HvJ EU, 12-12-2013, nr. C-116/12

By its first two questions, which should be examined together, the national court asks in essence whether Articles 29 and 32 of the Customs Code must be interpreted as applying to the determination of the customs value of goods imported on the basis of a contract which, although described as a contract of sale, in fact proves to be a working or processing contract that does not satisfy the conditions laid down in Article 24 of that code, so that the goods concerned are regarded as coming from the country where the working or processing was carried out.

In order to respond to these questions, it is necessary, first, to determine whether Articles 29 and 32 of the Customs Code apply exclusively to sales contracts or whether working or processing contracts can also fall within the scope of those articles. Secondly, it is necessary to ascertain to what extent the determination of the origin of the goods in accordance with Article 24 of the Customs Code applies when determining the customs value in the light of Articles 29 and 32 of the Customs Code.

To begin with, it must be noted that the term ‘sale’ is not defined by the Customs Code and that the code makes no reference to the law of the Member States in order to determine the meaning and scope of that term.

According to settled case-law of the Court of Justice, the need for uniform application of European Union law and the principle of equality require that the terms of a provision of European Union law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the European Union; that interpretation must take into account the context of the provision and the purpose of the legislation in question (see, inter alia, Case C-287/98 Linster and Others [2000] ECR I-6917, paragraph 43, and Case C-40/01 Ansul [2003] ECR I-2439, paragraph 26).

Therefore, the term ‘sale’ in Article 29(1) of the Customs Code is a concept of European Union law and must be interpreted in the light of the purpose of the rules in question and the context of that article.

As regards the purpose, according to settled case-law, the objective of the European Union legislation on customs valuation is to introduce a fair, uniform and neutral system excluding the use of arbitrary or fictitious customs values (Case C-11/89 Unifert [1990] ECR I-2275, paragraph 35; Case C-15/99Sommer [2000] ECR I-8989, paragraph 25; and Case C-306/04 Compaq Computer International Corporation [2006] ECR I-10991, paragraph 30).

As regards, the context of Article 29 of the Customs Code, it is important to bear in mind the system laid down by that code for determining the customs value of imported goods.

Thus, by virtue of Article 29, the customs value of imported goods is the transaction value, that is to say, the price actually paid or payable for the goods when they are sold for export to the customs territory of the European Union, adjusted, where necessary, in accordance with Articles 32 and 33 of that code.

In that regard the Court has held that, if as a general rule the price actually paid or payable for the goods forms the basis for calculating the customs value (see, to that effect, Sommer, paragraph 22), that price is a factor that potentially must be adjusted where necessary in order to avoid the setting of an arbitrary or fictitious customs value (Case C-256/07 Mitsui & Co. Deutschland I-1951, paragraph 24).

The transaction value must reflect the real economic value of imported goods and take into account all the elements of those goods that have economic value (see Compaq Computer International Corporation, paragraph 30, and Case C-354/09 Gaston Schul [2010] ECR I-7449, paragraph 29 and the case-law cited).

However, where the customs value cannot be determined by the transaction value of the imported goods in accordance with Article 29 of the Customs Code, the customs valuation is to be carried out in accordance with the provisions of Article 30 of that code by applying sequentially the methods laid down in subparagraphs (a), (b), (c) and (d) of paragraph 2 of that article.

If it is no longer possible to determine the customs value of the imported goods on the basis of Article 130 of the Customs Code, the customs valuation is to be carried out in accordance with the provisions under Article 31.

Consequently, it is clear, both from the wording of Articles 29 to 31 of the Customs Code and from the order in which the criteria for determining the customs value must be applied pursuant to those articles, that those provisions are subordinately linked to each other. Thus, when the customs value cannot be determined by applying a given provision, only then is it appropriate to refer to the provision which comes immediately after it in the established order.

