1

FREE MOVEMENT
GOODS

OF

Free movement of goods i.e. establishment of a common market between

Member States of EU, is one of the fundamental freedoms established by the Treaty
of Rome. The Treaty on the Functions of European Union (TFEU) lists main obstacles
to the freedom of movement of goods:

Custom duties on imports and exports ARTICLE 28 AND 30

Discriminatory internal taxation on imported goods ARTICLE 110
Quantitative restrictions on imports and exports ARTICLE 34 AND 35

A good has been described by the Court of Justice in COMMISSION V ITALY as any
product which can be valued in money and which are capable as such of forming
the subject of a commercial transaction.

Custom Duties
ARTICLE 28(1) TFEU is the foundational provision for this part of the Treaty:
The Union shall comprise a customs union which shall cover all trade in
goods and which shall involve the prohibition between Member States of
custom duties on imports and exports and of all charges having
equivalent effect, and the adoption of a common customs tariff in their
relations with third countries.
The idea is that goods can freely circulate within the internal market.

Third Countries
However, this principle does not apply to goods coming from third countries.
Such goods must first pass the common customs wall i.e. upon importation
of goods in any Member States of the EU, a common customs tariff must be
paid. This tariff is identical for all 28 Member States.
The tariff is determined based on the origin and the value of the good. Detailed
rules regarding the common customs tariff can be found in the EU CUSTOMS
CODE REGULATION 2913/92 and in further implementing legislation.

ARTICLE 29 OF THE TFEU holds that once all import formalities have been done
with and a common customs tariff has been paid, the goods coming from third
countries also become in free circulation within the internal market.

Fiscal Restrictions on EU Member States

ARTICLE 30 OF THE TFEU holds:
Customs duties on imports and exports and charges having equivalent
effect shall be prohibited between Member States. This prohibition shall
also apply to customs duties of a fiscal nature.
Custom Duties have been defined by the Court of justice as:
Financial charges demanded at the very time or by a reason of a good,
crossing a border between Member States.
As a result of the imposition of custom duties the cost price of the imported product
increases and from competition point of view has adverse consequences. As this is a
unilateral measure, it is the legislation of the host Member State which imposes a
custom duty on good to be imported.
To increase the effectiveness of ARTICLE 30, the concept of charges having an
equivalent effect to custom duties (CEEs) has been added to compliment the
prohibition of custom duties. The rationale is that it is designed to catch
protectionist measures that create a similar barrier to trade to customs duties
stricto sensu. It is therefore unsurprisingly that the ECJ has interpreted the term
expansively.
A CEE as defined in COMMISSION V ITALY is
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 absolute prohibition of custom duties and CEEs within the framework of the
Treaty was repeated in DIAMENTARBEIDERS.

Exception to Article 30
Member States cannot resort to any exceptions for breach of Article 30.
The proverbial exception to Article 30 is a payment to be made under national law
for a service rendered in the general interest imposed by EU law. The importers or
exporters will bear these costs of an inspection at the border, in this context.

However, in very limited circumstances can a charge be accepted under ARTICLE 30

OF THE TFEU. The Court accepts the imposition of a charge when it is levied to cover
the cost of a mandatory inspection required by an EU Regulation, the amount
proportionate to the cost of the service COMMISSION V GERMANY.
However, the European Court of Justice (ECJ) closely scrutinize such claims. This
theme can be seen in various ECJs decisions such as in the BRESCIANI CASE which was
designed to limit the ambit of any exception to ARTICLE 28 30 OF THE TFEU.
.
The application of ARTICLE 30 OF THE TFEU depends upon the effect of the duty or the
charge and not the purpose of imposing the restriction as per the Court of Justice.
Furthermore, a tax caught as a duty or a charge having an equivalent effect to
custom duties by ARTICLE 30 is in effect unlawful as stated in COMMISSION V ITALY. The
ECJ reaffirmed its emphasis on effect in DIAMENTARBEIDERS.

Recovery of Unlawful Charges

In case of unlawful charges levied, the general principle is that a Member State
must repay the charges: SAN GIORGIO CASE.
However, in circumstances where the trader has passes on the loss to customers,
and reimbursement would cause the trader to become unjustly enriched, would the
recovery of unlawful charges will not hold.

