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ECJ: EU Governments Flouted Customs Duties Rules

by Ulrika Lomas, LawAndTax-News.com, Brussels

22 December 2009


The European Court of Justice (ECJ) has declared that Finland, Sweden, Germany, Italy, Greece and Denmark have infringed Community law by withholding from the budget of the European Community customs duties payable on imports of armaments and material for civil and military use.

The European Community budget is funded from own resources which, in part, come from Common Customs Tariff duties on trade with non-member countries. The Community Customs Code requires member states to pay to the Community, as own resources, customs duties levied on imports of goods.

The European Commission asked the ECJ to declare that the six member states in question were in breach of their obligations under the Community Customs Code and under various regulations by refusing to pay as own resources of the Community customs duties levied when armaments were imported.

Generally, the member states argued that their refusal to make payment was justified because the collection of customs duties would have threatened their essential security interests. Member states also contend that applying these customs duties would increase national military budgets.

The infringements concern the period from January 1, 1998 to December 31, 2002, whereas, from January 1, 2003 – in order to take into consideration the protection of military confidentiality by member states – specific administrative procedures were provided for in order to allow the suspension of import duties on such material.

However, according to the ECJ, there is no provision of the Community customs legislation which, in respect of the period from January 1, 1998 to December 31, 2002, provided for any specific exemption from customs duties on imports of products of that type. Indeed, the ECJ observed that the suspension of customs duties on certain weapons and military equipment from January 1, 2003 confirms that there was a general assumption that an obligation to pay those customs duties existed prior to that date.

In a statement accompanying the judgment, it was explained by the ECJ that:

"The Court declares that, while it is true that it is for member states to take the appropriate measures to ensure their internal and external security, those measures are not entirely outside the scope of Community law, which provides for express derogations applicable in situations which may involve public safety, but exceptionally and in clearly defined cases which must be interpreted strictly."

"The Court also states that a member state cannot plead by way of justification the increased cost of military material because of the application of customs duties: on the contrary, a member state cannot avoid compliance with the obligations of joint financing of the Community budget."

"Lastly, the Court rejects the justification based on the Commission’s prolonged lack of action and the argument that adoption of the regulation on suspension of duties was tacit acceptance of the existence of an appropriate derogation. The Commission did not at any stage of the proceedings abandon its position in principle, and it always expressed its firm intention to maintain its claim to the collection of customs duties which should have been paid for periods prior to the introduction of the procedures for suspension."

TAGS: Italy

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