Free movement of Goods

Free trade area

• Removal of customs duties and quotas between members
• Goods can move freely between states without limitaions on quantity and without being subject to pecuniary charges
• Each state may impose their own quotas and customs duties as regards to countries outside the EU (i.e. Third countries)

Customs union

• Agreemet to impose a common level of duty on goods from non-member countries (i.e. Common Customs Tariff)

 Article 28 TFEU

The union shall comprise a customs union which shall cover all trade in goods and…the adoption of a common customs tariff in their relations with third countries.

Article 31 TFEU  

Common Customs Tariff duties shall be fixed by the Council on a proposal from the Commission

Common internal market

• Agreement to remove restrictions on the factors of production
• Common market inroduces competition policy
• 'Common market'/'Single market' are used synonymously but have slight differences in meaning
• Lisbon treaty only refers to an 'internal market'

Economic and monetary union

• common market + unified monetary and fiscal policies
• Single currency and common policies on interest rates

why? 

• Large internal market enables companies to specialise and grow in order to compete in the 'world stage'

Article 30 TFEU 

Tariff barriers to trade prohibiting customs duties and CEEs

Articles 34 TFEU 

Prohibition to QR’s (quantitative restrictions) and MEQRs (measures that have an equivalent effect to quantitative restrictions)

 Article 36 TFEU 

derogation (a way to try and justify the measure that you have in place) – only applies to article 34

Article 110 TFEU 

prohibition of discriminatory taxation

Article 30 TFEU 

Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States.

We can classify barriers to trade as either 'tariff based barriers' or 'non-tariff based barriers'. Tariff based barriers to trade are so called because they involve in some way, the payment of money

Sociaal Fonds voor de Diamantarbeiders v Brachfeld and Chougol Diamond Co (Cases 2 & 3/69) - Diamonds case 

 “…any pecuniary charge…imposed on goods by reason of the fact that they cross a frontier…” 

Thus, 3 elements:

• Pecuniary – involve money
• Imposed on goods
• By reason of the fact that they cross a fronties

Commission v Italy 1968

Case concerned a tax on the export of articles of an ‘artistic, historical, archaeological or ethnographic nature’.  The question was whether these articles amounted to ‘goods’ for the purposes of what is now Article 30 TFEU.  The Court of Justice held that the meaning of goods of was ‘products which could be valued in money and which are capable of, as such, of forming the subject matter of commercial transactions’.  Applying this to the facts of the case, the Court of Justice held that the articles in question were indeed goods.

• Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States
•  Pecuniary charge on goods which cross a frontier – but not a customs duty in a strict sense – fees are imposed in order to compile statistics, not imposed just because you were just moving the goods
• Not as strict as a customs duty – it is much wider

Commission v Italy (Re Statistical Levy) (Case 24/68)  - “…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, and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect …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.”

Sociall Fonds voor de Diamantardeiders v Chougal Diamond Co(Cases 2 & 3/69) - Charge on the importation of diamonds into Belgium was a CEE despite the fact that the measure was not protectionist (Belgium did not produce diamonds) and the fact that it was introduced to provide social security benefits for Belgian diamond workers.

• Only applies under article 30 - Customs duty is a breach of article 30
• CEE – look at it and see if this is a charge for a service?

The argument has often been advanced that charges avoid Article 30 TFEU because they are levied for services rendered to the importer, such as health and safety inspection or quality control inspection services.

 A charge for services will fall outside the Article 30 TFEU prohibition only if:

•  The services are of direct benefit to the importer/trader; AND
• The charge is proportionate to the service provided

Commission v Italy (Re Statistical Levy) (Case 24/68)

• Money raised was used to compile statistics claimed to be for the benefit of traders.  Court held that any advantage gained by importers and exporters was so general and difficult to assess that the charge did notconstitute consideration for ‘a specific benefit actually conferred’ and consequently comprised a charge having equivalent effect
• Any advantage gained by those traders were so general and vague that it constituted as being a valid service provided

Commission v Belgium (Health Inspection Service) (Case 314/82)

• Charges for inspections expressly permitted under EU law do not for this reason alone escape classification as CEEs.
• Just because they’re allowed doesn’t mean they escape classification

Commission v Germany (Case 18/87)

• Involved fees for inspections carried out pursuant to a Council Directive.The fees were a payment for a service and did not exceed the cost of the inspections, the inspections were mandatory and uniform for all the products in the Community [Union], were provided in the interests of the Community [Union] and they promoted the free movement of goods by neutralizing obstacles which may have resulted from unilateral inspections.
• Required by EU law – fees were payment for service which was mandatory by EU law

Article 30 TFEU is concerned with the elimination of fiscal barriers when goods are crossing national borders whilst Article 110 TFEU aims to ensure that the internal taxation system of a Member State does not discriminate directly or indirectly against products from other Member States.

