This is an extract of our Free Movement Of Goods document, which we sell as part of our European Law Notes collection written by the top tier of Oxford students.
The following is a more accessble plain text extract of the PDF sample above, taken from our European Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
EU 6 Goods
Free Movement of
FREE MOVEMENT OF GOODS Abbreviations: ECJ European Court of justice MSs Member states (of the EU) EP European Parliament CFSP Common Foreign and Security Policy TEU Treaty on EU (Maastricht) TFEU Treaty on the Functioning of the EU (Rome) EEC Treaty Treaty establishing the Economic European Community DE Direct effect CEE Charge having Equivalent Effect MEE Measure having Equivalent Effect QR Quantitative Restriction MR Mandatory Requirement CSA Certain Selling Arrangements
Benefits of free trade = specialisation comparative advantage economies of scale
maximisation of consumer welfare and overall efficiency (static and allocative efficiency both)
Spaak report highlighted these economic benefits of a common market, prior to signing of the Treaty of Rome.
But also have political benefits - 2 companies engaged in trade less likely to go to war. But there are problems that arise in practice, when applying the basic model
Assumption of perfect competition doesn't always hold: might have information asymmetry, transaction costs, and tendency to shirk commitments.
National regulation also ignores external costs, responding only to local concerns - can lead to protectionism (trade barriers + inefficient subsidies) Different stages of integration: i. Free trade area removal of impediments to free movement of goods, but each MS retains autonomy to regulate trading relations with non-MSs. ii. Customs union addition of common external policy towards non-MSs iii. Common market addition of free movement of persons, services and capital (not just free movement of goods, but of production factors - allows optimum allocation) iv. Monetary union above + single currency v. Economic union above + single monetary and fiscal policy controlled by central authority vi. Political union above + central authority responsible to central parlt with sovereignty of a nation's govt. Parlt might also set foreign and security policies. vii. Full union complete unification of economies, and common policy on matters like social security/income tax.
According to art 28(1) TFEU, EU is a customs union, with common customs tariff agains third parties.
But in fact, EU law has gone further, by prohibiting use of non-tariff barriers (QRs). Also prohibits anti-competitive behaviour by private actors which aims to resurrect barrier to trade. Four limbs to free movement of goods: i. Establishing a customs union (art 28 TFEU) : prohibits MSs to charge customs duties/CEEs on imports/exports (art 30) ii. Adopting a common customs tariff against non-MSs. iii. governed by Common Commercial Policy. One aspect of this is Common Customs Tariff tariff on goods paid upon entry into EU, third country goods subsequently treated as goods in free circulation - will then enjoy all the same free movement rights as EU goods.
Comparing art 30 and art 110 The 2 are complementary but mutually exclusive (Lutticke, 1966) Art 30 applies only to imports and is triggered by crossing of frontier. Art 110 applies to charges borne both by imported and 1 domestic product. Art 30 is an absolute prohibition, but art 110 permits internal taxation as long as it is not discriminatory/protective in effect. But art 36 derogations do NOT apply to both these rules.
EU 6 Goods
Free Movement of
Eliminating discriminatory taxation (art 110) : note this is NOT an absolute ban like art 30 (at the frontier). Internally, can still tax just not in discriminatory fashion v. Removal of quantitate restrictions/MEEs on imports and exports (art 34 and 35 TFEU). (i), (iii) and (iv) are negative measures, stopping MSs from interfering with free movement. But what is ideal is a single EU standard - achievable only through harmonisation (positive integration).
FISCAL MEASURES I) Article 30: custom duties and charges having equivalent effect (CEEs)
Of greater practical importance in early days, before internal market abolished all customs controls. Key treaty provisions:
Customs union, as defined in art 28 TFEU, contains both internal and external element. Here, concerned with the former required prohibition of customs duties/CEEs between MSs.
Art 30 TFEU: absolute prohibition on customs duties/CEEs.
Predecessor was art 12 EEC, which prohibited states from introducing new duties and increasing existing charges.
So now, can't even have any charges.
Customs duties charge specifying rate of duty to be paid by importer to host state. Protectionist!
Makes imported good more expensive than domestic good.
Charges having equivalent effect (CEEs)
Statistical Levy case (Comm v Italy), 1969: "any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier"
No de minimis rule!
