Free Movement Of Goods- The Abolition of customs duties and internal taxation/ Quantitive restrictions and measures having equivalent effect

Question 1

Explain Protectionism?

Answer 1

Local producers are threatened when customers are more attracted to other producers . Whole local industry can be put out of business. Protectionism tries to protect local economy by preventing outsiders entering the market or by handicapping them.

Question 2

Give some examples of ways protectionism prevents outsiders entering the market or handicaps them?

Answer 2

A Complete ban will prevent outsiders from entering the market.

Quotas limiting the scale of imports handicaps outside producers.

Tariffs can also limit or handicap outside traders from entering the market. For example, taxes to be paid before products can enter the country.

Other restrictions which make it hard for foreigners are, burdensome paperwork or inspections and unusual specifications

Question 3

What is the purpose of the ‘Single/Internal Market’?

Answer 3

The purpose of the Single/Internal market is to allow for the Fundamental Freedoms, such as Free movement of Goods, Services, People and Capital.

This means that traders are able to do business, providing their goods and services everywhere. Producers can access materials and workers from everywhere, investors can put money and take profits everywhere and workers can take jobs everywhere.

In order for this to happen, it requires an end to explicit and implicit/hidden barriers to trade. The explicit ones such as tariffs, import bans and prohibition on foreign service-providers are easy to tackle. However, the hidden ones, such as subtle ways of making life difficult for foreign business and favouring locals are more difficult.

Question 4

Which article defines the internal market?

Which article defines Free movement of Goods?

Answer 4

Article 26 of the Treaty on the Functioning of the European Union (TFEU) defines the internal market.

Question 5

What is the ‘Customs Union’?

Answer 5

The customs union is a group of states (in the European Union) whom have agreed to charge the same import duties as each other to allow free movement and trade between themselves.

Question 6

What is customs duty?

What is the motive behind custom duties?

Answer 6

Customs duty has two defining elements. First it is a pecuniary charge (payment of money) and secondly, it is imposed on goods by reason of the fact that they cross frontier.

The motive behind customs duties is to act as a barrier against imports and exports in order to raise state revenue and to protect domestic industries from more efficient or predatory competitors from abroad. They are protectionist hence they make the imported good more expensive than the rival domestic product.

Question 7

In order for goods to move without obstacle within the union, what was necessary?

Answer 7

It was necessary firstly to abolish customs duties and similar charges between the Member States.

Secondly, to deal with internal taxation and thirdly to ensure that non-pecuniary obstacles, such as quantitative restrictions and similar barriers, do not exist without good reasons.

Question 8

Which article abolishes customs duties between member states?

Answer 8

Article 31 of the TFEU and the ex article 26 of the European Convention (EC).

Question 9

Which article deals with internal taxation?

Answer 9

Article 110 of the TFEU and the ex article 90 of the EC.

Question 10

Which articles focus on the prevention of non-pecuniary obstacles without good reason?

Answer 10

Articles 34, 35 and 36 of the TFEU and the ex articles 28, 29 and 30 of the EC.

Question 11

In addition to the removal of barriers to trade within the EU itself, what else does a customs union include?

Which article is it under?

Answer 11

A custom union also includes the harmonisation of customs regulations on trade with third countries.

The EU has established and operates a common customs tariff, meaning there is a single external tariff applied by all EU Member States to imports coming from third countries.

Article 31 of the TFEU

Question 12

The TFEU lists the main obstacles to the free movement of goods in the EU. What are they?

Answer 12

The main obstacles to the free movements of goods in the EU are customs duties on imports and exports; charges having equivalent effect to customs duties; discriminatory internal taxation on imported goods; quantitative restrictions on imports and state monopolies of a commercial character.

Question 13

In which articles are customs duties on imports and exports found as well as charges having equivalent effect to customs duties?

In which article are discriminatory internal taxation on imported goods found?

In which articles are quantitative restrictions on imports found?

In which article are state monopolies of a commercial character found?

Answer 13

Articles 28 and 20 of the TFEU

Article 110 of the TFEU

Articles 34 and 35 of the TFEU

Article 37 of the TFEU

Question 14

What are examples of the meaning barriers to trade?

Answer 14

‘Barriers to trade’ are import and export restrictions between Member States.

Question 15

Why are barriers to trade normally imposed?

