JUDGMENT OF 4. 12. 1980 — CASE 54/80 PROCUREUR DE LA RÉPUBLIQUE v WILNER

In Case 54/80 REFERENCE to the Court under Article 177 of the EEC Treaty by the Juge d'Instruction [Examining Magistrate] at the Tribunal de Grande Instance [Regional Court], Paris, for a preliminary ruling in the proceedings brought before his office by the

THE COURT (Second Chamber) composed of: P. Pescatore, President of Chamber, A. Touffait and O. Due, Judges, Advocate General: F. Capotorti Registrar: J. A. Pompe, Deputy Registrar

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and procedure

Between 10 March 1972 and 7 March 1974 Victory France SA, a company having its registered office at 30 Rue Etienne Marcel, Paris 2ème, which has as its Chairman and Managing Director Mr Samuel Wilner and as its objects, in particular, the importation of secondhand fabrics, clothing and household linen, imported from the United States of America goods having a total declared value of US$ 1520093.39.

The French customs authorities maintain that on importation Victory France SA marked up the value by the sum of FF 3965540. For that reason, they rejected the invoices from the American exporter (Victory Jobbing House, the Director of which is Mr Henry Wilner, a brother of Samuel Wilner), even though the amount of the invoices was actually paid by the French importer and received by the said exporter, regard being had to the fact that the invoices were made out in France by the importer, Victory France SA. In order to determine the “normal price”, the customs authorities refer exclusively to the export declaration made by the American forwarding agent, Dorf International Limited, when the goods left the United States even though that declaration was not accompanied by any document emanating from Victory Jobbing House. They adopt only the value indicated by the forwarding agent, emphasizing that he had approved the printed words stating all the information contained in the declaration to be “true and correct”. Consequently, the customs authorities charge the accused in the main proceedings with a twofold offence :

In terms of customs law: uttering false declarations of value, perpetrated with the assistance of forged documents, and the marking-up of value on importation;

In terms of exchange-control law: the making of irregular payments by means of transfers to the United States under cover of markups in value.

The accused in the main proceedings challenged this interpretation and contended, first, on the basis of a statement provided by the forwarding agent, that the goods dispatched, being second-class or substandard, had been declared as rags, which allowed a more favourable freight rate to be obtained; secondly, that, as the New York Chamber of Commerce and Industry had confirmed, the declaration made in the United States was required only to permit statistics to be kept and not for levying duties or charges; thirdly, that the invoice prices, although higher than the value indicated by the forwarding agent on export from the United States, were clearly lower than the average values declared for similar goods by all French importers and that this precluded any accusation of marking up the value.

The customs authorities and Mr Wilner were at one in submitting that an interpretation of Regulation No 803/68 should be sought from the Court of Justice and the Juge d'Instruction therefore submitted the following question:

“Under Regulation (EEC) No 803/68 of 27 June 1968 on the valuation of goods for customs purposes, may the normal price of goods originating in and coming from the United States of America, which must be taken as the value to be declared on importation into France, be equal to the value of those same goods declared by the forwarding agent of the seller to the customs authorities of the country of origin, even if that value, which is much lower than the price paid by the French buyer and received by the American seller, is not based upon any accounting document (such as an invoice accompanying the goods) and even if that value is, moreover, lower than the normal price for the same goods agreed between a buyer and a seller under conditions of free competition?”

The order making the reference was received at the Court Registry on 12 February 1980. In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were lodged on 21 April 1980 by the Commission, represented for these purposes by Mr Beschel, acting as Agent, assisted by F. Herbert, of the Brussels Bar.

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.

By order of 4 June 1980 the Court, pursuant to Article 95 (1) of the Rules of Procedure, decided to assign the case to the Second Chamber.