Internal Taxation
ARTICLE 110 OF THE TFEU, which is directly effective in the Member States if EU,
provides that:
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.
Furthermore, no Member State shall impose on the products of other
Member States any internal taxation of such a nature as to afford indirect
protection to other products.
The basic purpose of this Article is to prevent the purpose / objective of ARTICLE 28
30 from being undermined by discriminatory internal taxation so that the local
goods are not given more preference than imported goods.

These provisions would be of no avail if it were open to a state to prejudice foreign

products once they were inside its own territory by levying discriminatory taxes,
thereby disadvantaging those imported products in competition with domestic
goods.

Article 110(1)
ARTICLE 110(1) OF THE TFEU requires that whatever system of internal taxation a
Member State adopts; it should be applied without any discrimination to similar
products. Concretely, this means that higher taxation of foreign or imported
products is prohibited: COMMISSION V ITALY.
Similar products are understood as comparable products in terms of the
characteristics, ingredients and the ability to meet consumer needs: COMMISSION V
FRANCE HUMBLOT CASE.
The result of this prohibition is that the taxation of domestic and foreign products
must be equalized. The rules relating to non-discrimination will also be resorted to if
the procedure for the tax collection treats domestic goods and those which come
from another Member State unequally: COMMISSION V IRELAND.
ARTICLE 110(1) covers indirect as well as direct discrimination. The ECJ has
emphasized that a tax system will be compatible with ARTICLE 110, only if it excludes
any possibility of imported products being taxed more heavily than similar
domestic goods: HUMBLOT CASE.
While the Treaty prohibits indirect as well as direct discrimination under ARTICLE
110(1), it may be necessary to determine which is in issue because direct
discrimination on grounds of nationality cannot be justified. Tax rules of a Member
State that tend to favour the national producers may be saved if there is some
objective justification, which is acceptable to the EU. In this way such Treaty Articles
are prevented from becoming too harsh or draconian in their application. This
judicial approach is exemplified in: CHEMICAL CASE COMMISSION V FRANCE.
Moreover, the probability of escaping the prohibition of ARTICLE 110 in case of
differential tax rates on cars is higher, where they were imposed to encourage the
use of environmentally friendly models, provided they did not discriminate against
imports: COMMISSION V GREECE.

The Relationship between Article 110(1) and (2)

ARTICLE 110(1) TFEU, prohibits the imposition of internal taxes on products from
other Member States in excess of those levied on similar domestic products.

Whereas, ARTICLE 110(2) is designed to catch national tax provisions that apply
unequal tax ratings to goods are in competition with each other.
The dividing line between the two proves to be problematic, due to the contestable
issue of whether the goods are deemed to be similar or not. The relationship
between ARTICLES 110(1) and 110(2) was brought forth in COMMISSION V FRANCE.
The first step is to determine whether the products are similar. If they are then
ARTICLE 110(1) applies. If they are not, then the tax rules may still be caught by
ARTICLE 110(2). The issue has arisen in a number of cases: FINK-FRUCHT GMBH CASE.
A breach of ARTICLE 110(1) means that the Member State has to equalize the taxes
on domestic and imported goods. Breach of ARTICLE 110(2,) means that the Member
State has to remove the protective effect, but this may not entail the equalization of
the tax burdens.
Thus the Courts are very careful in determining whether the analysis falls under
ARTICLE 110 (1) OR (2) as in JOHN WALKER CASE.

Article 110(2)
ARTICLE 110(2) deals with the prohibition of protectionist intent in context of
competing products The object is to prevent these differential tax ratings from
affording indirect protection to the domestic goods i.e. favoring of domestic
products is prohibited. If a provision is caught by ARTICLE 110(2) the Member State
has to remove the protective effect.
The methodology ECJ adjudicates to when determining the protective effect is found
in Commission v UK. Its judgment proceeds in two stages:
1. establish that there is some competitive relationship between the two
products product sustainability and consumer preference are important
considerations.
2. considers whether the tax system is protective of the domestic product the
price-elasticity of demand is an important determining factor.