Doesn't matter that the charge is not discriminatory/protective in effect. (here, small charge levied on all goods crossing frontier to cover cost of collecting trade statistics. Held to be CEE)
Looking at substance - doesn't matter how MS describes the charge
Comm v Italy above: described as a statistical levy.
REWE-Zentralfinanz, 1973: appeared as a health inspection charge unitarily imposed by MS on imported products.
Requirement that charge be imposed because of crossing of a border (distinguished from art 110)
Applies even to charges levied cos of crossing of internal frontier! This is so even if charge is also levied on goods from other parts of the territory of MS. It is as much an obstacle to free movement of goods! (Legros, 1992 - charge levied on goods imported into French overseas territory, regardless of whether goods were from other MS or France)
Carbonati Apuani, 2004: same applies for exports. Cannot impose charge on marble leaving town famous for it, which was headed to other MSs as well as other parts of Italy.
Oliver and Enchelmaier note the lack of authority. Also hard to reconcile with fact that art 28(1) expressly states that principle of free movement applies exclusively between M
Barnard notes that if court's approach is to be upheld, then same reasoning should apply to free movement of persons/capital. Yet this is not the law. The orthodox position in all other areas is that internal frontier stuff is wholly internal situation hence not subject to EU law.
Absolute prohibition of CEE applies even if money is not being used for protectionist purpose.
Diamantarbeiders, 1969: charge was used to fund social benefits for workers in diamond industry. Still not allowed. Looking at effect of charge - makes imports less competitive. Ignores potentially useful purpose. Defences/"permissible" charges 2
EU 6 Free Movement of Goods Comm v Germany, 1988: ECJ recognised that charge might be lawful in the following 3 circumstances:
1. Payment for genuine administrative service rendered to the trader
Where payment is consideration for a genuine service of direct benefit to the trader.
Comm v Belgium (warehousing), 1983: art 30 won't apply if nat court considers charge to be consideration for service actually rendered to importer and of amount commensurate with service.
NB: up to nat court to decide! But ECJ said that on the facts, storage was demanded solely in connection with completion of customs formalities - hence not consideration for genuine service.
Comm v Italy, 1989: Italian authorities charged traders for cost of opening customs posts beyond normal business hours. ECJ held that under Union directive, customs posts should have been open anyway, hence art 30 applied and this was unlawful CEE.
Must confer specific benefit to the individual trader! Hard to show!
Statistical Levy (Comm v Italy, 1960): held that the statistical information being charged for was beneficial to the public as a whole, hence should be paid for via general taxation.
Bresciani, 1976: compulsory vet health inspections were imposed in the public interest, hence public benefit on a whole, and should be paid for out of public purse.
Warehousing case: AG Mancini thought there was specific benefit cos trader wouldn't have to pay commercial warehousing costs as goods were cleared through customs closer to intended destination. But ECJ found that payment of storage charges was solely due to connection with completion of customs formalities, hence art 30 applied.
2. Charges for inspections required by Union law
Comm v Germany: Where Union law imposes mandatory inspections, cost of compliance can be passed on to importer. But 4 conditions:
1. Don't exceed actual cost
2. Inspections are obligatory and uniform for all such products in EU
3. Prescribed by EU law in general interest of the Union
4. Promote free movement of goods (unilateral measures of inspections face discrepancy)
Why the difference in treatment between charges required by Union vs national law?
harmonisation by Union law, even if it imposes charges, removes impediment to free movement which arises from divergence between national rules.
1. Charges falling within the scope of internal taxation
Where charge is due to general system of internal dues applied systematically, and applied to domestic goods alike, it comes under art 110 instead! (Mutually exclusive) Remedies:
Direct effect: Van Gend en Loos art 30 has vertical direct effect.
Dubois v Garner Exploitation, 1995: even if it were a private party responsible for collecting payment, art 30 will still apply - here, charge collected by G, manager of international rail station under contract between him and customers/importers. In reality, this was vertical situation cos G acting in place of the state.
Repayment of unlawful charges:
San Giorgio, 1983: trader can have restitutionary claim! Such a claim is a consequence of the rights conferred on indivs by the Treaty provisions prohibiting the charges. But NOT if trader would be unjustly enriched (where cost already passed on to third party - final consumer). for nat court to determine if burden of charge has been passed on, and whether restitution would result in unjust enrichment.
Comateb, 1997: if charges have been passed on to third parties (final consumers), can obtain reimbursement from either trader or state. If former, trader can then get from state.
