In Case C-79/89,
REFERENCE to the Court under Article 177 of the EEC Treaty by the Bundesfinanzhof [Federal Finance Court] for a preliminary ruling in the proceedings pending before that court between
Brown Boveri & Cie AG
and
Hauptzollamt [Principal Customs Office] Mannheim,
on the interpretation of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes (Official Journal 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: J.A. Pompe, Deputy Registrar,
after considering the written observations submitted on behalf of
Brown Boveri, by Hinrich Glashoff, tax adviser,
the Government of the Federal Republic of Germany, by Martin Seidel, Ministerialrat at the Ministry for Economic Affairs, and Klaus Peter Mueller-Eiselt, Regierungsdirektor at the Federal Finance Ministry, acting as Agents,
the Commission of the European Communities, by Joern Sack, Legal Adviser, assisted by Renate Kubicki, a national civil servant seconded to the Legal Department of the Commission, acting as Agents,
having regard to the Report for the Hearing,
after hearing oral argument from Brown Boveri 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
1 By order of 13 February 1989, which was received at the Court of Justice on 13 March 1989, the Bundesfinanzhof (Federal Finance Court) referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the interpretation of Article 3 of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes (Official Journal L 134, p. 1; hereinafter referred to as "the regulation on customs value").
2 The questions were raised in the course of proceedings between Brown Boveri & Cie AG (hereinafter "BBC") and the Hauptzollamt Mannheim (hereinafter "the Hauptzollamt") concerning the valuation for customs purposes of certain consignments of computer hardware and software.
3 Under a contract concluded in 1980, BBC purchased from an undertaking established in the United States of America a computer-assisted design system for a total of US (6) 000 000. The contract provided for the purchase of computer hardware, operating software and applications software. The applications software consisted of prepared programmes recorded on magnetic media and capable of adaptation to the special needs of BBC. No separate prices for the hardware and the software were agreed.
4 In February 1982, BBC took delivery of three consignments of hardware and taped software, and in June 1982 a further consignment of taped software was delivered. In the relevant customs declarations the imported goods were described as "computer parts" in February and as "software" in June. Each of the four invoices attached to the declarations showed a comprehensive price, without any reference to the carrier media or to any prices assigned to them.
5 In its declarations as to the value of the goods for customs purposes, BBC deducted from the comprehensive price the assembly costs, the cost of transportation within the Community and the value of the software.
6 By decisions of 2 June 1982 and 23 December 1983, the Hauptzollamt charged BBC additional customs duties. Basing itself on the prices shown in the four invoices attached to the customs declarations, the Hauptzollamt allowed deduction only of the cost of transportation within the Community. The value of the software and the assembly costs were included in the customs value on the ground that the invoices did not disclose separate amounts, which would have qualified for deduction.
7 BBC lodged an objection to both decisions and, during the administrative proceedings, submitted a new version of each of the three invoices for the consignments received in February 1982. Each of these invoices contained a breakdown of the comprehensive prices into hardware and software prices. BBC also produced two telex messages from the American manufacturer, quantifying the costs of the software and assembly.
8 The Hauptzollamt dismissed the objections as unfounded, whereupon BBC brought two actions before the Finanzgericht [Finance Court]. When those applications were similarly dismissed, BBC appealed to the Bundesfinanzhof, which decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
"1. Was Article 3 of Regulation (EEC) No 1224/80 to be interpreted in 1982 as meaning that the transaction value of imported carrier media with software recorded on them in respect of which the supplier had provided the declarant with an invoice containing only a total price was the entire invoice price, or was the transaction value only that part of the invoice price which corresponded to the carrier medium? Did it make any difference if the declarant distinguished between the price of the carrier medium and the price of the software at the material time or later?
2. Are charges for assembly to be regarded as having been 'distinguished' within the meaning of Article 3(4) of Regulation (EEC) No 1224/80 only when the distinction has been brought to the customs authorities' attention at the material time?"
9 Reference is made to the Report for the Hearing for a fuller account of the facts of the dispute before the national court, the course of 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.
Question 1
10 It should first be noted that under Article 3(1) of the regulation on customs value "the customs value of ... goods ... shall be the transaction value, that is, the price actually paid or payable for the goods when sold for export to the customs territory of the Community ...".
