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FREE MOVEMENT OF GOODS
European Studies Program (CUESP)
School of Law
Sukhothai Thammathirat Open University
To Dream The Impossible Dream:
Free Movement of Goods within EU Saravuth Pitiyasak
European Union(EU), formerly called European Economic Community(EEC) or European Common Market, came into existence on March 25, 1957 at the conclusion of the Treaty of Rome or EEC Treaty or latterly called EC Treaty . The main objective of this Treaty was to promote a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of standard of living and closer relations between the states belonging to it. The principal means of achieving this objective is to establish a Common Market by allowing goods to move freely within EU States. This free movement of goods will promote efficiency in production because it will permit producers in different countries to compete directly with each other. To follow this free movement of goods notion, it is necessary to remove all internal trade barriers; physical, technical and fiscal barriers, which create discriminatory restrictions, between EU States. As a result, all EU Member States must refrain from imposing all kinds of trade restrictions on imports, exports or goods in transit between themselves.
However, although it has been nearly half century since the creation of the EC Treaty, its free movement of goods notion is still on the way of journey. It has not yet reached the star. The goods still could not enjoy true freedom to move within the European Community. There are two obstacles which impede the free movement of goods. The first obstacle is the interpretation of the European Court of Justice (the ECJ) on the general provisions concerning free movement of goods in the EC Treaty, especially on the general provisions of technical barriers under Article 28(formerly 30) and Article 29(formerly 34). The second obstacle is the exceptions to the general provisions of Articles 28(formerly 30) and 29(formerly 34) based on Article 30(formerly 36) and the mandatory requirements arising from the ECJ in the Cassis de Dijon.
In this research, Part I will touch upon the history and background of the European Integration. Part II will examine the interpretation of the ECJ on the general provisions of the free movement of goods in the EC Treaty. Part III will analyze Article 30(formerly 36) and the Cassis de Dijon case which provide the exceptions to the general provisions of Articles 28(formerly 30) and 29(formerly 34) under the EC Treaty. Finally, Part IV will be the conclusion and some comments.
I. History and Background of European Integration
In 1957, the six original Member States (France, Germany, Italy, Belgium, the Netherlands and Luxembourg) agreed to sign the Treaty of Rome establishing the European Economic Community. After that, there were nine countries joining the Community in four times. The United Kingdom, Denmark and the Ireland joined the Community in 1973. Greece acceded to the Community in 1981. Spain and Portugal joined the Community in 1986. Austria, Finland and Sweden became members of the Community in 1995. Therefore, at present the Community numbers 15 members.
The Treaty of Rome has been revised three times. The first time was in 1986 by the Single European Act with its objective to create the internal market by December 31, 1992. To reach this objective, there were some requirements of removing many conflicting domestic laws and creating European laws. Fortunately, it was succeeded.
The second time was in 1992 by the Maastricht Treaty or a Treaty on European Union(TEU) with its notion to create a New European Union. It has transformed the European Economic Community into the European Community. This can imply that the Community is now concerned not only trade but also social matters. The name of European Union(EU) has begun to appear to the international community since then. Basically, the European Union is based on three pillars. The first is the cooperation of Member States within the Community. The second is the Common Foreign and Security Policy. The third is the Common Home Affairs and Justice Policy.
The third time was in 1997 by the Treaty of Amsterdam(ToA). ToA has been renumbering some old Articles, repealing some useless Articles and introducing some new Articles . Presently, one of the most interesting issue is the entry of 11 EU Member States into the third stage of Economic and Monetary Union(EMU) on January 1, 1999.
II. The Interpretation of the ECJ on the General Provisions of Free
Movement of Goods in the EC Treaty
A. The Background
As mentioned earlier, the objective of the European Community is to establish a Common Market which is built on a Customs Union. The first basic concept of a customs unions is the free movement of goods produced in Member States. Goods produced in one Member States should be able to move freely in all Member States without the payment of custom duties. The second is the common customs duties. If goods produced in third countries are imported into any Member States, they are subject to the payment of the common customs duties. The third is the free movement of goods from a third country. Once goods are imported into a Member State, they must be allowed to move freely in all other Member States without the payment of any further customs duties.
