Report for the Hearing in Case C-266/90
I — Legislative background
Commission Regulation (EEC) No 1626/85
1. The Community market in Morello cherries was exposed to serious disturbances owing to the low prices of imports into the Community of Morello cherries from nonmember countries. Therefore, protective measures were introduced by Commission Regulation No 1626/85 of 14 June 1985 on protective measures applicable to imports of certain Morello cherries (Official Journal 1985 L 156, p. 13).
2. Article 1(1) of that regulation, which adopts the description of Morello cherries used in the Common Customs Tariff, lays down a minimum price for imports of Morello cherries into the Community. For Morello cherries in syrup containing added sugar, in immediate packings, the minimum price per 100 kg was fixed, according to net capacity, at ECU 60.80 for immediate packings of a net capacity of more than 1 kg and at ECU 67.10 for a net capacity of 1 kg or less.
3. According to Article 1(2), if the minimum import price is not respected a countervailing charge as set out in the annex shall be applied.
4. Article 3 of the regulation reads as follows:
5. According to the second paragraph of Article 5 of Regulation No 1626/85, that regulation was to apply until 9 May 1986; it was extended until 9 May 1987 by Commission Regulation (EEC) No 1257/86 of 29 April 1986 amending Commission Regulation (EEC) No 1626/85 on protective measures applicable to certain Morello cherries (Official Journal 1986 L 113, p. 37).
Council Regulation (EEC) No 1224/80
6. Article 3(1) of Council Regulation (EEC) No 1224/80 on the valuation of goods for customs purposes (Official Journal 1980 L 134, p. 1) provides:
7. By virtue of Article 8(1) of Regulation No 1224/80, In determining the customs value under Article 3, there shall be added to the price actually paid or payable for the imported goods:
II — Facts and procedure before the national court
8. It appears from the order for reference that over the period 5 December 1985 to 10 September 1986 Franc Soba KG (Soba) arranged, at the Göggingen customs office, for the release into free circulation of a total of 103 consignments of stoned Morello cherries in glass jars. With each customs declaration Soba submitted the calculation of the reference price, in which it added to the invoice price of the Morello cherries the value of the packing material and containers (glass jars, lids, labels, cardboard boxes and shrink-wrapping materials) made available to the supplier free of charge.
9. Initially, the Hauptzollamt (Principal Customs Office) Augsburg (the Hauptzollamt), as requested by Soba, refrained from fixing a countervailing charge based on the minimum import price for the imported Morello cherries. However, by a later decision of 29 October 1986 the Hauptzollamt fixed a countervailing charge of DM 80.02 per 100 kg net weight of imported Morello cherries and demanded payment from Soba of a total of DM 1134138.17.
10. A complaint lodged by it was dismissed by the Hauptzollamt, whereupon Soba brought proceedings before the Finanzgericht Manchen (Finance Court, Munich).
11. Before that court, Soba essentially maintained that there was no justification for a countervailing charge since the import price of the Morello cherries exceeded the minimum price of ECU 67.10 fixed by Regulation No 1626/85. According to Soba, the FOB price on which the minimum impon price fixed by the regulation is based includes, according to trade usage and the Incoterms, the value of the normal packaging of the goods supplied. In its view, that interpretation is confirmed by Articles 3 and 8 of Regulation No 1224/80.
12. Considering that the outcome of the dispute depended on whether the cost of the containers and packing material made available by the buyer free of charge to the supplier should be included in the calculation of the import price under Regulation No 1626/85, the Finanzgericht, by order of 10 July 1990, stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling:
13. In the grounds of its order, the Finanzgericht expresses doubts as to the legality of the Hauptzollamts decision.
14. The Finanzgericht considers that, by virtue of Article 3(1) of Regulation No 1626/85, the import price is made up of the FOB price in the country of origin and the costs of transporting and insuring the goods as far as their point of entry into Community customs territory. The FOB price includes all costs incurred up to the time at which the goods are loaded onto the means of transport Consequently, the costs of containers and packing incurred prior to that time in principle form part of the FOB price.
15. The Finanzgericht considers that, in order to determine the FOB price, it is therefore irrelevant that those costs were invoiced to the buyer by the producer of the preserved fruit or by other undertakings entrusted with packaging: those costs cannot be excluded from the FOB price in the country of origin for the simple reason that the buyer did not incur them in the country of origin. The FOB price in the country of origin — the price free on board in the country of origin — includes all costs up to shipment in the country of origin incurred with a view to exportation. It is for that reason that the costs of containers and packing are also taken into account for post-clearance calculation of the import price on the basis of the resale price (Article 3(3) of Regulation No 1626/85).