Deutschmann v Germany (Case 10/65)

• The Articles are complementary, yet mutually exclusive

Commission v France (Reprographic Machines) (Case 90/79) 

• definition of a genuine tax was given by the Court of Justice
• a measure relating to a general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products. 

Why is the distinction important?

• If it is classed as a customs duty or CEE it is unlawful under Article 30 TFEU. If it is classed as a tax, it is permissible provided it complies with Article 110 TFEU 

Article 110 TFEU draws a distinction between similar products and products in competition.

Importance of identifying correct paragraph - if a breach of Article 110(1) TFEU the Member State must equalise taxation. If a breach of Article 110(2) TFEU, the Member State only has to remove the competitive effect of the tax regulation.

Article 110(1) TFEU

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.

Article 110(2) TFEU

Furthermore, no member state shall impose on the products of other Member States any internal taxation of such nature as to afford indirect protection to other products.

Commission v France (French Taxation of Spirits) (Case 168/78)

Court held that non fruit spirits (whisky, gin and vodka) were similar products to fruit spirits such as brandy, armagnac and calvados because they have similar characteristics and meet the same needs from the point of view of consumers.

John Walker v Ministeriet for Skatter (Case 243/84) 

Here, the issue was whether Whisky and fruit liqueur wine were similar.  It is obvious that they are both alcoholic drinks but the Court decided they were not similar because they had different characteristics.  The process used to make them was different and they had significant differences in terms of alcohol content.  Held that the term ‘similar products’ should be interpreted widely to encompass similar characteristics and comparable use. 

Taxation which openly treats domestic and imported products differently

Lutticke (Alfons) GmbH v Hauptzollampt Saarlouis (Case 57/65)

Internal tax levied on imported dried milk but not on domestically produced dried milk.  Held to be a directly discriminatory tax under what is now Article 110(1) TFEU.

In some cases, the discrimination is not down to the rate of taxation levied, but the rules relating to collection, or the basis of assessment.

Commission v Ireland (Excise Payments) (Case 55/79) 

Despite the fact that the tax rate was equal, the relevant legislation was held to be a breach of what is now Article 110(1) TFEU because importers had to pay the tax immediately on importation whilst domestic producers were given several weeks to do so.

Taxation which appears neutral, but has the effect of discriminating against imported products.

Humblot v Directeur des Services Fiscaux (Case 112/84)

French annual tax on cars differentiatied between cars below 16 hp and above 16hp.  Frence manufacturers did not produce cars above 16hp.  Humblot purchased a Mercedes in France and challenged the French taxation measure.  The Court of Justice held that the French law was protectionist and discriminatory in respect of cars imported from other Member States.

Cases involving indirectly discriminatory taxation suggest it is capable of objective justification.   Directly discriminatory taxation based on the nationality of the product can never be objectively justified. 

Chemical Farmaceutici SpA v DAF SpA (Case 140/79)- Italian internal taxation of synthetic ethyl alcohol was higher than taxation of fermented ethyl alcohol.  The products were interchangeable in use. Italians said that the higher taxation of synthetic alcohol (which Italy produced very little of) constituted a legitimate choice of economic policy aimed to encourage production using a different raw material (agricultural products), leaving the existing raw material (petroleum ingredients) for more important uses.

Commission v Greece (Case C-132/88) - Court considered an environmental justification for a car tax system providing for differential rates according to power rating.  Greece imposed a tax on new and second hand cars wherever they were produced and once over a 1.8 engine, the tax rose steeply.  Greece didn’t produce cars above 1.6.  Held it would escape Article 110 TFEU notwithstanding that all higher taxed cars were imported so long as the taxation didn’t have the effect of discouraging Greeks from purchasing foreign cars.  On the facts the tax was motivated by other considerations and there was no discernable protective effect.