Thus, the free movement of goods notion is based very much on the concept of a Customs Union. It is not the end in itself, but it is rather the means to reach the end, so called a Common Market. This free movement of goods notion goes beyond the concept of Free Trade Area because it is the creation of Common Market which establishes the common external customs tariffs and abolishes the internal customs duties and other forms of trade restrictions for goods coming from one Member State to another.
B. The General Provisions of the Free Movement of Goods in the EC Treaty
The free movement of goods is the cornerstone of the European Community and appears at the heart of the EC Treaty. It is the important pillar of the internal market in which Article 14(formerly 7A) of the EC Treaty defines as:
The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.
Article 14(formerly 7A) provides the legal basis for the creation of internal market within the European Community. To create the internal market, it is required to remove internal barriers to allow goods(as well as persons, services and capital) to move freely within the Community. Barriers to free movement of goods can be divided into three categories. They are physical barriers, technical barriers and fiscal barriers. Physical barriers involve the stopping and checking system to monitor goods passing the national borders. Fiscal barriers are tariffs and other indirect taxes imposed on exports, imports, or goods in transit. Technical barriers are quantitative restrictions or measure having a equivalent effect to quantitative restrictions which impede the free movement of goods. The common examples of technical barriers are national law and regulations for marketing goods and standard measures to protection public health and safety. Of all three barriers, technical barriers seems to be the most significant barriers because they cause the real obstacles to free movement of goods and the creation of the internal market. Thus, this research will mainly focus on technical barriers and will touch upon the others when necessary.
According to the EC Treaty, the free movement of goods provisions can be broken down into four groups.
(1). Articles 23(formerly 9) and 24(formerly 10): The rights of goods produced in a Member State and from a third country to move freely with the Community
Article 23(1)(formerly 9(1)) provides: The Community shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.
According to Article 23(1)(formerly 9(1)), the European Community shall be based upon a customs union. This union shall cover all trade in goods and shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect. There are two important aspects arising from this Article.
(1.1). The meanings of "goods"
In Art Treasures case, Commission v. Italy , the facts were that the Italian Government prohibited the exportation of art treasures(articles of artistic, historic, archaeological or ethnographic nature) and claimed that the art treasures did not constitute "goods". The ECJ defined goods as "products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions." Therefore, art treasures fell within the meaning of "goods" under Article 9(1)(now 23(1)). The ECJ also extended this definition in a few cases.
In Region of Wallonia case, Commission v. Belgium , the facts were that Belgium prohibited the importation of waste and contended that waste did not constitute "goods" if it could not be recycled or reused because they have no commercial value. The ECJ rejected this submission and held that all waste was to be regarded as goods.
In Almelo v. Energiebedriff Ijsselmij case , the ECJ made it clear that electricity constituted "goods". However, the ECJ did not come up with the conclusion that all intangibles constituted "goods".
(1.2). The application of the free movement of goods provisions
The free movement of goods provisions within EC Treaty should apply to all types of movements of goods.
First and basically, they apply to movement of goods from one Member State to be sold in another Member State.
Secondly, they apply to movement of goods in transit through one Member State to be sold in another Member State or outside the European Community.
In SIOT v. Ministry of Finance case , the ECJ confirmed that the freedom of transit within the Community constituted a general principle of Community Legislation.
Thirdly, they apply to reimportation of goods which are imported from one Member State to another, where they were produced or put on the market.
Fourthly, they apply to parallel imports.
Fifly, they apply to movement of goods by individuals.
In GB-Inno-BM v. Confederation du Commerce Luxembourgeois case , the ECJ confirmed that free movement of goods concerned not only traders but also individuals by holding that it requires, particularly in frontier areas, that consumers resident in one Member State may travel freely to the territory of another member State to shop under the same conditions as the local population.
In Schumacher v. Hauptzollamt Frankfurt Am Main case , the facts were that the Customs Office in German rejected the importation of personal medicines from France by Mr.Schumacher. The ECJ held that the German law was inconsistent with Article 30(now 28) because a general prohibition of individuals imports was not justified.
