2. If the answer to the first question is in the negative, must the first alternative provided for in the second subparagraph of Article 13(2) of Regulation No 2473/86 be interpreted as meaning that the customs value of the compensating products is to be determined in accordance with this provision even where the holder of the outward processing authorization has temporarily exported goods neither free of charge nor at reduced cost within the meaning of Article 8(1)(b)(i) of Regulation No 1224/80?

3. If the answer to the second question is in the affirmative, must Article 8(1)(b)(i) of Regulation No 1224/80 be interpreted as meaning that in order to determine the value of the products mentioned in that provision which have been manufactured by the holder of the outward processing authorization himself only manufacturing costs are to be taken into account and that the transaction value is to be adjusted for the general expenses and profit margin included in the selling price of those products?

If so, in order to determine the value of the compensating products, is their transaction value also to be adjusted for cost components forming part of the value of the temporary export goods to the extent that they are included in the transaction value of the compensating products?"

10 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the legal background, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

11 In order to grasp the scope of the questions referred to the Court in the context of the dispute in the main proceedings, it is necessary to begin by recalling the applicable provisions of Community law.

12 Under Article 1(2) of the regulation on outward processing, the arrangements in question allow Community goods to be temporarily exported from the customs territory of the Community in order to undergo processing operations and the compensating products resulting from those operations to be released for free circulation in the customs territory of the Community with total or partial relief from import duty.

13 Under Article 13(1) of the same regulation, "the total or partial relief from import duties provided for in Article 1(2) shall be effected by deducting from the amount of import duties applicable to the compensating products released for free circulation the amount of import duties that would be applicable to the temporary export goods if they were imported into the customs territory of the Community from the country in which they underwent the processing operation".

14 The second subparagraph of Article 13(2) lays down two methods of calculation for valuing the temporary export goods.

15 According to the first method, the value is that taken into consideration for those goods when determining the customs value of the compensating products in accordance with Article 8 (1)(b)(i) of the regulation on customs value, which refers to Article 3 of the same regulation.

16 Article 3(1) of the latter regulation states that the customs value of imported goods is 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", provided, inter alia, that "the buyer and seller are not related, or, where the buyer and seller are related, that the transaction value is acceptable for customs purposes under paragraph 2" (Article 3(1)(d)).

17 Article 3(2) of that regulation then lists a series of criteria for determining whether the transaction value between related persons is acceptable and lays down that in applying those criteria due account is to be taken of differences shown to exist in, among other things, the items enumerated in Article 8 and "costs incurred by the seller in sales in which he and the buyer are not related that are not incurred by the seller in sales in which he and the buyer are related".

18 Finally, Article 8(1) of the said regulation defines certain items to be added to the price actually paid or payable for the imported goods in order to determine the customs value under Article 3, including, under (b), the value, apportioned as appropriate, of certain goods and services where they are supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable. The products in question are, under (i), "materials, components, parts and similar items incorporated in the imported goods".

19 It follows that when applying the regulation on customs value to the compensating products it is necessary, in the circumstances contemplated by Article 8(1)(b)(i), to determine the value of materials, components, parts and similar items incorporated in the imported goods. It is only in those circumstances that the first method, which presupposes that that value has been determined, can be applied.

20 The second method, which is to be adopted if the value cannot be determined by the first method, provides that the value of the temporary export goods is the "difference between the customs value of the compensating products and the processing costs determined by reasonable means".

The first question

21 The first question aims to establish whether, in principle, for the calculation of import duty the customs value of the compensating products and of the temporary export goods must be based on their transaction value.

22 The Court has consistently held that, as a matter of principle, it is the transaction value determined in accordance with the method set out in Article 3 et seq. of the regulation on customs value that must be taken into account when calculating the value of the compensating products. It is therefore necessary to verify whether, as the national court considers, the transaction value must also be taken into account when calculating the value of the temporary export goods.

23 It appears from the examination of the provisions of the two regulations mentioned above that, for the purpose of calculating import duty, it is necessary to apply the procedure provided for in Article 13 of the regulation on outward processing, and not purely and simply to take the transaction value of the temporary export goods.

24 However, that procedure cannot be dissociated from the determination of the value of the compensating products, which occurs beforehand. When determining their value it is already appropriate to decide whether or not an adjustment has to be made pursuant to Article 8 of the regulation on customs value, and that decision determines the method to be adopted for valuing the temporary export goods in accordance with the second subparagraph of Article 13(2) of the regulation on outward processing.

25 In a situation of the kind at issue in the main proceedings, in which the competent authority decided that the transaction value of the compensating products could be taken as the customs value, no adjustment within the meaning of Article 8(1)(b)(i) was made. In those circumstances it is necessary to adopt not the first, but the second method of valuing the temporary export goods which is set out in the second subparagraph of Article 13(2).

26 According to that method, taking account of the transaction value of the temporary export goods may, in circumstances such as those of this case, constitute a reasonable means of determining the processing costs.

27 The answer to the first question submitted by the Finanzgericht must therefore be that the regulation on outward processing is to be interpreted as meaning that, in calculating the total or partial relief from import duty for which it provides, the calculation of import duty on the compensating products must in principle be based on the transaction value of those products, while the value of the temporary export goods must be calculated using one of the two methods set out in the second subparagraph of Article 13(2) of that regulation. If the value of the compensating products has been determined without any adjustment for the purposes of Article 8(1)(b)(i) of the regulation on customs value, the value of the temporary export goods corresponds to the difference between the customs value of the compensating products and the processing costs determined by reasonable means, such as taking account of the transaction value of the goods in question.

The second and third questions

28 In view of the answer to the first question, there is no need to rule on the second and third questions.

Decision on costs

Costs

2 29 The costs incurred by the German Government 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 (First Chamber),

in answer to the questions referred to it by the Finanzgericht Muenchen by order of 20 December 1990, hereby rules:

Council Regulation No 2473/86 of 24 July 1986 on outward processing relief arrangements and the standard exchange system is to be interpreted as meaning that, in calculating the total or partial relief from import duty for which it provides, the calculation of import duty on the compensating products must in principle be based on the transaction value of those products, while the value of the temporary export goods must be calculated using one of the two methods set out in the second subparagraph of Article 13(2) of that regulation. If the value of the compensating products has been determined without any adjustment for the purposes of Article 8(1)(b)(i) of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes, the value of the temporary export goods corresponds to the difference between the customs value of the compensating products and the processing costs determined by reasonable means, such as taking account of the transaction value of the goods in question.