Article 110(2) prohibits internal taxation which indirectly protects domestic products which although not similar to the imported products, are nevertheless in competition with them. 

Commission v United Kingdom (Excise Duties on Wine) (Case 170/78)

Looked at differential taxation of beer and wine.  The Commission argued that the difference in tax amounted to discrimination against imported wine and encouraged customers to buy beer.  Clearly, wine and beer are not similar.  Thus, to establish a breach it had to be shown that they are in competition within Article 110(2) TFEU. The ECJ held that the UK had imposed a higher duty on wine to give protection to beer.  Beer was generally a domestic product whilst wine was generally imported. As the tax favoured the domestic product, Article 110 TFEU had been breached.

• Article 34 TFEU - Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.
• Article 34 TFEU sets out the prohibition on quantitative restrictions and measures having equivalent effect on imports.  It is addressed to Member States but it has been interpreted widely.
• Interpreted widely to include measures adopted by public and semi-public bodies and private bodies where significant state involvement. – R v Pharmaceutical Society of Great Britain.
• Article 34 applies also to measures applied to only part of a MemberState’s territory.

Ditlev Bluhme (Case C-67/97)

Involved the prohibition of keeping a certain type of bee on a certain Danish Island.  Essentially amounted to the prohibition of importation of bees and was an MEQR despite the fact the measure only applied to part of the national territory.

Quantitative restrictions are measures which limit the import or export of goods by reference to an amount or value.

Geddo v Ente Nazionale Risi (Case 2/73) 

“.... measures which amount to a total or partial restraint of, according to the circumstances, imports, exports, or goods in transit” 

R v Henn and Darby (Case 34/79)

Procureur du Roi v Dassonville(Case 8/74) - The Dassonville Formula

“All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-community trade are to be considered as measures having an effect equivalent to quantitative restrictions”  

Directive 70/50 - Note that this was a transitional measure introduced at a time when the common market was becoming established to provide guidance and is not therefore formally applicable, but it does indicate the Commission’s view of MEQRs. 

• Distinctly applicable measures
• Measures which do not apply equally to domestic and imported products

See the non-exhaustive list in Article 2(1) of the Directive

• Indistinctly applicable measures
• Measures which apply equally to domestic and imported products

See the non-exhaustive list in Article 3 of the Directive 

International Fruit Company v Produktschap voor Groenten en Fruit (No. 2) (Cases 51-54/71)

The requirement for an import or export licence amounted to an MEQR applying Dassonville.  Impacts in three ways.  (1) Goods are effectively banned pending process of the application, (2) potential for rejection and (3) additional paperwork will result in additional costs which will need to be accounted for in determining the price of the goods

Walter Rau Lebensmittelwerke v de Smedt PvbA (Case 261/81)

Belgian requirement that all margarine for sale should be in cube shaped form or cube shaped packaging.  Problem was that importers would have to adapt their packaging processes to comply with a requirement not imposed upon them at home.

Commission v France (Case C-265/95)

Court held that [Article 34 TFEU] requires Member States to take all necessary and appropriate measures to ensure free movement of goods.  French farmers were violently protesting against the import of agricultural products from other Member States.  This included blocking lorries, destroying cargos, threatening retailers selling imported goods and violence against lorry drivers.  The Court held that France was in breach of Treaty obligations requiring Member States to take all necessary measures to ensure fulfilment of obligations arising out of the Treaty by failing to prevent the protests.  This clearly included facilitating the free movement of goods.

Cassis de Dijon case - German legislation required certain spirits to have a min  alcohol content of 25% if marketed lawfully in Germany.  French Cassis didnt satisfy this and couldnt sell in the German market.  It was argued that this was an MEQR.  Established 2 principles.

1 The principle of mutual recognition - Where goods have been lawfully produced and marketed in one Member State, there is no reason why they should not be introduced into another Member State. This principle acts as a presumption

Prantl (Case 16/83) - Italian wine was imported in bottles of a distinctive bulbous shape similar to a German bottle used for a particular quality wine. The ECJ held that bulbous wine bottles had been manufactured in Italy for over a hundred years and that ‘in accordance with a fair and traditional practice’ meant that they could not be excluded from Germany.