The Boundary between Article 28-30 and 110113

The general principle is that the relationship between the two is mutually exclusive.
They both concern the imposition of fiscal charges by the state. ARTICLE 28-30
catches those duties or charges levied as a result of goods crossing a border.
Whereas, ARTICLE 110-113 catches fiscal policy, which is internal to the state. They

prevent discrimination against goods once they have entered a particular Member
State.
However, it is important to first determine which set of Treaty Articles is applicable,
since the result can be significant for the legal test that is applied. If a state fiscal
measure is caught by ARTICLE 30 TFEU, then it will be unlawful. By contrast, if a fiscal
measure is caught by ARTICLE 110 TFEU, the taxation level set by the state are not
unlawful, and thus the inquiry will be whether the tax discriminates against the
importer under ARTICLE 110(1) or has a protective effect under ARTICLE 110(2).
In most circumstances it will not be difficult to determine whether the case falls
under ARTICLE 30 or ARTICLE 110. However, there are three situations that will prove
difficult:

Levies imposed on Importers

Where a state imposes a levy on an importer, such a case would normally be
decided on the basis of ARTICLE 30, and the levy would be deemed to a CEE.
However, a levy considered under Article 110 on the basis that the domestic
producers also have to pay is an unsuccessful argument as demonstrated by the:
BRESCIANI CASE. Only in exceptional circumstances the Court may decide that the
charge or levy is characterrised as a tax, the legality of which will be tested under
ARTICLE 110: DENKAVIT.
The ECJ holds that a charge levied at the border will be regarded as an internal tax
only where the comparable charge levied on national products is applied at the
same rate at the same marketing stage and on the basis of an identical changeable
market: MICHAILIDIS.

Imports taxed but not made by the State of Import

Where the importing state does not make the imported product, but imposes a tax
on it nonetheless. In such a case, the charge will not be classified as a CEE for as
the ECJ holds that if any charge imposed by a state on a product, which it did not
make at all, or only in negligible quantities, were to be classified as a CEE under
Article 30, then the charge would automatically be unlawful, and the importing state
could not tax goods, which it did not produce itself: CO-FRUTTA.

Selective Tax Refund

When a state chooses to make a selective refund of a tax or if it uses the money to
benefit a particular group the position appears to be as follows: if the money from a

tax flows into the national exchequer and is then used for the benefit of a particular
domestic industry, this could be challenged as a state aid: ARTICLES 107109 TFEU
NOTE: STATE AID REFERS TO FORMS OF ASSISTANCE FROM A PUBLIC BODY, OR PUBLICLY-FUNDED
BODY, GIVEN TO SELECTED UNDERTAKINGS (ANY ENTITY WHICH PUTS GOODS OR SERVICES ON THE
GIVEN MARKET), WHICH HAS THE POTENTIAL TO DISTORT COMPETITION AND AFFECT TRADE BETWEEN
MEMBER STATES OF THE EUROPEAN UNION.
The European Commission monitors and controls State Aid in the EU. Member
States are obliged to notify and seek approval from the Commission before granting
State Aid. This gives the Commission the opportunity to approve or refuse to
approve the proposed measure.
Classification problems as between ARTICLES 30 AND 110 TFEU arise when the money
that has been refunded can be linked to what has been levied pursuant to a specific
tax. The correct classification would then depend upon whether the refund or other
benefit to the national producers wholly or partially offsets the tax.
If the former, then the tax will be treated under ARTICLE 30, the rationale being that
what in effect exists is a charge levied only on the imported or exported product. If
the latter, the matter will fall to be assessed under ARTICLE 110, the rationale being
that the partial refund in effect means that there could be a discriminatory tax.
Three conditions must be satisfied for the charge to be considered under ARTICLE 30
rather than ARTICLE 110:

The charge must be destined exclusively for financing activities which very
largely benefit the taxed domestic product;

There must exist identity between the taxed product and domestic product
benefitting from the charge;

The charge imposed on

compensated: SCHARBATKE.

the

domestic

product

must

be

completely

Quantitative Restrictions
ARTICLE 34 OF THE TFEU states that:
quantitative restrictions on imports and all measures having equivalent
effect shall be prohibited between Member States.
ARTICLE 35 provides a similar provision as ARTICLE 34 but relating to exports.
However, ARTICLE 36 provides justification for a State imposing quantitative
restriction on the movement of goods for certain cases.