Answer 15

Barriers to trade are normally imposed by Member States for protections motives to protect domestic products from competition from imports.

Question 16

What is the meaning of import and export?

What is domestic products?

Answer 16

Import means coming in and exports going out.

Products which are made within the country.

Question 17

Barriers to trade can be Tariff or non-tariff.

What are Tariff barriers to trade?

Answer 17

Tariff barriers to trade are imports or exports reactions involving direct payments of money. They include customs duties and charges having equivalent effect to customs duties (CEEs).

Question 18

Which article prohibits Tariff Barriers?

Answer 18

Article 30 of the TFEU prohibits tariff barriers.

Question 19

What is the view of the TFEU in relation to national taxation that discriminates between imports and domestic products?

Answer 19

The TFEU also prohibits national taxation that discriminates between imports and domestic products.

Question 20

Once goods enter the Union at any point of entry can obstacles still be put in their way?

Answer 20

Once goods enter the Union at any point of entry obstacles cannot be put in their way, unless they are justified by one of the exceptions provided for the Treaty.

Question 21

What does Article 30 of the TFEU state?

Answer 21

Article 30 of the TFEU states that “customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of fiscal nature.”

Question 22

Give an example of a charge having equivalent effects to a custom duty (CEE)?

Use case.

Answer 22

Rendering the imported goods more expensive in comparison to domestically produced goods is an example of a charge equivalent to a custom duty.

In the case ‘Commission v Luxembourg and Belgium 1962’ the court defined equivalent charges as ‘duties whatever their description or technique, imposed unilaterally, which apply specifically to a product imported by a member State but not to a similar national product and which by altering the price, have the same effect upon the free movement of goods as a customs duty’.

Question 23

Does a charge which has equivalent effects to a custom duty need to be protectionist in order to constitute a breach?

Answer 23

No, charges having equivalent effects to a customer duty does not need to be protectionist in order to constitute a breach.

Question 24

Can customs duties ever be justified?

Answer 24

No, customs duties are an infringement of Article 30 and they can never be justified.

Question 25

What was the purpose of introducing the prohibition on charges having equivalent effect to a customs duty?

Answer 25

The purpose of this prohibition is to prevent Member States from circumventing the prohibition on customs duties by dressing them up or being creative with them in such a way that they manifest themselves as something else.

Question 26

Give an example of another case in relation to charges having equivalent effects to a custom duty (CEE)?

Answer 26

In the case ‘Commission v Italy 1969’ The Court of Justice stated that ‘any pecuniary charge, however small and whatever its designation and model of application, which is imposed unilaterally on domestic or foreign goods by the reason of the fact that they cross a frontier, constitutes a charge having the equivalent effect to a custom duty, even if it is not imposed for the benefit of the State, it is not discriminatory or protective in effect and if the production which the charge is imposed is not in competition with the domestic product.’ Meaning that this still breached article 30.

Question 27

The absolute prohibition on CEE’ applies even when the money is not used for a protectionist purpose. Give case.

Answer 27

Charges having equivalent effects to a customer duty does not need to be protectionist in order to constitute a breach. In the case ‘Diamonds 1969’ Belgian law required all importers of uncut diamonds to pay a levy into a workers’ social benefit fund. The Court of Justice ruled that the nature of the prohibition on customs duties was general and absolute. The purpose for which any levy was made was of no importance. The prohibition was based on the fact that any pecuniary charge however small imposed on goods by reason of the fact that they crossed a frontier constitutes an obstacle to the movement of such goods.

The court said that customs duties were prohibited independently of any consideration of the purpose for which they were introduced and the destination of the revenue obtained. Therefore, in this case the Belgian law was contrary to Article 30 TFEU.

Question 28

For a charge having equivalent effects to a custom duty to escape Article 30, what are the requirements?

Give case?

Answer 28

For a charge having equivalent effects to a custom duty to escape Article 30 the service must be of direct benefit to the importer or exporter and the charge must be proportionate to the value of the service.

In the case’ Commission v Belgium 1983’ Belgium levied charges for storage of imported goods at at public warehouses irrespective of whether the importer was depositing the goods to await customs clearance or simply presenting the goods for customs clearance. The Court of Justice held that a charge is a CEE unless it is the ‘consideration for a service actually rendered’. Also, the charge but not exceed the value of the service.