II — Observations lodged pursuant to Article 20 of the Protocol on the Statute of the Court of Justice

Observations of the Commission

The Commission states in limine that it considers the question submitted by the magistrate to be ambiguous inasmuch as, having regard to the case-law of the Court, “the value for customs purposes is the normal price” and there can therefore be no question of ascertaining whether the normal price is equal to the value declared by the American forwarding agent. In its opinion, the question put is concerned “more with the relationship between the various methods of calculating the normal price” and it consequently suggests that the question be reformulated as follows:

“Does Regulation No 803/68 permit the competent authorities of a Member State to set aside the value declared on the basis of the invoiced price (the price paid or payable within the meaning of Article 9) and to take a value for customs purposes which is much lower than the price invoiced and paid by the French buyer and received by the American seller where the value taken is based on a declaration made by the seller's forwarding agent to the customs authorities of the country of origin but not on any accounting document (such as an invoice accompanying the goods) and where, moreover, the declared value is less than the normal price of the same goods agreed between a buyer and a seller under conditions of free competition (such as appears from the average values declared by all French importers for similar goods) ?”

In regard to the offence of fraudulently exporting capital, the Commission considers that a national legislature may have resort, in the context of legislation other than customs legislation, to the concept of value for customs purposes, but such a reference cannot affect the Community provisions governing the uniform interpretation and application of the Common Customs Tariff.

On the question whether customs authorities may reduce a value which corresponds to the price invoiced and paid by the importer to the exporter, the Commission, which lodged its observations before the judgment in Case 65/79 Châtain was given by the Court, recalls that both the Member States which lodged observations (the Federal Republic of Germany, the United Kingdom, France and the Netherlands) and Mr Advocate General Capotorti answered that question in the affirmative and the Commission accordingly submits that “the determination of value for customs purposes may also be effected by a reduction of the declared value”.

In regard to the question whether an administrative authority may, with a view to setting aside the declared value, proceed upon an export declaration where the purpose of the declaration is purely statistical and the value shown in it is not confirmed by any accounting document, the Commission recalls that although the Court has stated that, in principle, it is the price paid or payable which is the best guide to the normal price forming the basis of the value for customs purposes (see judgment of 10 December 1970 in Case 27/70 Edding [1970] ECR 1045), it has also confirmed that the possibility allowed by Article 9 of Regulation No 803/68 of accepting the price paid or payable as the value for customs purposes in no way precludes recourse to other methods of calculating the normal price (see Case 111/79, Caterpillar [1980] ECR 773) and it referred to two methods: the deductive method and the comparative method.

The Commission recalls first that, as was pointed out by Mr Advocate General Capotorti in his opinion in Case 65/79 Châtain, the invoice price can only be set aside in the rare cases where there are reasons for thinking that the invoice price “differs considerably from the normal price” and that the fact that conditions of free competition do not obtain — where, as in the present case, the managers of the companies involved are brothers — is not sufficient to displace the price invoiced and paid since it appears from Articles 2 and 9 of Regulation No 803/68 that the requirement is concerned with the correspondence between the invoice price and the price under conditions of free competition without its being strictly necessary that a situation of free competition should exist between the buyer and the seller.

But, since Article 2 (1) of Regulation No 803/68 stipulates that for a sale to be assimilated to a sale transacted in conditions of free competition presupposes that “the price is not influenced by any commercial, financial or other relationship”, the Court of Justice states in the aforementioned Caterpillar judgment that such an influence “may also arise from a comparison made with the price of identical or similar goods paid by any buyer operating in the territory of importation” and thus referred to the comparative method. The Court also held in the same judgment that it is in accordance with Regulation No 803/68 to calculate the value for customs purposes on the basis of the price at which the goods are resold in an unaltered state after deduction of all the costs incurred by the buyer-reseller and, where necessary, an appropriate profit margin, thus referring to the deductive method.

The Commission is of the view that in the present case that latter method is the more appropriate one because there would be difficulties in using the comparative method since second-class or used merchandise is involved. That is confirmed by the information provided in the Juge d'Instruction's file, whence it appears that although the prices invoiced and paid by the importer are less than the average values declared for similar merchandises by the entirety of French importers, the reason might “lie in the inferior quality of the imported products which is. recognized in the customs documents attached to the file”.

In conclusion, the Commission suggests the following answer to the question raised :

“To the extent to which both the method based on the price paid, account being taken of the adjustments provided for in Article 9 (2) of Regulation No 803/68, and that based on comparison with the price of identical or similar goods indicate that there has been no markup in value as compared with the price under conditions of free competition, recourse, with a view to setting aside the invoiced price, to declarations emanating neither from the seller nor from the buyer, which were made outside the Community customs territory for statistical purposes, which are not supported by any accounting document and which appear to have had the purpose of obtaining favourable freight rates cannot constitute a proper application of the principles of assessment of value for customs purposes contained in the provisions of Community law.”