NB: unrealistic? Consumers probably vote with wallets and buy cheaper domestic product. hence, court also allowed trader claim for damages for loss of sales due to having to pass on the unlawful charges via higher pricing - leading to reduced sales.
National procedural autonomy: nat rules will govern the cause of action, subject to principles of equivalence and effectiveness (San Giorgio). Also, [reasonable] national time limits will apply to these claims - Edis, 1998.
3 EU 6 Goods
Free Movement of
II) Article 110: Internal Taxation
Deals with internal charges, not those applied at the frontier. Art 110(1): prohibits discriminatory taxation for similar goods. Art 110(2): prohibits taxation on goods in competition. Note that art 110 is about indirect taxation - on the product. NOT direct taxation (eg. Income tax on producer itself). National procedural autonomy is preserved by art 110 - MSs allowed considerable discretion to determine taxation policy (principle of fiscal autonomy).
Johnnie Walker, 1986: at the moment, MSs free to tax internally in absence of harmonisation, as long as it is done on non-discriminatory or protectionist basis. Hence, taxation policy which differentiates between products on basis of objective criteria will be permitted, if in pursuit of economic policy objectives (but cannot differentiate on basis of origin, or will be prohibited by art 110). This is FIRST STAGE of analysis - if have objective reason, then no breach of art 110!
Chemical Farmaceutici v DAF, 1981: Italian govt allowed to tax denatured synthetic alcohol at higher rate than fermented denatured alcohol, in order to promote agriculture/reserve petrol (base material of former) for other important uses - not on basis of origin!
Hence, different nature from other Treaty provisions - art 110 is permissive, while the rest are restrictive. So largely up to ECJ's intuition: if it thinks the taxation is underpinned by objective criteria, it won't apply art 110. But if it thinks there is discrimination on grounds of origin, will then apply art 110 analysis ECJ has allowed a wide scope to art 110.
Bergandi, 1988: art 110 applies also to tax imposed on use of products (not just typical levies directly imposed on the goods). Graduated tax system on games machines, correlating to their "moral badness" - objective criteria not based on origin! Hence not within scope of art 110!
Can also apply to charge on specific activity of an undertaking, in connection with products. There is accompanying power in art 113 to harmonise legislation, on taxation/excise duties etc, though subject to unanimous vote in Council, and consultation with EP.
A. Goods which are SIMILAR - art 110(1)
TEST: evolved over the years.
Started off which a formal test: whether goods will come within the same fiscal/customs/statistical classification - Fink-Frucht, 1968.
Later became a broader test: combines factual comparison with economic analysis of use REWE v HZA Landau, 1976.
Commission v Denmark, 1986: illustrates the second broader test.
Must compare the objective characteristics of the goods (method of manufacture/organoleptic properties.
Must also consider whether the goods are capable of meeting the same need from the consumer's perspective.
Here, comparing fruit wines and wines from grapes. Held to be similar! Manufactured from agricultural products and by same process of fermentation - same organoleptic properties. Also met same needs from consumers' POV.
Cf Johnnie Walker, 1986: comparing whisky and fruit liqueur wines, the former (manufactured exclusively abroad) being taxed at a much higher rate.
NOT similar just cos they contain same raw product (alcohol).
To be similar, raw material has to be present in roughly equal proportions. Here, fact that drinks could be diluted at time of consumption doesn't change fact that intrinsic characteristics were diff. Further, whisky is cereal based while fruit liqueur is fruit based (different organoleptic properties)
Comm v Italy, 1987: bananas v other soft fruit not similar cos of differences in organoleptic properties (others had high water content; thirst quenching properties. But they are goods in competition!
Where goods are similar, there cannot be discrimination against foreign goods on grounds of origin!
2 possible types of discrimination which are both prohibited. (terms to be interpreted widely Molkerei-Zentrale, 1968) 4
EU 6 Free Movement of Goods
- DIRECT DISCRIMINATION
Less favourable treatment of imported product on ground of origin
Only foreign good is taxed, or
Lutticke, 1966: powdered milk imported from Luxembourg into Germany subject to tax, but not domestic German product.
Foreign good is taxed at higher rate, or
Haarh Petroleum: national rules objected international transport to a tax 40%
higher than the rate imposed on domestic transport.
Conditions under which tax is paid/tax relief is granted
Comm v Ireland, 1980: Irish producers allowed longer time to pay tax.
