(INTERNATIONAL TRADE): FREE MOVEMENT OF GOODS

The aim of founding European Union was to stabilize political and economical issues
and to unity the law of diverse states and established four freedoms:
1. Free movement of capital
2. Free movement of service
3. Free movement of people
4. Free movement of goods
Free movement of goods has been and continues to be of fundamental importance
to the establishment and maintenance of the EU internal market. In essence, the
principle implies that any unnecessary trade barriers must be removed by Member
States. The free movement of hoods system is designated in both treaties of The
Treaty Establishing The European Community (hereafter EC Treaty) and The Treaty
on Functioning European Union (TFEU) and various reports, regulations and
directives.
Development (Stages of Economic Integration)
The concept of common market was at the very heart of Treaty of Rome 1957
establishing the European Economic Community. It has been referred to in many
ways since, from the common market at the outset, moving the mixture of the
common market and internal market following Single European Act 1986. Now,
following the Lisbon Treaty, solely to the internal market.
In practice, such integration occurs over number of different stages:
1. Free Trade Area
Involves Member States agreeing to remove all customs duties and Pecuniary charges:
Charges relating to
quotas between themselves. Thus, goods can move freely between
the payment of
the Member States without limitations on quantity and without being
money
subjected to further pecuniary charges which may make non-national
goods uncompetitive. However, each Member States may impose their own
quotas and customs duties as regard countries outside the free trade area(third
countries).
2. Custom Union
Develops this further by introducing an agreement between Member States to
impose a common level of duty on goods from non-member countries. This
common level of duty known as the Common Custom Tariffs.
Article 28TFEU: the union shall comprises a custom union which cover all trade
in goods andthe adoption of a common tariff in their relations with third
countries.