III — Oral procedure

At the hearing on 8 September 1980 Mr Abensour appeared for the accused in the main proceedings and Mr Herbert and Mr Beschel appeared for the Commission.

The accused in the main proceedings recalls first that the particular feature of this case lies in the fact that the offence in respect of which he is being prosecuted is based on an interpretation, which is, moreover, disputed, which the French customs authorities give to Regulation No 803/68 on value for customs purposes.

Turning thereafter to the facts, the accused submits first that the fact that the Chairman and Managing Director of the French company is the brother of a member of the board of the American company “cannot have any effect on the value to be declared”; secondly, that the export declarations subscribed by the American forwarding agent on dispatch of the goods “without the production of any sales invoice and without any special instruction from the consignor cannot have any effect either on the value to be declared”; thirdly, that the fact that the seller placed trust in the purchaser and permitted him to make out the invoices bearing the seller's billhead by entering the price after a prior telephonic agreement “does not amount either to a factor capable of casting the slightest doubt on the genuineness of the price”; and fourthly, that by proving that the values declared were the subject of actual transfers of funds to the credit of the seller and that Victory France purchased those goods at a price lower than that of other French importers he has destroyed the customs authorities' arguments.

Consequently, the accused in the main proceedings asks “the Court of Justice to express the view that in the present case Mr Samuel Wilner cannot be accused of making any markup in value”.

Finally, fearing that the Court may declare that “there are no grounds for proceeding to judgment” the accused in the main proceedings expresses the desire that, as in the Donckerwolcke case the Court “should go further” and rule “that these facts cannot be accepted”.

The Commission, recalling that the judgment in the Châtain case was delivered after the lodging of its written observations, asks the Court no longer to have regard to the answer which the Commission has suggested and proposes that the Court give a reply “along the same lines as the operative part of the Châtain judgment”.

According to the Commission, the question has in fact two aspects. The first, which is not expressly raised, is concerned with a question of principle, namely: may the value for customs purposes be reduced? The second, which emerges expressly from the question submitted, relates to the method of establishing the value for customs purposes, that is to say the normal price, and is consequently more concerned with the Caterpillar judgment.

Since the purpose of Article 177 is “to provide the court making the reference with a practicable answer to the issue with which it is faced” the Commission suggests that the Court should consider only the question of principle and adopt the line or argument put forward in the Châtain judgment.

As regards the fears of the accused in the main proceedings, the Commission is of the view, first, that the Court ought to give an answer to the Juge d'Instruction at the Tribunal de Grande Instance, Paris, but that, on the other hand, it ought to confine itself to an answer related to Regulation No 803/68 without considering “the position under legislation intervening in the fiscal or financial field”.

Finally, the Commission draws the Court's attention to one point of fact: according to the accused in the main proceedings, the value declared is less than the average price and logically it would therefore be necessary to increase that value instead of reducing it but the Commission questions whether identical or similar goods are truly involved, in which event the price difference would be explicable.

The Advocate General delivered his opinion at the sitting on 16 October 1980.

Decision

1. By order of 31 January 1980, which was received at the Court on 12 February 1980, the Juge d'Instruction [Examining Magistrate] at the Tribunal de Grande Instance, Paris, submitted for a preliminary ruling under Article 177 of the EEC Treaty a question on the intepretation of Regulation No 803/68 of the Council of 27 June 1968 on the valuation of goods for customs purposes (Official Journal, English Special Edition 1968 (I), p. 170).

2. This question has been raised in the context of a criminal investigation against the Chairman and Managing Director of Victory France SA, who is accused of having declared to the customs, at a value in excess of the normal price, goods bought from Victory Jobbing House, a company incorporated in the United States of America, the director of which is the brother of the Chairman and Managing Director of Victory France. The purchases in dispute are spread over the period between 10 March 1972 and 7 March 1974 and amount to a sum of US$ 1520093.39. On the basis exclusively of the export declaration made by the American forwarding agent when the goods left the United States, even though that declaration was not accompanied by any document emanating from the American company, the French customs authorities maintain that, on importation of the goods in question, Victory France SA marked up the value by FF 3965540 for the purpose of enabling it irregularly to transfer capital to the United States.