Question 29

One of the charges most frequently imposed on products entering and leaving a country are those for health inspection. Animal products and plants may still be subjected to such inspections if these are necessary to protect public health. Which article provides for exemptions from the free movement of goods?

Answer 29

Article 36 TFEU provides for exemptions from the free movement of goods with regards to inspections for public health purposes.

Question 30

Inspections of imports of slaughtered meat, fruit and vegetables, living animals and plants may be necessary, but could the inspection fee charged violate Article 28 TFEU?

Answer 30

The Court has held that inspection fees levied only on imported products violated Article 28 TFEU. Later, in the case Bresciani 1976, the court held that a stated that a state could not justify a fee on the ground that the inspection is necessary to protect general health, stating that the public should bear the cost and not the importer. However, the Court added that if the same fee is charged for the inspection of imported products and domestic products and applied to the same criteria and at the same stage of production, then the fee is not a charge equivalent to a duty but rather a systematically applied internal tax.

Question 31

Defences/Justification.

The Treaty does not provide any defences to a breach of Article 30 TFEU. However, sometimes Member States have argued that charges imposed on imports or exports fall outside Article 30 because they are levied for services rendered, such as health inspection services.

Give case?

Answer 31

In the case ‘Commissions v Germany 1988’ Germany charged a fee for inspection costs of live animals upon their import, this fee was not contrary to the EU’s common customs policy Article 28 TFEU. This is because any charge on imports would usually be classed as a customs duty, which would be prohibited. This particular charge constituted payment for an actual economic service which fulfilled obligations under EU law and so the charge was economically justifiable.

Question 32

Although the Court of Justice has stated in a number of cases that charges for services rendered are lawful, this is only as long as the payment is in consideration for a genuine service of direct benefit to the importer or exporter. It is difficult to convince the Court that any charge is a service.

State case?

Answer 32

In the case ‘Commission v Italy 1989’ certain formalities were carried out for importers outside defined hours and this was considered to be a specific service for which an additional charge could be made. However, it was found that the customs posts should have been open away during those hours under regulations then in force and, therefore, the charge could not be considered to have imposed foe a specific service.

Question 33

What is another case where It was difficult to convince the Court that a specific charge was a service?

Answer 33

In the case ‘Commission v Belgium 1983’ Belgium charged for the use of a special warehouse within the country where customs formalities could be completed instead of at the frontier. The Commission argued that this constituted a breach of Article 30. The Advocate General argued that this facility provide a specific benefit for the importer. The Court disagreed and found that when payments of storage charges are demanded solely in connection with the completion of customs formalities, it could not be regarded as the consideration for a service actually rendered to the importer.

Question 34

Charges arising under a provision of EU Law

Answer 34

If charges are imposed under Union rules they will not be considered to be charges having an equivalent effect to a custom duty, as long as they do not exceed the actual costs of the inspections in connection with which they are charged’ the inspection is an obligation for all products concerned in the union; they are prescribed by EU law in the general interest of the Union and they promote the free movement of goods and avoid obstacles stated under article 36 of the TFEU.

Question 35

The EU Law does not prohibit national taxation but it does prohibit taxation that discriminates between imported and domestically produced goods.

What does article 110 TFEU S.1 and S.2 state with regards to this?

Answer 35

Article 110 s.1 TFEU prohibits taxes on imported products exceeding those applied to similar domestic products. Article 110 s.2 TEU prohibits taxes in imported products giving indirect protection to other products.

Question 36

What happens if s.1 of Article 110 TFEU is breached?

What is s.2 is breached?

Answer 36

If s.1 of Article 110 TFEU is breached, the Member State must equalise taxation. If Article 2 is breached, the Member State has to remove the competitive effect of the tax regulation.

Question 37

Indirect taxation is taxation that appears not to discriminate between imported and domestically produced gapped but nevertheless has a discriminatory effect.

Give cases?

Answer 37

In the case ‘Humblot v Directeur des Services Fiscal 1367’ A French system of annual vehicle taxation subjected lower power-rated cars to a lower tax than higher power-rated cars. As Francine did not produce higher power-rated cars, the effect was to place imported cars at a competitive disadvantage, amounting to indirect
discrimination and a breach of Article 110 TFEU.