3. Internal Market
The Internal Market, promoting the free movement of goods, services, capital and
people, is one of the most significant and consistently progressing objectives for
the European Union (EU). The EU, which spans an area of twenty seven member
states and a population of almost half a billion potential consumers, aims to
 create a single harmonised and borderless market where competition is free and
undistorted, a market where persons and goods can move freely. In order to
attain this objective, the EU since the mid 1970's, has endeavoured to develop
clear measures and legislation aimed at facilitating cross border trade between
member states by increasing consumer confidence and safeguarding the
interests of consumers. This has recently led to the adoption of the Unfair
Commercial Practices Directive 2005 (UCPD), one of the latest and perhaps
most important pieces of legislation concerning consumer protection to come
from the EU. The Directive has been implemented in the UK by the Consumer
Protection from Unfair Trading Regulations 2008 (CPR), resulting in a major
upheaval of consumer protection law in the UK.
4. Economic and monetary union
Common market+Unified monetary and fiscal policies. Amongst other things, a
single currency and common policies on interest rate.
Meaning of goods
Article 34 and 35 TFEU cover all types of goods that have imported or exported.
The case law however, cover the meaning of goods.
In Commission v Italy, it was held that the products which can be valued in
money and which are capable of forming the subject of commercial transactions
are accepted as goods in respect to TFEU.
The scope of goods for the purposes of the principle of free movement of goods
is therefore defined widely. Works of art, coins which are no longer defined as
money, electricity and natural gas, also accepted as goods except services.
However, subsequent case law, Jagerskiold v Gustafsson has identified the
outer edges of the scope of the term by refusing to accept the grant of fishing
rights and the issue of fishing permits as goods.
Trade Barriers
There are two types of barrier to the free movement of goods which EC law
seeks to remove, namely, tariff barriers and non-tariff barriers.
Tariff Barriers
Tariff barriers are some form of financial or fiscal barrier or obstacle to trade. They
take the form of a tax or a customs duty.
Custom Duty
A customs duty, imposed on imports, is a direct obstacle.
Article 28 of TFEU promotes the free circulation of goods within the EU by
establishing a customs union. Customs union prohibits the charging of any duties
on imports and exports within member states of the EU or the levying of any
charge having the equivalent effect as a customs duty (CHEE). Duties are still
payable on goods coming from countries outside the EU but once the goods have
passed through the import formalities of one member state they enjoy the same
freedom of movement as goods originating within the EU.
 In Commission v Luxembourg, Lux and Belg governments introduced a special
import duty on imported gingerbread, in order to equate the foreign price to the
domestic price which was high because of an internal tax on rye, an ingredient in
gingerbread.
It was held that this special import duty was a charge with equivalent effect to a
customs duty.
Commission v Italy (Statistical Levy case) the CoJ defined a CHEE as "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" The case concerned the levying of a small fee (only 10 lira) on imports
and exports to fund statistical surveys. Although the fee was small it was still
found to be an impediment to the free movement of goods and therefore a breach
of Article 30 of the TFEU.
Exception of the absolute prohibition of custom duties and charges:
It is not always the case that a charge on imported or exported goods will be
considered a CHEE. In Commission v Belgium(Custom Warehouse), Belgium
government argued that it could not be a CHEE as it was imposed not by the
reason of crossing a frontier, nor the completion of customs formalities, but was
imposed for the use of storage facilities. As such, it amounted to a charge for
service rendered to the importer and was therefore justified. The Court was
acceptance of the view that the placing goods in temporary storage was a service
rendered to importer. Furthermore, court and commission accepted that such a
service may legally give rise to a payment commensurate with the service
provided.
In Bresciani v Amministrazione Italiana delle Finanze, a charge was imposed
on imported raw cowhides for veterinary and public health inspections. In
determining whether the charge amounted to CHEE, CJ focused upon who
benefited from the alleged service provided. Thus, it is clear that in order to
sustain the argument that a charge is justified on the basis of being in place for a
service rendered, the service concerned must be of direct benefit to the goods or
traders concerned. This is not satisfied where the service is merely in the general
interest. So, in this case, CoJ found that charges in connection with veterinary
inspections were not acceptable because they were not in the individual interest
of the importers.
In Commission v Germany (Animal Inspection Fees) CJ found that fees
charged for animal inspections which were required by an EU Council Directive
were acceptable. The case also highlighted that fees were acceptable if they
were in consideration for services rendered and proportionate to that service.
Moreover, it should be noted here that the important consideration is not the
amount of the charge, but rather the extent to which the amount levied is
commensurate with the service provided. The clearest illustration is found in Ford
of Spain v the Spanish State. A charge of 0.165% of the value of the goods was
considered to be excessive for the service provided. The court made it clear that
even if the levying of a charge was allowed for a service rendered, the charge in
 the instant case amounted to CHEE as the amount could not be proportionate to
the service rendered, being based as it was on the value of the goods concerned
rather than the costs related service.
However, Bresciani v Amministrazione Italiana delle Finanze, the charge
imposed was held to be a CHEE regardless of the fact that the charge was
proportionate to the cost of the compulsory public health inspections and was
calculated according to the quantity of imported goods rather than the value of
goods. Whilst proportionality will always be a vital consideration in determining
the validity or otherwise of a charge for a service rendered , it will not, in itself,
justify a charge.
***So, to justify a charge, that charge must be of direct benefit to the goods
or traders concerned and the charge must be proportionate to the services
rendered.
If a measure amount to a custom duty
or CHEE, it must be abolished. Article
30 prohibits the imposition of such
Tax charges.

