OPINION OF MR ADVOCATE-GENERAL TRABUCCHI

DELIVERED ON 27 JUNE 1973 ( 1 )

Mr President,

Members of the Court,

The German court asks in the first question whether Regulation No 803/68/EEC of the Council of 27 June 1968 on the valuation of goods for customs purposes is invalid as it was enacted on the basis of Article 235 of the EEC Treatv.

The reasons given for this doubt are expressed in German legal writing, which unfortunately is only referred to in a general manner by the Bundesfinanzhof. Some writers have in fact expressed reservations because the Council, rather than making use of rules in the Treaty directly relevant to the matter in issue and which in their opinion would have conferred appropriate powers on the Community Executive, based itself on Article 235. This Article is a subsidiary rule for use only in cases where action by the Community is necessary to attain one of the objectives of the Treaty, and the latter does not provide the necessary powers.

The dissent expressed by legal writers is essentially concerned with two separate issues, first the scope of Article 235 and secondly the scope of Articles 111 and 113 of the Treaty on the common commercial policy.

It is not my intention to enter into a theoretical discussion, which would be out of place here. But as the court which asked the preliminary question referred purely and simply to the differing opinions of legal writers to justify its doubts on the validity of the Community Regulation, one cannot avoid considering, even if only very briefly, the main arguments of those writers, to which that court refers.

We must, however, make some preliminary remarks.

It is certain that the differences, however small, between the national customs provisions in force for the application of the Common Customs Tariff can distort competition and cause deflections of trade. It is also certain that the criteria for determining the value of goods for customs purposes have a direct effect on the application of the Common Customs Tariff, and in the absence of a unitary criterion in all the Member States, there could be no uniform application of Community duties. It was on the other hand noticed that the powers of adjustment offered by the Convention on the valuation of goods for customs purposes signed in Brussels on 15 December 1950 had led to differing provisions within the sphere of action of Member States, parties to such Convention. It was therefore necessary to bring about the alteration of national regulations with regard to this matter.

Are there specific Rules in the Treaty which would have permitted the adoption of these measures without the need to resort to Article 235?

One argument stems from a narrow interpretation of Article 235, which considers that such provision applies only in the total absence of any specific provision in the Treaty. Such an interpretation means that Article 235 cannot be considered as a provision empowering the Community to deal with a situation when another rule of the Treaty provides powers of action (however small they may be) by different means considered more suitable — or the only ones suitable — to accomplish the object sought. Such a solution is justified by the argument that otherwise the specific provisions providing a power of action less drastic than that possible in theory under Article 235 would be superfluous, or there might even be a risk of modifying the substantial effect of such provisions.

The above argument leads one in particular to the hypothesis which specially interested the German Court. This is that in view of the existence of Article 27, which provides the Commission with the power to make recommendations to States so that they can take steps to approximate their national customs provisions to the extent necessary for the proper working of the Common Customs Tariff, this rules out any power of the Community to enact legislative measures on the same matter, even where legislative measures would correspond more to the objects sought than the simple recommendations orovided for by Article 27.

This argument as was fairly pointed out by the Council, would lead to an absurd result when applied in strict logic: considering especially that the Commission holds a general power under Article 155 of the Treaty to make recommendations, which would make the provision of Article 235 practically inanolicable.

But it is above all for another reason that such a narrow interpretation of Article 235, which finds not the slightest support in its wording, appears unwarranted. The applicability of this rule is provided expressly for those cases where the Treaty has not laid down the powers necessary to attain one of the Community's objectives. Consequently the express provision of inadequate powers does not mean that this condition is not satisfied.

Appraisal or the need for specific action within the meaning of Article 235, and of the suitability of the measures available for attaining the objectives pursued, comes within the jurisdiction of the Council. Such need therefore exists when the Council, taking account of the nature of the matter in question and the particular requirements arising in the area where the Community functions, considers that the specific powers expressly conferred by the rules of the Treaty for attaining given objectives are unsuitable.