In the case ‘Commission v United Kingdom (Excise Duties on Wine) The UK taxed wine at a higher rate than beer. Comparing beer with the cheeper varieties of wine, the Court of Justice found that there was a degree of substitution between them and that the two products were in competition. Since the taxation system favoured the domestic product, it breached s.2 Article 110 TFEU.

Question 38

Measures having equivalent effect to quantitive restrictions.

Measures having equivalent effect to quantitive restrictions include health and safety requirements, packaging requirements, and requirements relating to the composition or marketing of goods.

Give a case which defines this.

Answer 38

In the case ‘Procurer du Roi v Dassonville’ riders who had imported Scotch whisky from France to Belgium were prosecuted in Belgium for infrgitment of national legislation requiring imported goods bearing a designation of origin to be accompanied by a certificate of origin issued by the state of origin. In their defence, the traders claimed that the requirement was a measure having equivalent effect to a quantitive restriction. The Court of Justice defined ‘MEQRs’ as: ‘All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-community trade’, applying this definition, the Court held that the Belgian requirement was indeed a MEQR and a breach of article 34.

Question 39

Directive 70/50 in relation to MEQR

Answer 39

The Directive refers to distinctly applicable measures, which are measures that do not apply equally to domestic and imported products in article 2. The Directive also refers to inductively applicable measures, which are measures that do apply equally to domestic and imported products in article 3.

Question 40

Describe distinctly applicable measure (MEQR)

Use case.

Answer 40

Distinctly applicable measures treat imported and domestic products unequally by applying only to the imported product, placing it at a competitive disadvantage as against the domestic product. In the case Commission v Ireland (‘Buy Irish’ Campaign) an Irish Government campaign to help promote Irish products, including widespread advertising of domestic but not imported products and use of the ‘Guaranteed Irish’ symbol constituted a measures equivalent to quantitive restriction.

Question 41

Describe indistinctly applicable measure (MEQR)

Use case.

Answer 41

Indistinctly applicable measures apply equally to imported and domestic products, and although they appear to not discriminate, their effect is to disadvantage imported products, creating a distinctive to importation and a hindrance to interstate trade. In the case Commission v United Kingdom (Origin Marking of Goods) a UK requirement that certain goods for retail sale in the UK be marked with their country of origin was a measures equivalent to quantitative restrictions. This is because, although it applied equally to imports and domestic products, it enabled consumers to distinguish between domestic and imported products, allowing them to assure any prejudices they may have against the foreign products.

Question 42

Not only must Member States refrain from imposing measures that restrict the free movement of goods, they must also take steps to ensure the free movement of goods.

Give cases.

Answer 42

In the case ‘Commission v France 1997’ the French authorities had failed to prevent violent protests by French farmers against agricultural products being imported from other Member States, such as interception of lorries, violence against lorry drivers, and damage to goods displayed in French shops. The Court of Justice held that France was in breach of article 10 of European Convention, now known as article 4 of the Treaty of the European Union, which requires Member States to take all appropriate measures to fulfil Treaty obligations.

Furthermore, in the case ‘Schmidberger v Austria’ Austria’s decision to allow a demonstration by environmental protestors, caused a 30 hour motorway closure, although the decision was justified on the grounds of the rights to freedom of expression and assembly, it was held that it impended the free movement of goods, and was a breach of article 34.

Question 43

Measures falling outside Article 34 (The Rule of Reason- Cassis de Dijon)

Answer 43

There are still measures which fall outside of Article 34, referred to as ‘the rule of reason’. This rule states that obstacles to movement within the EU resulting from disparities between the national laws relating to the marketing of the products in question, must be accepted in so far as those provisions may be recognised as being necessary in order to satisfy mandatory requirements, relating in particular to the effectiveness of fiscal supervision;the protection of public health;the fairness of commercial transactions and the defence of the consumer.

Question 44

Measures falling outside Article 34 (The Rule of Reason- Cassis de Dijon)

Answer 44

The notion that ‘reasonable’ restraints may fall outside of Article 34 was developed in the case of ‘Cassis de Dejon’. The applicant was refused permission to import Cassis de Dijon into Germany from France because the product did not comply with a German requirement that fruit liquers, to be marketed lawfully in Germany, must have a minimum alcohol content of 25%. The alcohol content of the French cassis was between 15 and 20%. The applicant challenged the legislation, claiming that it was an MEQR. Germany argued that the measure was justified on grounds of public health and the fairness of commercial transactions, asserting that low alcohol spirits create a tolerance to the alcohol and cause alcoholism and that high rate of national tax on high-alcohol drinks gave low-alcohol drinks a competitive advantage. The Court of Justice applied the ‘principle of mutual recognition’ and the Cassis ‘rule of reason’.