The purpose of imposing a prohibition on quantitative restrictions is to ensure that

foreign products are not discriminated against and that they have free access to
national markets.
The GEDDO CASE broadly defines the scope of a quantitative restriction:
measures which amount to a total or partial restraint of, according to the
circumstances, imports, exports or goods in transit.
However, an even broader definition is allotted to measures having an equivalent
effect to quantitative restrictions (MEQRs) by the European Commission and the ECJ.
Moreover, ARTICLE 2 OF THE DIRECTIVE 70/50 provides an idea as to the scope of an
MEQR as defined by the Commission. It lists down ways in which the importing state
can discriminate against goods. These includes:

Minimum or maximum prices for imported products;

Less favorable prices for imported products;
Lowering the value of the imported product by reducing its intrinsic value or

increasing its costs;

Payment conditions for imported products which differ from those for

domestic products;
Conditions in respect of packaging;
Composition;
Identification;
Size;
Weight etc.

An MEQR was defined in the DASSONVILLE CASE as:

All trading rules enacted by the Member States which are capable of
hindering, directly or indirectly, actually or potentially intra-Community
trade
This is a very wide definition as a result of which the Court has given a broad
interpretation to the provisions of free movement of goods i.e. Article 34
NOTE: THE DEFINITION OF MEQR IN DASSONVILLE IS NOW ARTICLE 34 OF THE TFEU.
Moreover, the ECJ in Dassonville Case influenced by ARTICLE 3 OF THE DIRECTIVE 70/50
held that where a products authenticity is not guaranteed, in such a case should the
Member State enact measures to defend the consumer they would be justified
provided that such measures are reasonable and do not hinder the trade between
Member States and the goods are freely accessible in the EU Community.

The ECJ holds that the presence of a discriminatory intent is irrelevant for it is the
effect of the MEQR that is crucial in proving the existence of an MEQR. It takes a
broad view of measures that hinder the free flow of goods, and the definition does
not even require that the rules actually discriminate between domestic and
imported goods. Moreover, the ECJ indicated that if the restriction is reasonable
they may not be caught by ARTICLE 34 OF THE TFEU. This is the origin of what came to
be known as the rules of reason.

Discriminatory Barriers to Trade

ARTICLE 34 catches national provisions that favour domestic goods over imported
one. There are numerous types of case involving direct or indirect discrimination
between domestic and imported goods.

Import and Export Restriction

Import or Export licences are caught by ARTICLE 34 as a certificate of trade removes
the purpose of free movement of goods. Moreover, national provisions that subject
imported goods to requirements that are not imposed on domestic goods are
caught by ARTICLE 34: COMMISSION V ITALY. This is exemplified in the case of BOUHELIER.

Promotion or Favouring of Domestic Products

Favouring or promoting domestic product to the detriment of competing imports is
forbidden by ARTICLE 34. This can occur in a number of ways:
i.

where a state engages in a campaign to promote the purchase of

domestic as opposed to imported goods: COMMISSION V IRELAND

ii.

where a state has rules on the origin-marking of certain goods:

COMMISSION V UNITED KINGDOM

iii.

public procurement cannot be structured so as to favour domestic

producers: COMMISSION V IRELAND

iv.

where the discrimination is evident in the administrative practice:

COMMISSION V FRANCE

Price-Fixing
A state cannot treat imported goods less favorably in law or fact than domestic
products through price-fixing regulations: HANDELSGESELLSCHAFT MBH

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Measures which make Imports more Difficult or Costly

There are numerous ways in which a Member State can render it more difficult for
importers to break into that market, as exemplified by the SCHLOH CASE
(Roadworthiness testing for imported vehicles).

National Measures versus Private Action

ARTICLE 34, only applies to measures taken by the state as opposed to those taken

by private parties: SAPOD AUDIC CASE.