In addition to charges for services rendered, member While if the measure amounts to a
matter of internal taxation, it is lawful
states are able to charge taxes on goods. Such tax, if
subject to Article 110 TFEU. Treaty
challenged, should be considered under Article 110 does not prescribe an appropriate
TFEU. level of taxation, but is concerned
Denkavit v France, defined internal taxation as a with the discriminatory or protective
taxation measures.
general system of internal dues applied systematically
and in accordance with the same criteria to domestic
products and imported products alike. Internal taxation is distinguished from
custom duties and CHEEs. A charge is a tax if it is part of an internal system of
taxation, as indicated by Denkavit. Custom duties and CHEEs are charges levied
on goods by reason of important.
It is important to note that, Article 110 and 30 are complimentary but mutually
exclusive, so a charge on goods cannot be both a tax and a custom duty/CHEE.
The distinction is vital as if classed as a custom duty/CHEE it is unlawful under
Article 30 TFEU. If classed as a tax, it is permissible provided it complies with
Article 110 TFEU.
Furthermore, under Article 110, to ensuring taxation is applied without prejudice
to imported goods, member states must not impose taxation on imported
products that are
1. similar and
2. can be considered in competition with a national product.
Similar product
Since Article 110(1) prohibits the differential taxation of similar products, the
similarity of the imported and domestic products is clearly important. In
number of cases concerning alcoholic drinks, the Court of Justice has
interpreted similar broadly.
In Whiskey v Cognac/ Commission v France, France imposed a tax on the
manufacturing of certain spirits, namely those distilled from cereal, e.g.
whiskey. Yet, this tax did not apply to spirits distilled from fruits, e.g.
brandy/Cognac. It was held that, as long as different type of spirit could be
regarded as being in competition with each other, taxing one but not the other
would violate Article 110(2) TFEU which on taxes on different products. Tax
would make Brandy more attractive to consumer than whiskey, as whiskey
more expensive, which might have an adverse effect on the free movement of
goods btw Member States.
John Walker v Ministeriet for Skatter, in order to determine whether
products are similar, it is necessary first to consider certain object
characteristic of both categories of beverages, for instance, their origin,
method of manufacture and in particular their taste. Secondly, to consider
whether or not both categories of beverages are capable of meeting the same
needs from the point of view of consumer.
Competing products
Article 110(2) has been explained as a means of prohibiting internal taxation
that applies unequal tax ratings to domestic and imported goods, which,
although not similar, are nevertheless in competition with each other. As has
been observed, whether goods are in competition will depend on whether
they are perceived by the consumer to be interchangeable, and whether this
is the case will be decided by examining whether the price of one product
rises in relation to another, and subsequently consumers switch to the lower-
priced product.
The case of Commission v United Kingdom have best illustrates this. Here,
CJ looked at the differential taxation of beer and wine. CJ held that 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(2) had been breached.
 Non- tariffs barriers
The free movement of goods is realised not only by the
Article 34: quantitative
removal fiscal barriers but also by the removal of non-
restriction on imports and
financial obstructions. Articles 34 and 35 of the TFEU
all measures having
prohibits any form of quantitative restrictions on imports
equivalent effect shall be
and exports and any measure having the equivalent
prohibited between MS.
effect of quantitative restrictions.
Quantitative restrictions are measures which restrict the
volume of goods which may be imported or exported, for example by means of
quotas, licensing, or by an outright ban. In Re v Henn and Darby, a ban on the
important of pornographic material amounted to a quantitative restriction under
Article 34 TFEU. In Commission v UK (Import of UHT Milk) it was found that
import licences acted as a quantitative restriction on importers even though the
licences were a mere formality and issued on request.
On the other hand, Measures having equivalent effect to quantitative restriction is
more difficult than quantitative restriction. MEQR is defined in Procureur du Roi
v Dassonville as all trading rules enacted by a member state which are capable
of hindering, directly or indirectly, actually or potentially, intra-community trade.
The definition is very broad and encompasses a variety of diverse forms of
obstruction. In this case, it was found that the requirement in Belgium to have a
certificate of origin for goods constituted a MEQR. In contrast inaction by France
that allowed protestors to halt Spanish produce entering France was also
considered to constitute a MEQR.
Legislative guidance is available in the form of Directive 70/50 but again, the
language is necessarily broad and widely interpreted.
Particularly significant is that measures need not have a direct effect on imports
to constitute a breach of Article 34 of TFEU. This is demonstrated in Case 249/81
Commission v Ireland (Buy Irish) which concerned a government controlled
company which undertook an advertising campaign to promote the sale of
national products. It was found that the state encouragement to buy Irish should
be considered a MEQR. The decision in Commission v Ireland (Buy Irish) was
tempered slightly in Apple and Pear Development Council v Lewis where it
was held that a member state could create a specialised national product group
to research and give technical advice provided no attempt was made to entice
consumers to purchase only home grown produce.
Measures effecting the free movement of goods may be distinctly applicable or
indistinctly applicable. Distinctly applicable measures impose different burdens on
national and imported goods, to the detriment of the imported goods. Indistinctly
applicable measures are those which impose the same burden on national and
imported goods but which may impose a different burden in fact. It is harder to
show that these are breach of free trade, however apart from a few exceptions
which were identified in the following case, they are consider to breach article 28
and 29. In Cassis de Dijon, the law in question was a German one that
prohibited the sale of various liquors with an alcohol content of less than 25%.
Cassis was a French liquor with an alcohol content of 15-20%. It was found that
 the prohibitions contained in Article 34 of the TFEU apply to indistinctly applicable
measure as well as distinctly applicable measure.
Article 34 TFEU also applied where a MS fails to adopt the necessary measures
in order to ensure the free movement of goods, even where obstacles are not
caused by the State. This obligation to ensure the free movement of goods is an
obligation arising from Treaty itself. In Commission v France, French producers
of fresh fruit, particularly strawberries, objected to Spanish imports of
strawberries, claiming that such imports caused economic loss to French farmers
Following significant collective action by French citizens, preventing the import of
Spanish fresh fruit, the Commission took action against France. It was held that
France required to act to prevent the blocking of imports. France was required to
give effect to EU law by virtue of ifs obligation of fidelity under Art 4(3) TEU (as it
is now, under the Treaty of Lisbon). By omitting to act, this obligation was
breached, as the internal market an area of free movement for, inter alia,
goods, could not function effectively France would be required to take
proportionate steps to assist in preventing the blockades.