Besides, it is not correct to argue that, even where a necessary though inadequate power is expressly provided by specific provisions, the applicability of Article 235 would make such provisions superfluous or be tantamount to their alteration. Recourse to such provisions, which will in most cases provide a simpler procedure than that prescribed by Article 235, will remain the rule, whereas recourse to Article 235 will be limited to particular cases where in view of the circumstances the powers of action provided by the Treaty are considered unsuitable to attain the objectives sought.

The other ground of dissent expressed by legal writers and referred to by the German court is based on competely different considerations and concerns more specifically the field of customs. Even this is basically an interpretation defining the scope of Article 235 but not only, as in the first argument, to the detriment of the Community's power of action. The suggested limitations on the applicability of Article 235 in customs matters springs from the recognition that the Community already holds here a general regulatory power, either under Article 9, which provides that the Community is based on a customs union, or under Articles 111 and 113 which expressly confer on the Community the necessary powers for the management of its own external commercial policy. If on the basis of the customs union the legislature considered it proper to grant the Community a general power to make regulations on external commercial policy, then a fortiori the Community must possess such a power to ensure the proper working of the Common Customs Tariff. The argument finds support in the provisions of Articles 23 (3) and 28 of the Treaty, which have as their premise a unitary and obligatory customs system. Such is in brief the argument of the writers to whom we refer.

The valuation of goods for customs purposes is obviously a necessary condition for the application of customs duties, in the same way as the determination of the basis of assessment is a necessary condition for the application of tax. There is no doubt that the rules establishing the criteria for determining the basis for taxation come under tax law: apart from an express legislative provision to the contrary, the power to determine such criteria belongs by necessary implication to the same authority invested with the power to assess the tax. For the same reason, the determination of criteria relating to the valuation of goods for customs purposes belongs (when there is no enactment to the contrary) to the same authority which has the power to establish the tariffs for customs duties.

The power of administering the customs union which includes in particular the power to determine and alter the duties in the Common Customs Tariff (Article 28 of the Treaty) must thus include by necessary implication the power to enact the rules which, since they directly concern basic elements of the matter, are necessary for the proper functioning of the customs union. This consideration suffices for the recognition that the Community's power to regulate the valuation of goods for customs purposes naturally stems from the combination of powers and competence belonging to the Community for customs purposes, without any need to bring into action the procedure of Article 235 nor to resort to the powers conferred on the Community by Articles 111 and 113 on the common commercial policy. We do not consider that the inclusion of Article 235 of the Treaty excludes the applicability of the method of interpretation called ‘the doctrine of implied powers’, to the extent that de recognition of powers of action conferred on the Community is necessary, not generally to attain the objectives of the Treaty, as this rule provides, but more precisely for the correct exercice of powers specifically conferred on the Community in determined sectors. The Court has moreover on various occasions used a similar method of interpretation, even recently in the judgment in Case No 22/70 (Commission v Council, Rec. 1971, p. 263 ss.). The exercise of the power so recognized four regulating the value for tax purposes ought to be carried out according to the same rules of procedure provided by Article 28 of the Treaty.

But if one were to consider the question in the light of and on the basis of Articles 111 and 113 of the Treaty on the common commercial policy, which have been invoked in this matter by certain writers, it must be noted that these rules are clearly connected with the application of the Common Customs Tariff, since one of the principal means of carrying out the commercial policy, as specified in Article 113, is the conclusion of tariff agreements and this has expressly as its prime object the level of duty for external tariffs. Where the criteria applied for the valuation of goods for customs purposes are not alike, they can cause differing rates of customs duties. That could prejudice the proper development of a common commercial policy.

There are very close links existing between the Common Customs Tariff and the commercial policy, and in particular the latter can only develop alongside a fully operating common customs policy.

It is therefore necessary for the Community itself directly to control the valuation of goods for customs purposes. In the absence of a specific provision of the Treaty on this matter, if one feels unable to adopt the criterion of interpretation considered above, related to the aggregate of powers conferred on the Community for administering the customs union, it appears to me that the provisions of Articles 111 (1) and 113 constitute a suitable basis for adopting the Regulation in issue. The former imposes on the Community the task of creating during the transitional period the conditions needed for implementing a common policy while the latter Article provides, after the expiry of that period, the powers necessary to bring about the exercise of a commercial policy based on uniform principles.

