Filip Køepelka, Masarykova univerzita (krepelka@law.muni.cz)

                           Course: Introduction to the European Union Law

                              [5] Free movement of goods in the EC/EU

   Free movement of goods is certainly the most important basic economic freedom of the EC/EU.
   Key legal measures are customs union and the reduction of administrative barriers.

   The EC/EU customs union includes uniform external trade policy towards imports and exports
   from and to non-member states (in our course it will be tought later as special topic) and
   suppression of all fiscal barriers relating  interstate trade in goods. ECT provisions enjoy
   direct effect, incompatible national law shall not be applied by state administrative
   authorities and courts.  

   Fiscal barriers (customs, charges having equivalent effect and tax discrimination)

   The EC law clearly prohibits all custom duties and charges having equivalent effect. Custom
   duties  are charges imposed on goods due to their importation or exportation clearly labelled
   as customs. Charges having equivalent effect are all other taxes, contributions, fees and
   other charges based on same construction. There is no need for clear border between customs
   and charges having equivalent effect, both practices of member states (including
   self-government) are absolutely prohibited, no exception is allowed. Original version of
   E(E)CT and treaties of accession provided for temporary exceptions. Banned custom duties are
   rare, charges having equivalent effect were identified in many fiscal practices of member
   states. Export duties are disallowed too, they cannot be justified similarly as administrative
   restrictions.  

   ECT prohibits separately  indirect tax discrimination. Internal taxes are generally allowed
   (and key indirect taxes even expected by EC law). However, discriminatory practices  are
   prohibited. The Court of Justice had from time to time condemned or identified these
   practices: distribution of similar types of goods (which can be both for similar or same
   purpose and can compete) to different tax rates, if domestic production subjected to lower
   rate and imported to the higher one. There were several cases of discrimatory differentiated
   taxation of alcoholic beverages or cars.

   Indirect tax harmonisation   

   The EC law provides (several directives) for detailled harmonisation of indirect taxes. Value
   added tax (VAT) shall be imposed according to unified model, basic tax rate (15%) and list of
   goods allowed for lower rates or exemption are fixed by EC law too. Other general indirect
   taxes are not allowed. The EC law requires three excises (taxes on consumption): fuel,
   alcoholic beverage  and tobacco procucts taxes and sets minimum rates. 

   The EC law coordinates competences of member states for indirect taxation of  goods, crossing
   borders of member states: generally the state of purchase to consumer is competent  to impose
   the tax, exceptions include vehicles or distance sales. 

   Administrative (non-fiscal) barriers

   The ECT pays appropriate attention to administrative measures affecting adversely interstate
   commerce. Free movement of goods cannot be achieved with sole abolition or suppression of
   fiscal obstacles. ECT provides for general rule and exceptions and entitles the EC for
   far-reaching harmonisation of production and distribution standards of goods. The
   harmonisation enables significant reduction of restriction justified by exceptions.   

   General rule is the prohibition of quantitative restrictions (quotas) and measures having
   equivalent effect on  both imports and exports. This prohibition is not absolute, the ECT
   includes list of exceptions.

   The Court of Justice has repeatedly interpreted the notion of "measure having equivalent
   effect". It started with wide-reaching approach (any measure of member state actually and
   potentially adversely affecting interstate trade in goods: Dassonville judgement), later it
   accepted that some generally applied reasonable measures for protection of general interests
   are not covered ("judicial quasi-exceptions", Cassis de Dijon) and approved various sale
   arrangements (Keck judgement). 

   ECT listed exceptions confirm tasks of member states, they retain majority of their functions:
   protection of health, order, security, morality, culture and individual property rights. They
   shall not be used for discrimination of imported goods. 

   The Court of Justice uses objective test of measures justified by protection of human, animal
   and plant life and health. Many member state practices have been disapproved as unnecessary
   and discriminatory. The number of legitimate use of the exception has been gradually reduced
   by detailed harmonisation or unification of production and distribution standards.   

   On the other hand, the EC case-law has repeatedly recognized different approaches of
   particular member states to protection of national security, public order and morality and
   protection of national treasures.

   The protection of intellectual property rights (patents, trademarks, copyright etc.) are
   limited to member states, although harmonised by both universal and European international
   treaties and the EC/EU law.  However, the Court of Justice has repeatedly refused misuse of
   intellectual property for the separation of markets.  

   Harmonised standards for manufacture and distribution of goods

   ECT grants to the EC general power to harmonise or unify standards for production and
   distribution of various types of goods. Harmonised or unified standards reduce legitimate use
   of above mentioned exceptions, especially the protection of health and life of humans, animals
   and plants. Real free movement of many goods cannot be achieved without standardisation.   The
   instrument for harmonisation or unification are numerous directives for almost all branches of
   industry. The Europeisation of the standards remains hidden, because it is prescribed directly
   by national law and usually enforced and controlled by national authorities.  

   Results of liberalization

   Free movement of goods contributed to Europe-wide integration of markets of vast majority of
   goods. Only goods for immediate consumption, goods difficult to transport or language-related
   goods are traded in separated national markets. This integration causes environmental damages,
   because vast majority is delivered by trucks. 

   

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   Homework

   Read judgement: nr. 124/81 Kommission v. United Kingdom (UHT Milk) celex nr. 61981J0124