16. The Finanzgericht also considers that that conclusion is not undermined by Commission Regulations (EEC) Nos 2237/85 of 30 Juli 1985 laying down detailed rules for the application of the minimum import price system for dried grapes (Official Journal 1985 L 209, p. 24) and 67/86 of 15 January 1986 on protective measures applicable to imports of provisionally preserved raspberries (Official Journal 1986 L 12, p. 13). According to the definition of FOB price in each of those provisions, the FOB price in the country of origin is the price paid or to be paid for the quantity of products contained in a consignment including the cost of placing the consignment on board a means of transport at the place of shipment in the country of origin and other costs incurred in that country. The costs of packing goods are incurred in the place where the goods are packed and in that regard it is irrelevant where the packing material came from and who paid for it. Similarly, the transaction value includes the costs of containers and packing material, even where the containers and related material have been made available free of charge to the seller of the goods. That is the only reasonable conclusion and the only one that conforms with the aim of the minimum price system, in so far as the costs relating to the containers and packing materials are in fact incurred by the buyer in the country of importation in respect of the imported product and are passed on in the resale price (see also Article 3(3) of Regulation (EEC) No 1626/85), so that the fact of their being taken into account cannot be detrimental to domestic competition, in particular where, as in the present case, the costs of packing were incurred in the domestic market.
III — Procedure before the Court
17. The order for reference was received at the Court Registry on 5 September 1990.
18. Pursuant to Article 20 of the Protocol on the Surute of the Court of Justice of the EEC, written observations were submitted by the Commission of the European Communities, represented by Ulrich Wölker, a member of its Legal Service.
19. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry and, pursuant to Article 95(1) and (2) of the Rules of Procedure, assigned the case to the Fourth Chamber. However, it asked the Commission to answer a number of questions.
IV — Written observations submitted to the Court
20. The Commission considers that the question submitted should be answered in the negative and that the countervailing charge was properly made.
21. According to the Commission, although the FOB price includes all costs up to loading of the goods on to the means of transport, those costs can be taken into account only if they have actually been borne by the seller. The Commission draws a distinction between the price and the value of the goods. The value covers the costs borne for any reason up to the date of loading of the goods in the country of origin regardless of who actually bears the costs. On the other hand, the price, as is apparent from Article 3(3) of Regulation No 1626/85, is the consideration actually paid for the costs borne by the seller and the price must therefore be based solely on the invoice drawn up by the seller for that purpose. According to the Commission, the FOB price represents the upper limit of what can be taken into account but does not automatically include everything which may appear on the seller's invoice in cases where the seller bore the costs in question.
22. According to the Commission, the reference to the resale price in Article 3(3) of Regulation No 1626/85 is not pertinent to the answer to be given to the question raised since if the authorities in the importing country establish that the packing costs cannot have been invoiced by the seller because, for example, the packing material was supplied to h free of charge by the buyer, they cannot take those costs into account when reconstituting the import price.
23. In the Commission's opinion, the reference to immediate packings in Article 1(1) of Regulation No 1626/85, which is exactly the same as the term used in the corresponding Common Customs Tariff heading, serves to identify the goods in question and does not mean that the packing must be taken into account in all cases in determining the price.
24. The Commission considers that the opposite interpretation based on Regulation No 1224/80 dos not influence the answer to be given to the question submitted since the value of the goods for customs purposes, within the meaning of Article 3(3) in conjunction with Article 8(l)(ii) and (iii) of that regulation, includes in all cases the costs of the containers and packing material. According to the Commission, Regulation No 1626/85 is a lex specialis for determination of the import price for the purposes of the protective measures and accordingly displays clear differences from Regulation No 1224/80. Whereas Article 3(1) of Regulation No 1626/85 refers solely to the FOB price of the goods, adding to it only the costs of transport and insurance, Article 3(1) of Regulation No 1224/80, which is also based on the price actually paid or payable (the transaction value) refers to the adjustment to be made in accordance with Article 8 of the same regulation, pursuant to which the costs of the containers and packing materials must be added to the price to the extent to which they are not included in the price actually paid or to be paid for the goods.
25. According to the Commission, the customs value is thus a wider concept than the FOB impon pńce (plus transport and insurance costs) and in every case covers the packing costs, even if they are not mentioned on the invoice. For the rest, Article 3(2) of Regulation No 1626/85 refers, according to the Commission, to the provisions concerning customs value solely for currency conversion, thus showing that those provisions are not of general application.
26. Finally, the Commission quotes the interpretative note 2/85 (VI/4681/85) annexed to its written observations, which shows that in the present case the costs of packing must not be taken into account. According to the Commission, that note, drawn up by its officials, was discussed within the relevant management committee in October 1985 and was brought to the attention of all the Member Sutes. The Hauptzollamt's decision was in conformity with that note.
27. The Commission proposes the following answer to the question submitted by the Finanzgericht Munchen:
V — Answers to the questions put to the Commission
28. The Commission was asked to answer the following questions:
29. The Commission answered the first question as follows:
30. The Commission replied as follows to the second question:
31. The Commission replied as follows to the third question:
1 Language of the case: German.