Since, for the purposes of the customs valuation, priority is to be given to the transaction value in accordance with Article 29 of the Customs Code, that method of determining the customs value is assumed to be the most appropriate and the most frequently used.

In order to maintain that priority, it is necessary to interpret the term ‘sale’ in Article 29(1) broadly.

Accordingly, the issue whether the contractual relationship between the buyer and the seller must be qualified as a contract of sale or whether it merely falls within a contract for working or processing the imported goods is not relevant since the working or processing operations, as appropriate, are carried out with no charge to the buyer in favour of the seller.

That interpretation is moreover supported by the provisions of Article 32 of the Customs Code, which stipulate the elements that must be added to the price actually paid or payable for the imported goods in order to determine their customs value.

In that regard, Article 32, in particular paragraph 1(b)(i), requires the value of certain products supplied 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 be added to the price actually paid or payable in so far as that value has not been included in that price.

Thus, Article 32 refers expressly to a situation such as that at issue in the main proceedings. Indeed, it is common ground that the two basic elements, that is to say, concentrated orange juice and white sugar, were made available to Agrima free of charge and that the price charged for each import represented only the cost relating to the mixing of the two basic elements.

In those circumstances, the customs value of the goods is, in accordance with Article 29 of the Customs Code, the price actually paid for those goods, subject to adjustments having to be made in accordance with Article 32.

It follows from the foregoing considerations that Articles 29 and 32 of the Customs Code must be interpreted as applying to the determination of the customs value of goods imported on the basis of a contract which, although described as a contract of sale, in fact proves to be a working or processing contract.

Secondly, as regards the determination of the origin of the goods, under Article 24 of the Customs Code, an item in whose production two or more countries are involved originates in the country where the last significant processing or working, economically justified and carried out in an enterprise equipped for this purpose and leading to the manufacture of a new product or representing an important stage of manufacture, takes place.

In that regard, the Court has held that the last processing or working is substantial only if the resulting product has its own properties and a composition of its own, which it did not possess before that process or operation (Case 49/76 Gesellschaft für Überseehandel [1977] ECR 41, paragraph 6).

Ascertaining in which country the imported goods underwent, as the case may be, substantial processing or working, within the meaning of Article 24 of the Customs Code, is not decisive where the customs value of those goods is the transaction value for the purposes of Article 29, since, as is clear from paragraphs 37 to 39 above, that value is to be determined in accordance with the criterion based on the real economic value of the goods, taking into account the various elements that make up those goods.

Consequently, when the customs value of the imported goods on the basis of a working or processing contract is determined, it is immaterial whether the working or processing operations satisfy the conditions laid down in Article 24 of the Customs Code, so that those goods may be regarded as originating in the country in which the operations took place.

On the other hand, it must be noted that the concept of the origin of goods can have an effect on the export refund system. Thus, as regards Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p. 1), the Court has previously ruled that, under the first paragraph of Article 5(1) of that regulation, payment of the refund is to be conditional not only on the product having left the customs territory of the European Union but also on its having been imported into a non-member country (Case C-218/09 SGS Belgium and Others [2010] ECR I-2373, paragraph 40).

Indeed, the purpose of Article 5(1) is to prevent abuses which, in the case referred to in Article 5(1)(b) of that regulation, consist in, inter alia, the risk that the exported product may be re-introduced into the European Union (Case C-114/99 Roquette Frères [2000] ECR I-8823, paragraph 17)

Such an abuse cannot exist where the product in question has undergone substantial and irreversible processing, as a result of which it has ceased to exist as such, and a new product, coming under a different tariff heading, has been created (Roquette Frères, paragraph 19, and Case C-515/03 Eichsfelder Schlachtbetrieb [2005] ECR I-7355, paragraph 31).

That interpretation is moreover supported by Article 20(1) of Regulation No 800/1999, in accordance with which the refund is regarded as unwarranted, in particular if the product is reimported into the European Union without having undergone substantial working or processing within the meaning of Article 24 of the Customs Code (Roquette Frères, paragraph 20, and Eichsfelder Schlachtbetrieb, paragraph 32).