No express defences - CANNOT be saved. Hence, MS has to remove the discriminatory element of the taxation policy.
Reverse discrimination? Allowed! MS can treat domestic products less favourably.
Peureux, 1979: French distillers required by French law to pay tax, which distillers of imported alcohol did not have to pay.-
Situation where measure does not make any reference to product origin/nationality on its face, but there is de facto burden imposed on the imported goods (no burden in law, burden in fact)
Comm v France (Tobacco), 2002: dark-tobacco cigarettes received more favourable tax than light-tobacco cigarettes, and former were almost exclusively produced in France while latter were imported.
Humblot, 1985: French system imposed gradually increasing tax on all cars up to engine size of 16cv. For those with larger engine sizes, had flat rate of taxation (no such larger cars were produced domestically). ECJ held that this was indirect discrimination, reducing competition faced by domestic cars.
Feldain, 1987: France then reformed system by replacing 2nd flat rate with more specific bands - still targeted foreign cars, hence still found indirect discrimination.
Cf Comm v Greece, 1990: similar car taxation. But ECJ found that Comm had failed to make out prima facie case of discrimination - that Greek system might have effect of favouring sales of domestic cars.
must show actual, not just potential, disparate impact (unlike art 34)
Objective justification - only available for indirect discrimination, not direct discrimination.
National measure can be saved if MS makes out objective justification (national interest which justifies taxation policy).
National interest must be unconnected with origin
Pursue recognised legitimate objective
If so, no breach of art 110!
Barnard notes that French might have won in Humblot had they argued they were protecting the environment.
No case as yet where objective justification has been successfully argued in taxation!
Might be cos there are 2 stages of the inquiry: objective justification is at stage 2. Stage 1 concerns whether MS can justify differentiated tax arrangements on basis of objective criteria - if yes, then won't even reach stage 2 (won't have to consider discrimination and then justification)
See Bergandi, 1988: MS advanced consumer protection/public morality justification at stage 1! Didn't have to go through stage 2. It was only if all the "bad" games machines were imported that you would go on to stage 2 and apply art 110 - might then be justified objectively)
2 stages: implies ECJ will undertake more intense scrutiny at 2nd stage, since having gotten case past 1st stage means that a prima facie case of discrimination has been established.
B. Goods which are in COMPETITION - art 110(2) 5
EU 6 Free Movement of Goods
TESTS for whether goods are in competition:
Economic test: cross-elasticity of demand if goods are substitutable - Comm v Belgium
Factors: composition of product; consumer preference etc largely impressionistic: whether tax is likely to bring about prohibited protective effect.
Comm v UK, 1980 (No 1): comparing wine and beer. Comm argued that on basis of unit volume, wine was being subject to a much higher tax burden than beer.
Held that the 2 drinks were in competitive relationship, ad for some consumers, they could be actually substituted. (For other consumers, there was potential substitution)
**ECJ considered that tax policy had crystallised consumer habits: must be aware of this possibility that tax policy has reinforced the already advantageous position of one of the goods, when considering the possible degree of substitution. Hence adopt forward-looking approach, not just a snap shot of the present.
Exceptionally, sent case back to Comm to try to sort it out. But parties still couldn't agree.
Case then returned to ECJ 3 years later, which ruled that the decisive competitive relationship was between beer and the most accessible wines (not all wines!)
Held that effect of taxation was to protect domestic beer production, and to promote wine as luxury product, making it less of a genuine alternative to domestic beer.
Remedy: if case had come under art 110(1), solution would have been to equalise tax rates.
But here, art 110(2) merely required removal of protective effect of scheme. Hence, lowered tax on wine and raised beer tax. Not exactly equal treatment!
Comm v Sweden, 2008: similar issue being litigated. But here, ECJ found Sweden was not in breach of art 110.
Held that beer and wine were, to a certain extent, in competition with each other as they were capable of meeting identical needs, but only between beer and the cheapest wines.
Then found that the higher tax rate had been applied chiefly to imported products.
But when considering whether the higher tax rate had protective effect: whether the higher tax on wine was liable to influence the market, ECJ noted that the price difference between the 2 products was almost the same before and after taxation.
Stricter analysis here. Burden of proof on Comm to show something closer to actual protective effect, which Comm failed to do so. C. Other issues that have arisen
A globalised approach? In some 1980s case, the ECJ considered both art 110(1) and (2) together. But although the tests overlap somewhat, the remedies are different - hence problematic!