Finally, they apply to movement of goods involving no commercial transactions. It was confirmed by the ECJ in the waste disposal case, Commission v. Belgium.
Article 24(formerly 10) of the EC Treaty recognizes the third concept of a Customs Union or the free movement of goods from a third country by providing:
Products coming from a third country shall be considered to be in free circulation in a Member State if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in that Member State, and if they have not benefited from a total or partial drawback of such duties or charges.
According to Article 24(formerly 10), goods from a third country shall be freely moved within the Member States if three conditions are met. First, goods have been passed the import formalities. Secondly, goods have been paid in Import Member States any customs duties or charges having equivalent. Finally, the goods must not have benefited from a total of partial drawback of such duties or charges.
Example Company A in France imports Tuna cans from Thailand and has already paid the common customs duties in France. If Company A wants to export these tuna cans to Germany, it will have the freedom to do so without paying any other customs duties because both France and Germany are the Member States of European Union.
(2). Article 25(formerly 12): The abolition of customs duties and charges having equivalent effect
Article 25(formerly 12) of the EC Treaty deals with customs duties. It aims to abolish customs duties and charges having equivalent effect.
Article 25(formerly 12) provides:
Member States shall refrain from introducing between themselves any new customs duties on imports or exports or any charges having equivalent effect, and from increasing those which they already apply in their trade with each other.
According to Article 25(formerly 12), it prohibits the introduction of new customs duties or charges having equivalent effect, and equally prohibits the increase of those which are already in existence. This prohibition applies both to imports and exports. The impact of this Article was enhanced by the ECJ in the following cases.
In Van Gend en Loos case, Van Gend en Loos v. Nederlandse Administratie der Belastingen , the ECJ held that Article 12(now 25) had direct effect (the principle that Community legislation must be applied by national courts as the law of the land) and created individual rights which national courts must protect. Therefore, individuals could invoke Article 12(now 25) before national courts.
In Sociall Fonds voor der Diamantarbeiders v. Brachfeld & Chougol Diamond Co case , the facts were that the Belgian authorities imposed a duty on diamonds to raise money for Belgian diamond workers. The ECJ held that customs duties are prohibited independently of any consideration of the purpose for which they were introduced and the destination of the revenue obtained therefrom. Therefore, the duty came within Article 12(now 25) and was prohibited.
In Re Statistical Levy case, Commission v. Italy , even though there was no definition of charges having an equivalent effect in the EC Treaty, the ECJ defined this term as "any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic and foreign goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge ... even if it is not imposed for the benefit of the state, is not discriminatory or protective in effect and if the product on which the charge is imposed is not in competition with any domestic product."
However, the problematic cases concerning charges having a equivalent effect are these two following cases.
In Re: Storage Charges case, Commission v. Belgium, the facts were the Belgian authorities imposed charges on the goods undergone customs clearance in a warehouse. The ECJ held that charges for customs clearance constitutes charges having an equivalent effect if they are imposed solely in connection with the completion of customs formalities.
In Re: Animals Inspection Fees case, Commission v. Germany , the facts were that German imposed charges covering actual costs incurred in maintaining the inspection facilities. The ECJ held that the fee does not exceed the actual costs incurred as a consequence of the inspections. The inspections themselves are prescribed by European law and have the objective of promoting the free movement of goods. Hence, imposing charges genuinely incurred for such services do not amount to charges having equivalent effect to customs duties.
According to the two ECJ judgments above, charges made for services authorized by the Community legislation may not constitute charges having a equivalent effect to customs duties if they have met the following conditions.
1. The charges do not exceed the actual cost of the services.
2. The services are required by Community legislation.
3. The services promote the free movement of goods.
4. The charges must not be imposed solely in connection with the completion of custom formalities.
(3). Article 90(formerly 95): The abolition of measures of discriminatory domestic taxation
Article 90(formerly 95) provides:
No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
According to Article 90(formerly 95), internal taxation may not be discriminatory imposed between domestic products and imports. This covers not only the finished products but also the raw materials or components of such products.