Question 45

The Cassis rule of reason applies only to indistinctly applicable measures. Distinctly applicable measures cannot be justified by Cassis mandatory requirements.

Give case.

Answer 45

In the case ‘Commission v Ireland ( Restrictions on Importation of Souvenirs) The Court of Justice refused to apply the rule of reason to a distinctly applicable Irish measure, adopted allegedly in the interest of consumers and fair trading, requiring imported souvenirs depicting Irish motifs to be marked foreign or with their country of origin.

Question 46

Proportionality

By permitting only ‘necessary’ restrictions, the rule of reason embodies a proportionality requirement. Restrictions must go no further than is necessary to achieve their objective, namely the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions, the defence of the consumer, or any other mandatory requirements. Proportionality has frequently proved a hurdle for Member States.

Give cases.

Answer 46

In the case of ‘Cassis de Dijon’ Germany’s justifications for its legislation on the alcohol content of fruit liqueurs, the protection of public health, and the fairness of commercial transactions, fell within the ‘mandatory requirements;. However, the provision was not necessary to satisfy those requirements. The same objectives could have been by means that were less of a hindrance to trade, such as a requirement to label the products with their alcohol content.

(Packaging requirements)
In the case ‘Walter Rau’ Belgium maintained that national legislation requiring margarine to be retailed in cube shapes was necessary to protect the consumer from the risk of confusing butter and margarine. The Court held that, legislation prescribing a particular form of packaging goes further than is necessary and consumer protection could not be achieved by measures which were less of a hinderance to intestate trade, such as a labelling requirement.

In the case ‘Commission v Germany (Beer Purity Laws) Germany sought to justify a rule requiring all drinks marketed as ‘bier’ to contain only specified ingredients on grounds of consumer protection, claiming that German consumers associated ‘bier’ with products containing only these ingredients. The Court of Justice declared that consumer protection could be achieved by measures that were less of a hindrance imports, namely a requirement for beer to be labelled with an indication of its ingredients.

Question 47

Dual Burden and Equal Burden rules
(Keck applies only to rules concerning ‘selling arrangements’ and not to rules relating to the goods themselves, such as packaging, content and labelling)

These are rules relating to goods themselves. These impose requirements that are additional to requirements that may be applied in the state of origin, creating an extra burden for producers.

Use cases.

Answer 47

In the case ‘Keck and Mithouard’ Keck and Mithouard were prosecuted for reselling goods at a loss, breaching French competition law. Relying on article 34 as a defence, they argued that the French legislation violated the free movement of goods principle. The Court of Justice acknowledged that the legislation restricted the overall volume of sales and hence the volume of sales of products from other Member States. However, the Court held that, national measures prohibiting certain ‘selling arrangements’ do not fall within the Dassonville formula ‘provided that those provisions apply to all affected traders operating within the national territory and provided that they affect in the same manner, in law and in fact, the marketing of domestic products and of those from other Member States’. Such provisions do not impede market access for imported products any more than for domestic products and fall outside article 34. The Court of Justice indicated that its judgment was aimed at traders who invoke article 34 to challenge national rules restricting their commercial freedom. Challenges of this kind had been made in the UK ‘Sunday trading’ cases, for example, the case of ‘Torfaen Borough Council v B&Q plc’.

Question 48

Derogation article 36 TFEU

Article 36 sets out the sounds on which Member States may justify restrictions on interstate trade, allowing derogation from the free movement of goods principle. Because of the fundamental importance of free movement to the internal market, the Court of Justice interprets these grounds very restrictively. Article 36 list of justifications is exhaustive.

Give case.

Answer 48

In the case ‘Commission v Ireland (Restrictions on importation of Souvenirs) The Court of Justice refused to apply the Cassis rule of the reason to a distinctly applicable Irish measure requiring imported souvenirs depicting Irish motifs to be marked foreign or with their country of origin. The Court also refused to accept a justification based on consumer protection, since this justification is not listed in article 36.