Indistinctly Applicable Rules: Cassis de Dijon

There are many other rules that create barriers to trade between Member States,
other than discrimination against the nation of the products origin. The Commission
appreciated this in ARTICLE 3 OF THE DIRECTIVE 70/50. which covered measures that
were equally applicable to domestic and imported products.
Moreover, DASSONVILLE also made it apparent that ARTICLE 34 OF THE TFEU can also
catch indistinctly applicable measure considering that the definition of an MEQR did
not require a measure to be discriminatory.
In the landmark case of CASSIS DE DIJON the ECJ encapsulated he principle of mutual
recognition by building upon the rule of reason found in the DASSONVILLE
judgement. This is because the basic idea was that when goods had been marketed
in one Member State, they should be admitted into another Member State without
restriction, unless the state of import could successfully invoke one of the
mandatory requirements.
The judgement in CASSIS DE DIJON holds that:
obstacles to movement within the Community resulting from
disparities between the national laws relating to the marketing of the
products in question must be accepted in so far as those provisions may
be recognized as being necessary in order to satisfy mandatory
requirements relating in particular to the effectiveness of fiscal
supervision, the protection of public health, the fairness of commercial
transactions and the defence of the consumer.
This list is not exhaustive. The mandatory requirements that constitute the rule of
reason are taken into account within the framework of ARTICLE 34, and are separate
from the exception found in ARTICLE 36.

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There are a number of cases found in the post-Cassis judgment applying the
abovementioned principles:
DESERBAIS
GILLI AND ANDRES
RAU

Indistinctly Applicable Rules: Article 35

In case of ARTICLE 35 OF THE TFEU which prohibits quantitative restrictions and
MEQRs on exports, a provision will only be caught if there is direct or indirect
discrimination. It does not catch indistinctly applicable measures the rationale being
that to do so would impose a dual burden on the importer i.e. he will have to
satisfy the relevant rules in its own state and also the state of import. This will not
normally be so in relation to ARTICLE 35: GROENVELD.

The Limits of Article 34

CASSIS DE DIJON signaled the ECJs willingness to extend ARTICLE 34 to catch
indistinctly applicable rules. An indistinctly applicable rule is one which applies, at
least on the face of it, to imported and domestic products alike. The same rule
applies and imposes an equal burden on both products. This imposes a dual burden
on the importer as the importer may have already satisfied a similar rule in the
state of export. Therefore, the imported product has to comply with two sets of
product requirements in order to be marketed lawfully in the state of import.
The key issue is whether rules of this nature should be held to fall within ARTICLE 34,
subject to a possible justification, or whether they should be deemed to be outside
the scope of ARTICLE 34 altogether. If the rules are within ARTICLE 34 they are prima
facie unlawful. The burden falls on those relying on ARTICLE 34 to seek a possible
objective justification and show that the effects of the rule were proportionate. The
latter issue would be determined by the national Courts: TORFAEN BC V B & Q PLC.
The ECJ rulings have differed regarding this in many cases. In some cases, the ECJ
held that rules which did not relate to the characteristics of the goods and did not
impose a dual burden on the importer, but concerned only the conditions on which
all goods were sold were outside ARTICLE 34: OEBEL. Whereas, in other cases the
result on the same rules have been different: CINETHEQUE.
In KECK CASE a distinction was made between the characteristics of the goods and
selling arrangements. The decision was based in part upon the distinction between
dual-burden rules and equal-burden rules.

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It held that rules relating to the characteristics of the goods themselves that

put imports at disadvantage i.e. requirements to be met is an MEQR and

therefore, falls within the scope of Article 34 because they would have to be
satisfied by the importer in addition to any such provisions existing within its
own state. Such rules were by their very nature likely to impede access to
the market for imported goods. These CASSIS DE DIJON type rules impose a dual
burden on the importers.
Whereas, rules concerning selling arrangements fall outside the scope of
ARTICLE 34 as they are concerned with arrangement of the circumstances of
sale, provided that they effected in the same manner in law or fact domestic
and imported goods. They imposed an equal burden as it did not impose extra
costs on the importer which prevent their access to the market: TANKSTATION PUNTO
CASA.
The distinction drawn in KECK proves to be problematic due to the ambiguous nature
of the term selling arrangement. The definition seems to cover only static selling
arrangements: rules relating to the hours at which shops may be open, the length of
time for which people may work or the type of premises in which certain goods may
be sold. Non-static or dynamic selling arrangements: are outside the scope of Article
34 as they include the ways in which a manufacturer chooses to market this specific
product, through certain forms of advertising, free offers and the like.
In order for a provision to qualify as a selling arrangement, two requirements must
be satisfied:

the rule applies to all traders in the territory: FAMILIAPRESS.

the restriction effects in the same manner in law and in fact, the marketing of
both domestic and imported goods DI AGOSTINI CASE.