Having said this, we can observe however that in this case the question has only an academic importance. By enacting the Regulation on another basis, the Community has, through a more complicated procedure, nevertheless attained the desired objective. Even supposing that this Regulation could have been adopted by a simpler procedure under a different rule or by implication on the basis of a number of specific rules and powers provided by the Treaty, one cannot see what damage to the public interest has been caused by the adoption of such a measure on the basis and under the procedure of Article 235. It would certainly be against the spirit of the system created by the Treaty if the Commission or the Council were to consider it necessary to act on the basis of Article 235 in a case where other provisions of the Treaty already clearly provide suitable powers of action. But we do not have to consider what legal consequences could result on such a hypothesis. In the present case, in the absence of an express and clear provision of the Treaty specifically empowering the enactment of this Regulation, one must dismiss the idea that because this provision was prudently based on the general authorizing rule of Article 235, such fact could possibly constitute an irregularity liable to render it invalid.

Secondly the German court requests the interpretation of Article 11 (2) (b) of the abovementioned Regulation No 803/68 on the case of forward payment (i. e. at the time prescribed by Article 5 (a)) where the existence of a different price for cash payment has not been proved to the customs authorities. The national court asks us in particular whether, in order to fix the value for customs purposes at a lower level than the agreed price for forward payment, it is necessary that another price of a definite amount has been fixed between the seller and the buyer in question, or other buyers, for cash payment, or whether it is sufficient to prove that the price determined for forward payment includes a charge for credit.

The abovementioned Article 11 prescribes in paragraph (1) that:

‘The price to be taken into account in determining the value for customs purposes of goods declared for direct home use shall be the cash price payable on the date specified in Article 5 (a)’.

By the provision in Article 5, the material time for valuation for customs purposes of goods declared for direct home use is the date of acceptance by the customs authorities of the declarant's statement of his intention that the goods should enter into home use.

However, under Article 11 (2) the cash price is taken to be ‘a price payable later than the date specified in Article 5 (a), if there is no provision for a discount for cash payment, or if proof of the existence of a different price for cash payment has not been furnished to the customs authorities’.

We know that the company concerned in the main action had bought goods from an associated firm doing business in a third country and these goods were to be paid for on the 15th day of the fourth month after purchase. The German customs authorities levied duty on the basis of the full invoice price, refusing to deduct 3 % declared as credit charges by the importing company.

Because there was no discount agreement the German customs authorities, basing their decision on the provision of Article 11 cited above, gave as the reason for their refusal the fact that the importer had not addressed proof of the existence of a cash price different from the invoice price. But the Finanzgericht, on an appeal against the refusal of the customs authorities, was of a different opinion, considering the fact that the importer had produced a letter from his supplier which declared that credit charges were included in the invoice price, the court of first instance held that the importer had adequately proved the existence of a different price for cash payment within the meaning of Article 11, thus, to establish the value for customs purposes, reduced the invoice price by 3 %, using a formula to calculate the flat-rate (reduction of invoice price by 1 % for each month elapsing between purchase and payment). According to information given at the hearing by certain interveners, such formula was affirmed by German case-law and then enacted by the Federal Minister of Finance in an order of 1964 which seems however to have been specifically repealed following the entry into force of Regulation No 803/68.

It seems, then, that in this matter the question referred by the Bundesfinanzhof on the interpretation of Article 11 concerns the general problem (which in other contexts has already been pronounced on by this Court) of defining the limits within which national authorities can base themselves on rules and criteria of domestic law when applying Community legislation.

From the decisions of this Court the following criteria can be drawn regarding this matter:

1. Community legislation must be applied so as to safeguard its essential uniformity throughout the Community:

2. Consequently, the integration of Community legislation through rules and criteria of domestic law is allowed only where lacunae exist and only where strictly necessary for its proper application, and in any case so that it cannot discriminate between individuals subject to such legislation.