Mutual Recognition
In Cassis, German legislation required fruit liqueurs to have a minimum alcohol
content of 25 percent if marked lawfully in German. French Cassis only had an
alcohol between 15-2o percent and therefore could not be sold in German
Market. It was argued that the condition was an MEQR. CJ established two
principle, mutual recognition and rule of reason.
Mutual recognition works as a presumption to be applied to differing Member
States requirement. The presumption is where the goods have been lawfully
produced and marketed in one MS, there is no reason why they should not be
introduced into another MS. The application of different regulatory requirements
is in itself a barrier to free movement.
This is illustrated in Prantl, where Italian wine was imported in an Italian
bocksteutel) bottle used for a particular bulbous shape similar to a German bottle
used for a particular quality wine. CJ notes that bulbous wine bottles had been
manufactured in Italy for over a hundred years and therefore,
The answer must therefore be that Article 34 must be interpreted as meaning that
the application by a MS to imports of wine originating in another MS of national
legislation allowing only certain national producers to use a specific shape of
bottle when the use of that shape or a similar shape of bottle accords with a fair
and traditional practice in the state of origin constitute a measure having an effect
equivalent to a quantitative restriction.
 Rule of reason
The second principle, rule of reasons, allows for certain circumstances when
indistinctly applicable restriction would be allowed if they could satisfied the
following mandatory requirement which stressed in Cassis De Dijon, that is,
effectiveness of fiscal supervision, the protection of public health, the fairness of
commercial transactions and the defence of consumer.
It should be note that the rule of reason applies to indistinctly applicable
measures only. In Commission v Ireland, Irish legislation required Irish
souvenirs not Manufactured in Ireland to bear the label foreign. Commission
argued this breached Article 34 on the ground that measure had the effect of
lowering the value of imported product by causing the reduction in value or an
increase in cost. Irish government justified on the basis of consumer protection.
However, as the measures only applied to imported products, it was a distinctly
applicable measures and therefore could not be covered by the rule of reason
from Cassis.
In order to satisfy rule of reason, the measured being used must be no more than
is necessary to achieve their aim. If the measures goes beyond necessary, it will
fail outside Cassis and will therefore be classified as a breach of Article 34.
For example, in Walter Rau Lebensmittelwerke v de Smedt PvbA, Belgian
requirement that all margarine for sale should be in cube-shape form or cube-
shape packaging was argued to be placed for the protection of consumer on the
basis that Belgian consumer was so used to purchasing margarine in this
particular form that so sell margarine in the other forms may cause confusion. It
was held that, if the aim of measure was to prevent confusion amongst Belgian
consumers, this could be achieved in a way that was more proportionate and
therefore less of a hindrance to be free movement of goods.
An example of a requirement development post-Cassis is to found in
Commission v Denmark, where Danish legislation required certain drinks sold
in Denmark to be packaged in reusable containers and deposit and return
scheme were to be established. These measures were all well designed to
protect environment. CJ recognized environmental protection as a mandatory
requirement, but was clear that the measures were still required to satisfy the test
of proportionality. Unfortunately, for Danish gov, they did not.
Besides, in Torfaen Borough Council v B&Q plc, which concern in the Shops
Act 1950, which with limited exceptions prohibited Sunday trading in UK. B&Q
argued that this provision was an MEQR because its consequence was to reduce
sales and hence the volume of imports from other Member States. CJ found that
Sunday trading rules were justified because they were in accord with national or
regional sociocultural characteristics. In so doing, mandatory requirement were
again developed further in including these.
In Criminal Proceedings against Keck and Mithouard, it have further divided
indistinctly applicable measures into selling arrangements, which would not
breach Article 28, and product-related requirements, which would, this was
necessary as traders were beginning to challenge every national rule that even
Selling arrangement can be defined as rule relating to the market circumstances in which the
goods are sold as opposed to rules relating to the composition of the product or its packaging.
 slightly limited commercial freedom. It was decided that not all differences should
be removed due to one countrys rule being stricter than other. In Keck, a French
law prohibited the selling of goods at a loss. This was considered a selling
arrangement and so did not breach Article 28. In contrast, product-related
requirements, which often relate to the packaging aspects of the producs, such
as those in the case of Mars and Schwart, DO breach Article 28.