3. On the basis of these facts, the Examining Magistrate charged the Chairman and Managing Director first with being responsible for making a false declaration of value, committed with the assistance of forged documents, secondly, in terms of customs law, with marking up the value on importation and, thirdly, in terms of exchange-control legislation, with making irregular transfers of capital to the United States. The accused in the main proceedings disputed the price taken by the French customs and submitted, on the one hand, that in this case the declaration by the American forwarding agent did not constitute a means of determining the normal price of the goods and, on the other hand, that the invoiced prices were clearly less than the average values declared for similar goods by all French importers. Having regard to the fact that the matter was governed by Regulation No 803/68, the Magistrate considered that interpretation of that regulation was necessary and submitted a question worded thus :

“Under Regulation (EEC) No 803/68 of 27 June 1968 on the valuation of goods for customs purposes, may the normal price of goods originating in and coming from the United States of America which must be taken as the value to be declared on importation into France, be equal to the value of those same goods declared by the forwarding agent of the seller to the customs authorities of the country of origin, even if that value, which is much lower than the price paid by the French buyer and received by the American seller, is not based upon any accounting document (such as an invoice accompanying the goods) and even if that value is, moreover, lower than the normal price for the same goods agreed between a buyer and a seller under conditions of free competition?”

4. In the context of the judicial cooperation provided for by Article 177, whereby national courts and the Court of Justice are called upon, each within the scope of its own jurisdiction, to contribute directly and reciprocally to the reaching of a decision aimed at ensuring the uniform application of Community law in all the Member States, the Court may extract from the wording of the question submitted and the facts set forth by the national court the matters of Community law necessary for the national court to be able to decide in accordance with Community law the legal problem with which it is faced.

5. In the present case, although the question from the Examining Magistrate is confined to an issue concerning the assessment on importation of the value of goods for customs purposes on the basis of a declaration of value made by the seller's forwarding agent to the customs authorities of the country of origin, the grounds stated in the order making the reference make it possible to recognize the question as one which is truly concerned with whether, in the context of Regulation No 803/68, the customs authorities of a Member State may reduce the value of the goods for customs purposes with a view to purposes other than those of customs control properly so termed.

6. In its judgment of 24 April 1980 in Case 65/79 Procureur de k République v René Châtain [1980] ECR 1345, the Court had occasion to indicate in detail the matters of Community law which apply to this topic.

7. At the time of the events which lie at the source of the dispute in the main proceedings, the factors making up the legal position were substantially the same as those in the Châtain case.

8. Consequently, it is enough to recall in this context the operative part of that decision of the Court in order to apply it to the issue facing the Examining Magistrate in this case, namely, that “the reduction by the competent authorities of a Member Sute of the invoice price of goods imported from a nonmember country does not accord with the aims of the rules relating to the determination of the value of goods for customs purposes. However, the determination of value for customs purposes in accordance with those regulations cannot have the effect of requiring the fiscal and financial authorities of the Member States to accept that valuation for purposes other than the application of the Common Customs Tariff.”

9. From the foregoing it follows that it is not in accordance with Regulation No 803/68 for the value for customs purposes of goods imported from a nonmember country to be determined, for the requirements of customs, by the national authorities by reference to a declaration made by the forwarding agent to the customs authority of the exporting country at a level which is less than the price invoiced and paid for the goods.

Costs

10. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT (Second Chamber), in answer to the question submitted to it by the Examining Magistrate at the Tribunal de Grande Instance, Paris, hereby rules:

1 The reduction by the competent authorities of a Member State of the invoice price of goods imported from a nonmember country does not accord with the aims of the rules relating to the determination of the value of goods for customs purposes. However, the determination of the value for customs purposes in accordance with those regulations cannot have the effect of requiring the fiscal and financial authorities of the Member States to accept that value for purposes other than the application of the Common Customs Tariff.

2 It is not in accordance with Regulation No 803/68 for the value for customs purposes of goods imported from a nonmember country to be determined, for the requirements of customs, by the national authorities by reference to a declaration made by the forwarding agent to the customs authority of the exporting country at a level which is less than the price invoiced and paid for the goods.