For forward payments, Regulation No 803/68 prescribes no flat-rate reduction in the sale price in arriving at the valuation for customs purposes, but by such Regulation the power of fixing this value at a level lower than the invoice price is subject to well-defined conditions:

— the provision of a discount for cash payment in contracts between seller and buyer, in which case the value for customs purposes is based on the invoice price reduced by the amount of the discount;

— or, where there is no such agreement, proof of the existence of a different price for cash payment, in which case the value for customs purposes will be fixed according to the latter price.

As can be seen, the principle established by Article 11 (1) is strictly upheld in every case. By such principle the price to be taken into account for the valuation for customs purposes is the cash price fixed by the seller in his dealings with the particular buyer in question (even if the latter opts for the higher price for forward payment) or, where there is no such specific cash price, then that which is generally quoted by that seller in his dealings with other buyers.

This is a criterion ensuring that the value for customs purposes used in the application of the Common Customs Tariff adheres as closely as possible to economic reality, and at the same time avoiding uncertainties and complications as regards proof.

For this reason the Regulation is precise in laying down the conditions in which a price lower than that actually paid is to be taken into account for the purposes of customs duty. Even in judging the present case within the framework of the Regulations outlined above, one must bear in mind above all the necessity for a clear and common assessment of the criteria of application of the Community rules.

The statement given by the seller which only confirms that the negotiated price includes credit charges, without specifying what would instead have been the cash price, could constitute a sufficient basis allowing the national court to deduct the probable discount which in practice and according to local commercial usage would give the corresponding cash price. But this presumptive deduction made by the courts applying the different systems of different commercial practices is contrary to the requirements of uniformity and clarity demanded by the Regulation. On the hypothesis under the Regulation it is a question of two specifically prescribed prices and the customs authorities can easily adopt as a basis the price resulting from deduction of the discount, or the cash price generally used by the particular seller, without any of the uncertainty deriving from different local customs and the difficulty of ascertaining them. Whereas in the case in issue, if one follows the argument of the court of first instance, the customs authorities could find no criterion in the Community system to determine the above-mentioned ‘credit charges’ and must leave the decision to the individual national authorities which would calculate the amount of the discount by criteria which are either generally imprecise or which possibly differ from state to state.

As has already been observed and is also clearly established in the preamble of the Regulation itself, the Community legislature intended to ensure that the level of protection (as represented by the Common Customs Tariff) is the same throughout the Community by making the valuation of goods for customs purposes subject to a common Community system. This is not only to prevent deflection of trade and distortion of competition, but also to ensure for importers equal treatment as regards the imposition of duties under the Common Customs Tariff. In cases of the type examined by the German court, the practice of making deductions from the invoice price on the basis of criteria drawn from the general national rules, and more particularly from national case-law and usage, is clearly not compatible with the object of uniformity sought by the said Regulations.

Certainly there was nothing to prevent the Community legislature from laying down uniform criteria for a flat-rate reduction in the invoice price fixed for forward payment. But because of the need for simplicity it was considered advisable to reduce the invoice price for cash payment only in cases where a specific cash price is fixed.

Such a limitation cannot prejudice buyers in any way, since they are warned of it. Nothing in fact prevents the importers concerned, even when they, prefer to fix a forward price, from agreeing, with the seller on a different price, or, what amounts to the same thing, a discount for cash payment in cases where, in fixing the forward price, credit charges have in effect been included.

For the above reasons I would reply as follows to the questions of the Bundesfinanzhof:

1. Regulation No 803/68/EEC of the Council dated 27 June 1968 on the valuation of goods for customs purposes is not invalid by reason of its basis under Article 235 of the Treaty.

2. In order to fix the value for customs purposes, within the meaning of Article 11 (2) (b) of Regulation No 803/68/EEC of the Council, at a lower level than the price laid down for forward payment, it is not relevant to prove generally that the price for forward payment includes credit charges. What must be proved is that a different price, of a definite amount, for cash payment, (even if in the form of a discount), has been fixed between the seller and the buyer in question, or that such a price appears in the seller's price-lists or is currently quoted by him.

( 1 ) Translated from the Italian.