Summary
Parties
Grounds
Decision on costs
Operative part
Keywords
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Common Customs Tariff - Customs valuation - Transaction value - Determination - Harvest seed produced from basic seed supplied by the buyer - Licence fees payable by the buyer to the breeder of the basic seed for services performed within the Community - Fees to be added to the price paid
(Council Regulation No 1224/80, Art. 8(1)(b)(i) )
Summary
For the purposes of determining the customs value of harvest seed produced from basic seed supplied by the buyer, there should be added to the price paid or payable, in accordance with Article 8(1)(b)(i) of Council Regulation No 1224/80, licence fees which the buyer has to pay to the breeder of the basic seed in respect of the propagation of that seed, even where the breeder' s service has been performed within the customs territory of the Community.
In the first place, such licence fees must be attributed to the purchase of the basic seed, and form part of the price payable for that seed, which is then incorporated in the imported goods; in the second place there is no general principle which excludes from customs valuation services provided and goods produced within the customs territory of the Community.
Parties
In Case C-116/89,
REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht Muenchen (Finance Court, Munich) for a preliminary ruling in the proceedings pending before that court between
BayWa AG
and
Hauptzollamt (Principal Customs Office) Weiden,
on the interpretation of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes (Official Journal 1980 L 134, p. 1),
THE COURT (First Chamber),
composed of: G. C. Rodríguez Iglesias, President of the Chamber, Sir Gordon Slynn and R. Joliet, Judges,
Advocate General: C. O. Lenz
Registrar: H. A. Ruehl, Principal Administrator,
after considering the observations submitted on behalf of
BayWa AG, by Helmut Fischer, a member of its Legal Department,
the Government of the Federal Republic of Germany, by Ernst Roeder, Regierungsdirektor in the Federal Ministry of the Economy, acting as Agent, and
the Commission of the European Communities, by Joern Sack, Legal Adviser, acting as Agent,
having regard to the Report for the Hearing,
after hearing oral argument from BayWa AG, represented by Martine Schmitt, of the Paris Bar, and the Commission at the hearing on 29 March 1990,
after hearing the Opinion of the Advocate General delivered at the sitting on 2 May 1990,
gives the following
Judgment
Grounds
1 By order dated 15 February 1989, which was received at the Court on 10 April 1989, the Finanzgericht Muenchen referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes (Official Journal 1980 L 134, p. 1, hereinafter referred to as "the customs valuation regulation").
2 The question arose in the context of a dispute between the German company BayWa AG and the Hauptzollamt Weiden concerning a decision determining customs duties on imports of harvest seed.
3 BayWa buys basic seed from German breeders and sells it to propagation undertakings in Poland and Czechoslovakia which produce harvest seed. That harvest seed is then bought by BayWa, imported into the Community and sold on the Community market. Under its contracts with the German breeders, BayWa is under an obligation to pay, normally before 31 May in the year following the harvest, licence fees calculated according to the quantity of harvest seed produced in the non-member country.
4 By a decision of 27 May 1985 the Hauptzollamt included the licence fees paid by BayWa to the German breeders in the customs value of the harvest seed. In so doing, it relied on Article 8(1)(b)(i) of the customs valuation regulation which provides that the value, apportioned as appropriate, of "materials, components, parts and similar items incorporated in the imported goods" is to be added to the price actually paid or payable for those goods "where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of the imported goods, to the extent that such value has not been included in the price actually paid or payable".
5 BayWa appealed against that decision to the Finanzgericht Muenchen, which decided to stay the proceedings and seek a preliminary ruling from the Court on the following question:
"In the case of a sale of harvest seed for the production of which basic seed supplied by the buyer was used, should there be added to the price paid or payable, for the purpose of determining the customs value, licence fees which the buyer has to pay in respect of the harvest seed to the breeder of the basic seed, even where the breeder' s service has been performed within the Community?"
6 Reference is made to the Report for the Hearing for a fuller account of the facts of the case in the main proceedings, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.
7 It must be borne in mind that under Article 3(1) of the customs valuation regulation the customs value of goods is to be determined by adjusting the transaction value in accordance with Article 8. Article 8(1) lists a number of items to be added to the price actually paid or payable for the goods including, inter alia, the value of materials incorporated in the imported goods.
8 It is common ground that the customs value of the harvest seed comprises both the value of the basic seed and the costs of propagation and certification incurred by the propagation undertakings in the non-member countries. However, BayWa maintains that the licence fees cannot be deemed to form part of the value of the materials incorporated in the imported goods, since they are calculated on the basis of the quantity of harvest seed produced, imported and subsequently sold in the Community. It claims that the obligation to pay the licence fees does not arise until it markets the harvest seed in Germany and that those fees cannot, therefore, be deemed to form part of the value of the basic seed.