2 The rule of reason - Obstacles to free movement of goods acceptable if necessary to satisfy mandatory requirements relating in particular to:

The effectiveness of fiscal supervision; The protection of public health; The fairness of commercial transaction; The defence of the customer

NOTE : THE RULE OF REASON APPLIES TO INDISTINCTLY APPLICABLE MEASURES ONLY.

Any measures must be no more than is necessary to achieve the aim.  If the measure goes beyond what is necessary, it will fall outside of Cassis.

‘Cassis de Dijon’ Case   - German legislation required certain spirits to have a minimum  alcohol content of 25% if marketed lawfully in Germany.  French Cassis did not satisfy this and thus could not sell in the German market. One argument put forward by the German authorities was that low alcohol spirits cause alcoholism on the basis that they induce tolerance to alcohol.  However, the Germans could have used other measures to achieve their aim which were less of a hindrance to trade such as a labelling requirement.

Walter Rau Lebensmittelwerke v de Smedt PvbA (Case 261/81) - Belgian requirement that all margarine for sale should be in cube shaped form or cube shaped packaging. Here the Belgians argued the reason for the requirement was in relation to consumer protection.  I.e. not wanting to confuse the customer.  The ECJ ruled that if there is a choice as of measures to achieve an objective, the measure which least restricts the free movement of goods should be adopted.  In this case, couldn’t the same end be achieved by simply labelling margarine as “MARGARINE” thereby avoiding confusion?

It is important to appreciate that the list of mandatory requirements is non-exhaustive.  Thus, they have been added to by the Court of Justice in subsequent cases.

Commission v Denmark (Case 302/86)

Danish legislation required (amongst other things) certain drinks sold in Denmark to be packaged in re-usable containers and deposit and return schemes to be established all designed to protect the environment.  The ECJ recognised environmental protection as a mandatory requirement.  However, the requirements were still required to satisfy the test of proportionality (they did not).

Rules relating to the market circumstances in which the goods are sold (Rules relating to where, when, how and by whom goods may be sold)

Criminal Proceedings against Keck and Mithouard (Cases C-267 & 268/91) -  French law stating that goods could not be re-sold at a loss.  This was an issue because it would affect the overall volume of sales and the sales of products from other Member States.  The court said that certain selling arrangements do not fall within the Dassonville formula

“...provided that those provisions apply to all affected traders operating within the national territory and provided they affect in the same manner, in law and in fact, the marketing of domestic products and of those from other Member States…”

Tankstation ‘t Heukske (Cases C-401/92 & C-402/92) - Held that Article 34 didn’t apply to rules concerning the opening times of shops at petrol stations which applied to all and affected all in the same manner.

Discriminatory restrictions will fall within Article 34 TFEU 

Konsumentombudsmannen (KO) v De Agostini (Svenska) Forlag AB [(Cases C-34-6/95) - Ban on TV advertising at kids under 12.  Court found that where a producer is unable to advertise its product it may be prevented from accessing a market.  The same restrictions may have less impact on domestic products as they will already be known.  Thus, outside of Keck due to the discriminatory effect.

Note, a number of recent cases have explored a further category of MEQRS that is those not relating to the characteristics of a product, nor the way in which a product is sold etc, but those measures which impose restrictions on the use of a product.

Commission v Italy (Italian Trailers) (Case C-110/05)

Italian legislation imposed a ban on two and three wheeled vehicles from towing trailers. The Court held that such a law constituted an MEQR as it prevents a demand from existing for trailers specifically designed for motorcycles.  As such, the legislation has the effect of hindering market access.  However, the measure was found to be necessary and proportionate to the aim of protection public health.

The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports ... justified on grounds of public morality, public policy or public security;  the protection of health and life of humans, animals or plants….protection of national treasures….protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.. 

The principle of mutual recognition also applies to Article 36 TFEU.

(1) Public Morality, Public Policy, Public security - R v Henn and Darby (Case 34/79) - Ban on the import of pornographic material.  Justified on this ground as it is for each Member State to determine standards.  The laws were found not to discriminate in favour of a domestic product.(2) Protection of health and life of humans, animals or plants - Commission v UK (Imports of Poultry Meat) - Here, there was a ban on Turkey meat to avoid the spread of Newcastle disease.  However, the measures had been rushed through and took effect just before Christmas.  Furthermore, no consideration had been given to the efforts of the French to prevent the disease.

(3) Protection of national treasures

(4) Protection of industrial and commercial property