In Re Tax on Beer and Wine case, Commission v. United Kingdom , the facts were that the United Kingdom maintained different levels of internal taxation on wine and beer. The ECJ held that wine and beer were similar and that the differential in taxation amounted to the discrimination contrary to Article 95(now 90).
(4). Articles 28(formerly 30) and 29(formerly 34): The elimination of quantitative restrictions and measures having an equivalent effect to quantitative restrictions
Articles 28(formerly 30) and 29(formerly 34) deals with the prohibition of quantitative restrictions and measures having an equivalent effect to quantitative restrictions on imports and exports. They are the central provisions of the free movement of goods under the ECJ because they deal with the elimination of technical barriers which are the most dangerous to free movement of goods notion.
Article 28(formerly 30) provides: Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States.
Article 29(formerly 34) provides: Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States.
According to Articles 28(formerly 30) and 29(formerly 34), they lay down the basic prohibition on quantitative restrictions on imports and exports respectively. Member States are prohibited to impose quantitative restrictions and all measures having equivalent effect on imports and exports between themselves.
(4.1). Quantitative Restrictions
The ECJ has decided the meaning of quantitative restrictions in the following cases.
In Riseria Luigi eddo v. Ente Nationale Risi case , in defining the meaning of quantitative restrictions, the ECJ stated that the prohibition on quantitative restrictions covers measures which amount to a total or partial restraint of, according to the circumstances, imports, exports or goods in transit. Therefore, the concept of quantitative restrictions covers not only quotas which appears in Articles 32 and 33(now repealed by the ToA), but also the total or complete bans on imports or exports.
In Import of Lamb case , Commission v. France and Import of Potatoes case , Commission v. UK, the ECJ held that the most obvious examples of quantitative restrictions on imports and exports are complete bans or quotas restricting the import or export of a given product by amount or by value.
(4.2). Measures having an equivalent effect to Quantitative Restrictions
Measures having an equivalent effect to quantitative restrictions mean laws, regulations, administrative provisions, administrative practices, and all instruments issuing from a public authority including recommendation which have similar effect to quantitative restrictions. However, the ECJ has also clarified the concept of measures having equivalent effect to quantitative restrictions in the cases below.
In Procureur du Roi v. Dassonville case , the facts were that a trader imported Scotch whisky, produced in England, from France into Belgium. The Belgium laws required a certificate of origin which could only be obtained from British customs. The trader claimed that the requirement of a certificate of origin in these circumstances was equal to a measure having an effect equivalent to a quantitative restriction and therefore was prohibited by Article 30(now 28). The ECJ defined the meaning of a measure having an effect equivalent to a quantitative restriction as all trading rules enacted by Member State which are capable of hindering directly or indirectly, actually or potentially, intra-Community trade and held that the requirement of a certificate of authenticity, which is less easily obtainable by importers of an authentic product than importers of a product in free circulation, constitutes a prohibited measure of equivalent effect to a quantitative restriction as prohibited by the Treaty. Therefore, Belgium laws violated Article 30(now 28).
In Re Buy Irish Campaign case, Commission v. Ireland , the facts were that Irish government sponsored advertising campaign. The ECJ held that the campaign was designed to substitute domestic products for imports, therefore, the Irish Government violated Articles 30(now 28).
In Cinetheque SA v. Federation Nationale des Cinemas Francais case , the facts were that French law banned for sale of rental of videos of films during the first year in which the film was shown. This law applied equally to domestic and imported videos. The video-cassette distributors challenged the law as a violation of Article 30(now 28). The ECJ held that Article 30(now 28) of the EEC Treaty must be interpreted as meaning that it does not apply to national legislation which regulates the distribution of cinematographic works by imposing an interval between one mode of distributing such works and another by prohibiting their simultaneous exploitation in cinemas and in video-cassette form for a limited period, provided that the prohibition applies to domestically produced and imported cassettes alike and any barriers to intra-Community trade to which its implementation may give rise do not exceed what is necessary for ensuring that the exploitation in cinemas of cinematographic works of all origins retains priority over other means of distribution.