9 In support of its argument, BayWa pointed out that under the terms of its contracts with the German breeders no licence fees would be due if the harvest seed were destroyed in the non-member countries. Furthermore, the obligation to pay the licence fees arises solely out of the contractual relationships between BayWa and the breeders; the contract between BayWa and the propagators in the non-member countries, however, contains no reference to any such obligation and breeders' rights are not recognized in either Poland or Czechoslovakia.
10 That argument must be dismissed. It is clear that the licence fees are intended to constitute consideration for the breeders' services and to provide the breeders with a fair share of the profits resulting from the breeding of the basic seed. That is why, apart from the initial price charged for the basic seed, the breeders are entitled to a licence fee calculated on the basis of the quantity of harvest seed imported and determined as at the date on which that seed is marketed. The breeder thus bears, to a lesser degree, the risks of the process of propagation and marketing. It follows, inter alia, that no licence fees are due if the harvest of the seed in the non-member countries is lost. Likewise, if BayWa has not sold the harvest seed by 31 May in the year following the harvest, the time-limit for paying the fees is extended.
11 Furthermore, it is clear from the documents submitted to the Court that the contracts between, on the one hand, BayWa and the German breeders and, on the other, BayWa and the Polish and Czechoslovakian propagation undertakings are closely linked. The contracts for the purchase of the basic seed are entered into only on production of the propagation contract between BayWa and the undertaking in the non-member country. They mention, moreover, the assurances which the propagation undertakings must give. The breeders thus ensure that unless they authorize otherwise all the harvest seed is imported into Germany and marketed there, giving rise to the payment of the licence fees.
12 The licence fees must therefore be attributed to the purchase of the basic seed, and form part of the price payable for that seed. Since the basic seed is then incorporated in the imported goods, those fees must be added, pursuant to Article 8(1)(b)(i), to the price actually paid or payable for the imported seed.
13 In view of that finding, it is not necessary to consider BayWa' s arguments based on the interpretation of Article 8(1)(c) and (5)(b) of the customs valuation regulation and Article 1(2) of Commission Regulation (EEC) No 3158/83 of 9 November 1983 on the incidence of royalties and licence fees in customs value (Official Journal 1983 L 309, p. 19).
14 At the hearing, BayWa claimed that the inclusion of the licence fees in the customs value of the harvest seed would be contrary to the general principles of Community customs law, since the breeders' services which led to the production of the basic seed were performed entirely within the customs territory of the Community.
15 That argument must also be dismissed. There is no general principle which excludes from customs valuation services provided and goods produced within the customs territory of the Community. It is sufficient to refer once again to Article 8(1)(b)(i) of the customs valuation regulation, which takes no account whatever of whether the costs involved in the production of the items incorporated in the imported goods were incurred in the Community or elsewhere.
16 It is true that Article 8(1)(b)(iv) provides for the inclusion in the customs valuation of certain intellectual services, such as engineering, development, artwork and design work, only if they were undertaken elsewhere than in the Community.
17 It must be noted that that provision makes no mention of breeders' services. Furthermore, it concerns only services which are "necessary for the production of the imported goods". In the case with which the main proceedings are concerned, however, no intellectual service, such as engineering, was necessary during the production of the harvest seed: the intellectual service which led to the production of the basic seed had been completed and it played no part in the propagation process.
18 The answer to the question raised by the Finanzgericht Muenchen must therefore be that in the case of a sale of harvest seed produced from basic seed supplied by the buyer, there should be added to the price paid or payable, for the purposes of determining the customs value in accordance with Article 8(1)(b)(i) of Council Regulation No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes, licence fees which the buyer has to pay to the breeder of the basic seed in respect of the propagation of that seed, even where the breeder' s service has been performed within the customs territory of the Community.
Decision on costs
Costs
19 The costs incurred by the Government of the Federal Republic of Germany and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, in so far as the parties to the main proceedings 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.
Operative part
On those grounds,
THE COURT (First Chamber),
in answer to the question referred to it by the Finanzgericht Muenchen by order of 15 February 1989, hereby rules:
In the case of a sale of harvest seed produced from basic seed supplied by the buyer, there should be added to the price paid or payable, for the purposes of determining the customs value in accordance with Article 8(1)(b)(i) of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes, licence fees which the buyer has to pay to the breeder of the basic seed in respect of the propagation of that seed, even where the breeder' s service has been performed within the customs territory of the Community.
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