In the light of all of the foregoing considerations, the answer to the first and second questions is that Articles 29 and 32 of the Customs Code must be interpreted as applying to the determination of the customs value of goods imported on the basis of a contract which, although described as a contract of sale, in fact proves to be a working or processing contract. For the purposes of that determination, it is immaterial whether the working or processing operations satisfy the conditions laid down in Article 24 of that code, so that the goods concerned may be regarded as originating in the country where those operations took place.

By its third and fourth questions, which should also be examined together, the national court, for the purposes of determining the customs value in accordance with Articles 29 and 32 of the Customs Code, essentially seeks to ascertain the value of goods which have benefited from an export refund that was obtained by the implementation of a practice involving the application of provisions of European Union law with the aim of wrongfully securing an advantage.

In this case, it is common ground that the applicants, under cover of a permanent export and allegedly substantial processing, intended to hide the fact that the goods were in fact inwardly processed. By dint of that practice, they circumvented the application of Article 146(1) of the Customs Code, under which goods giving rise to the granting of export refunds cannot be open to the outward processing procedure.

It is settled case-law that the scope of European Union regulations must not be extended to cover abuses on the part of a trader (Case 125/76 Cremer [1977] ECR 1593, paragraph 21, and Case C-279/05 Vonk Dairy Products [2007] ECR I-239, paragraph 31).

A finding of abuse requires, first, a combination of objective circumstances in which, despite formal observance of the conditions laid down by the European Union rules, the purpose of those rules has not been achieved. Secondly, it requires a subjective element consisting in the intention to obtain an advantage from those European Union rules by creating artificially the conditions laid down for obtaining it. The existence of that subjective element can be established by, inter alia, evidence of collusion between the European Union exporter receiving the refunds and the importer of the goods in the non-member country (Case C-110/99 Emsland-Stärke [2000] ECR I-11569, paragraphs 52 and 53, and Eichsfelder Schlachtbetrieb, paragraph 39).

It is for the national court to establish the existence of those two elements, evidence of which must be adduced in accordance with the rules of national law, provided that the effectiveness of European Union law is not thereby undermined (Emsland-Stärke, paragraph 54).

As regards the conclusions to be drawn from the finding of such irregularity, Article 4(3) of Regulation No 2988/95, which is general in scope, states that ‘[a]cts which are established to have as their purpose the obtaining of an advantage contrary to the objectives of the Community law applicable in the case by artificially creating the conditions required for obtaining that advantage shall result, as the case shall be, either in failure to obtain the advantage or in its withdrawal’ (Case C-158/08 Pometon [2009] ECR I-4695, paragraph 27).

In that regard, the Court has previously held that the obligation to give back an advantage improperly received by means of an irregular practice does not constitute a penalty, but is simply the consequence of a finding that the conditions required to obtain the advantage derived from the European Union rules were created artificially, thereby rendering the advantage received a payment that was not due and thus justifying the obligation to repay it (see, to that effect, Emsland-Stärke, paragraph 56, and Pometon, paragraph 28).

Thus, an importer who has artificially placed himself in a situation making him eligible for export refunds is obliged to pay the duties on the products concerned, without prejudice, where appropriate, to administrative, civil or criminal penalties provided for by national law.

It follows that the determination of the transaction value in accordance with Articles 29 and 32 of the Customs Code necessarily takes into account the export refund which the exporter wrongfully benefited from by artificially creating the conditions required to obtain that advantage.

Having regard to all the foregoing considerations, the answer to the third and fourth questions is that Articles 29 and 32 of the Customs Code must be interpreted as meaning that, when the customs value is determined, account must be taken of the value of the export refund which a product has benefited from and which was obtained by putting into effect a practice involving the application of provisions of European Union law with the aim of wrongfully securing an advantage.