Comm v Denmark, Comm v Italy and Comm v France, all alcohol/spirits cases, illustrate this globalised approach. Said that art 110, "taken as a whole", applies without distinction to the products considered.
Cf Comm v Italy (Bananas), 1987: more rigorous in distinguishing art 110(1) and (2). Found that bananas and other table fruits were not similar under art 110(1) cos of differences in organoleptic characteristics and water content. Then went on to consider if they were in competition under art 110(2) - yes!
For art 110(1) discrimination must be eliminated by equalising taxes or extending benefit enjoyed by domestic goods to imported goods.-note this actually only requires equality of treatment. Can be levelling up or down.
If art 110(2) state has to remove protective effect, does not necessarily mean equalising tax burden! Hence for Comm v UK, UK lowered tax for wine slightly and raised it a bit for beer - but still not equal treatment!
Hans Just, 1980: confirmed that there is a restitutionary claim. Art 110 is directly effective, so indivs can invoke it, and get state to repay any unlawful taxes. But subject to principle of national procedural autonomy, and unjust enrichment.
Can also get damages for loss of sales.
Subject to national time limits, as long as principles of effectiveness/equivalence upheld
Haahr Petroleum, 1997: national time limits will usually apply to such claims.
Cases on the boundary between art 30 and art 110: 6
EU 6 Goods
Free Movement of The "exotic" import
Where there are no similar/competing domestic products (or where domestic production is minuscule).
Co-frutta, 1987: MS can tax such goods (though they are largely imported) - won't be CEE as long as tax fits within general scheme of taxation applied systematically to categories of products, according to objective criteria not related to product origin.
Barnard approves. Makes sense, otherwise MS can't tax any product which they themselves don't produce.
But note ECJ will still check that the tax is not discriminatory/protective (tax in Co-frutta was found to be indirectly protective). Para-fiscal charges
Where the burden born by domestic products is offset (partially/wholly)
Compagnie Commerciale, 1992:
If proceeds of charge fully offset the burden, then basically only the imported good is taxed, hence will have effect equivalent to customs duties - will be contrary to art
30. But if there's only partial offset, then charge will come under art 110 - prohibited to the extent that it is discriminatory. Will be direct discrimination.
Whether it is whole or partial offset is for nat court to determine.
Capolongo, 1973; Italian law established body to promote development of cellulose production, funded by govt charge on both domestic and imported cellulose paper. But money was fully refunded to nat producers, so art 30 applied. "Other" levies
Brescani, 1976: B imported raw cowhides from France into Italy, which were subject to health inspection for which fee was charged. Domestic products were not submit to same duty, but when domestic animals were slaughtered, they were subject to vet inspection (charged) to determine if meat could be consumed.
ECJ said irrelevant that domestic production was subjected to similar financial burden, UNLESS charges were applied according to same criteria and at same stage of production.
Only if so, will art 110 apply. Otherwise, as on the facts, art 30 will apply.
Denkavit v Danish Ministry of Agriculture, 1988: ECJ found that annual charge levied on importers and national producers on certain foodstuffs for inspections was covered by art 110: general system of internal dues applied systematically and according to same criteria for both classes of products
Cf Mikhailides, 2000: charge was imposed on imported tobacco to compensate for a charge imposed on domestic product. But the latter had been imposed at earlier production stage, while latter imposed at marketing stage. Hence, art 30, not art 110, applied. [No single identical chargeable event discrepancy is at frontier. Can't be equalised by internal factor.]
Relevant treaty provisions (TFEU):
Art 34 (ex art 28 EC) on imports
Art 35 (ex art 29 EC) on exports
Art 36 (ex art 30 EC) on derogations from art 34 and 35. Both arts 34 and 35 prohibit quantitative restrictions (quotas/bans) and measures having equivalent effect (MEEs)
But there have been significant differences in case law.
Only in Gysbrechts, 2008: landmark case where ECJ made significant move towards convergence between case law on imports and exports.
But shortly after, in the Trailers case, ECJ extended definition of MEEs for imports only (to market access/restriction approach). There is much more case law on art 34, since art 35 unlikely to create problems - MSs have interest in facilitating exports anyway. 7
Buy the full version of these notes or essay plans and more in our European Law Notes.