Recent case law that incorporates the principle of product use:

COMMISSION V ITALY
AKLAGAREN V PERCY MICKELSSON

Article 36: Defences to Discriminatory Measures

If trade rules are found to be discriminatory they can be saved through ARTICLE 36 OF
THE TFEU.
The provisions of Article 34 and 35 shall not preclude prohibitions or
restrictions on imports, exports or goods in transit justified on grounds of
public morality, public policy or public security, then protection of health
and life of humans, animals or plants, the protection of national treasures

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possessing artistic, historic archaeological value, or the 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 ECJ has construed ARTICLE 36 strictly. Discriminatory rules will be closely
scrutinized to ensure that the defence pleaded is warranted. They must also pass a
test of proportionality: the discriminatory measure must be the least restrictive
possible to attain the end in view.

Case Law:

Public Morality: HENN AND DARBY CONEGATE

Public Policy: CENTRE LECLERC
Public Security: CAMPUS OIL V MINISTER FOR INDUSTRY AND ENERGY
Protection of Health and Life of Humans, Animals, or Plants: COMMISSION V UK
SANDOZ BV

Principle of Mutual Recognition:

The burden of proof under ARTICLE 36 rests with the Member State. Member State
application of the justification is now subject to important new conditions laid down
by EU legislation of REGULATION 764/2008.
Mutual Recognition: Goods lawfully marketed in one Member State should, in
principle, be admitted to the market of any other state. This leads to competition
among rules, or regulatory competition. A producer will normally have to comply
with the national rules of only one Member State for its goods to be move freely in
the EU. Firms are then able to choose between different national regulations.
Consumers can choose between the products that comply with those rules. This
creates a competitive process among the different national rules: the choice of
producers of where to produce and of consumers of what to but will determine the
best rules.

Mandatory Requirements: Defences to Indistinctly

Applicable Rules
The rationale for mandatory requirements is that many rules that regulate trade are
also capable of restricting trade, yet some serve objectively justifiable purposes.
The list of mandatory requirements in CASSIS DE DIJON is often referred to as the rule
of reason. It draws upon the earlier hint in DASSONVILLE that, in the absence of EU
measures, reasonable trade rules would be accepted in certain circumstances. In
OOSTHOEK, the rule of reason was regarded as a general principle of interpretation

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designed to mitigate the effects of strict prohibitions laid down in the Treaty
provisions on free movement.
The burden of proving justification rests on the state relying on the mandatory
requirement. Member States application of the mandatory requirements is now
subject to important new conditions laid down by EU legislation: REGULATION
764/2008

The Relationship Between the Mandatory Requirements

and Article 36
The traditional view has been that the CASSIS mandatory requirements are separate
from the justifications under ARTICLE 36.
The ECJ held that the CASSIS exceptions could be used only in respect of rules that
were not discriminatory. The Cassis list of mandatory requirements includes matters
such as the protection of consumers and the fairness of commercial transactions,
which are not mentioned within ARTICLE 36, and the Cassis list is not exhaustive.
The ECJs willingness to create a broader category of justification for indistinctly
applicable rules is explicable because discriminatory rules strike at the very heart of
EU, and hence any possible justification should be narrowly confined.

The Mandatory Requirements Case Law:

Consumer Protection: COMMISSION V GERMANY

Fairness of Commercial Transactions: KARL PRANTL
Public Health: COMMISSION V GERMANY
Protection of the Environment: COMMISSION V DENMARK
Pluralism of the Press: FAMILIAPRESS
Fostering of certain forms of art: CINETHEQUE
Road Safety: COMMISSION V ITALY