It has been held to include:

1. Where or by whom goods may be sold.

Commission of European Union v Hellenic Republic (c391/92)

2. When goods may be sold

Semeraro Casa Uno Srl v Sindaco del Comune di Erbusco

3. Advertising restriction
Konsumentombudsmannen v De Agostini (svenska) Forlag AB

4. Price control
Keck

In Tankstationt Heukske, CJ held that Article 34 TFEU did not apply to rules
concerning the opening times of shops at petrol stations which applied to all
and affected all in the same manner, such matters amounted to selling
arrangement.
However, those discriminatory restriction that do not satisfy the Keck test will
remain in Article 34 and fall to be considered within Article 36 or Cassis.
Derogation:
Article 36 of the TFEU provides a number of clearly defined exceptions to the
prohibitions detailed in Articles 34 and 35. Specifically restrictions to the free
movement of goods may become justified on grounds of public policy, morality, or
public security. In addition, in order to protect the health and life of humans,
animals, and plant and to protect national treasures the prohibitions maybe lifted.
Finally, derogations from Articles 34 and 35 is allowed in order to protect
industrial and commercial property.
In Case 113/80 Commission v Ireland (Metal Objects) it was held that the list
of grounds for derogation in Article 36 of TFEU should be construed as narrowly
as possible because they were exceptions to a fundamental principle. Article 36
of the TFEU also stipulates that any prohibitions or restrictions to the free
movement of goods should not be means of arbitrary discriminatory or a
disguised restriction on trade between member states.