11 The question of the customs valuation of carrier media containing software has been resolved since 1 May 1985 by the insertion of Article 8a into the regulation on customs value by Council Regulation (EEC) No 1055/85 of 23 April 1985, amending Regulation (EEC) No 1224/80 (Official Journal L 112, p. 50). Article 8a(1) provides as follows:
" ... in determining the customs value of imported carrier media for use in data processing equipment and bearing data or instructions, only the cost or value of the carrier medium itself shall be taken into account. The customs value of imported carrier media bearing data or instructions shall not, therefore, include the cost or value of the data or instructions, provided that such cost or value is distinguished from the cost or value of the carrier medium in question."
12 It follows that the object of the first part of Question 1 is to establish whether, in principle, the value of the software should have been taken into account for the purposes of customs valuation in the case of imports carried out before 1 May 1985.
13 The Commission takes the view that before that date Article 3(1) of the regulation on customs value, which takes the transaction value as the basis for valuing goods, was fully applicable to software recorded on carrier media. The Commission admits that software, not being "goods" as such, is not subject to the Common Customs Tariff. Nevertheless, it maintains that data and information, combined with the carrier medium, constitute a single item of goods which is subject, as a whole, to customs legislation. It follows that the customs value is to be determined by reference to the price actually paid or payable for that whole. Accordingly, the Commission takes the view that, although Article 8a of the regulation on customs value did indeed amend the rules for the calculation of that value, it is not applicable to the case before the Bundesfinanzhof.
14 BBC, on the other hand, argues that Article 8a of the regulation on customs value is merely declaratory in character. It claims that only "goods" are subject to customs duty. It follows that the inclusion in the customs value of the value of intangible property such as software would lead to an arbitrary value, in breach of Article 2(4)(g) of that regulation.
15 In that respect it should be observed that, according to its preamble, Regulation No 1055/85 was adopted as the result of a decision of the Committee on Customs Valuation, set up by Article 18 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (hereinafter "the GATT Agreement"). The main provisions of the GATT Agreement were implemented by the regulation on customs value.
16 The Committee on Customs Valuation was set up for the purpose of affording parties to the GATT Agreement the opportunity of deliberating on matters relating to the administration of the customs valuation system as it might affect the operation of the Agreement.
17 According to the decision adopted by that Committee at its meeting on 24 September 1984, application of the transaction value as the basis for the customs valuation of software recorded on carrier media is fully consistent with the Agreement; however, the decision concedes that it will also be consistent with the Agreement for Contracting States to adopt, if they so wish, the practice of taking account only of the value of the carrier medium itself, provided that this value is distinguished from the cost or value of the data or instructions.
18 The sixth recital in the preamble to Regulation No 1055/85, mentioned above, shows that the Council took the view that the adoption of that second approach to the valuation of carrier data containing software would contribute to a more harmonious development of world trade and was therefore acceptable to the Community. Consequently, the regulation on customs value "should be amended accordingly".
19 Consequently, by inserting Article 8a into the regulation on customs value the Council wished to make use of the opportunity created by the decision of the GATT Committee on Customs Valuation for adopting a new practice in the customs valuation of carrier data containing software. Nevertheless, it should be added that neither the decision of the GATT Committee nor Regulation No 1055/85 is retroactive in its effects. It follows that prior to the entry into force of Regulation No 1055/85 on 1 May 1985 the basis for the valuation of software recorded on carrier media was the transaction value, in accordance with Article 3 of the regulation on customs value.
20 It is therefore appropriate to establish the meaning of "transaction value" in the context of the valuation of carrier media contained in a software programme.
21 BBC is correct in arguing that software is not, as such, "goods" within the meaning of Article 3(1) of the regulation on customs value but is intangible property not subject to the Common Customs Tariff. However, when such property is embodied in an item of goods, the cost of acquiring that intangible property must be regarded as an integral part of the price paid or payable for the goods, and hence of the transaction value. In the case before the Bundesfinanzhof, the value of the software must therefore be regarded as an integral part of the customs value of the imported goods.
22 It is irrelevant to the present case whether the data and instructions embodied in the carrier medium can subsequently be altered by the user at will or whether they can be separated from the carrier media, since the material time for customs valuation is the time of importation and, by then, the software is integrated in the carrier media.
23 The answer to be given to the first part of Question 1, therefore, is that in 1982 Article 3 of Regulation (EEC) No 1224/80 was to be interpreted as meaning that the transaction value of carrier media containing at the time of importation recorded software in respect of which the supplier had invoiced a comprehensive price to the declarant had to be the invoiced price.
24 In the light of that answer to the first part of Question 1, there is no need to give a ruling on the second part.
Question 2
25 The object of Question 2 is to establish the time at which the assembly costs are to be distinguished from the price actually paid or payable for the imported goods in order to qualify, in appropriate cases, for exclusion from the customs value in accordance with Article 3(4)(a) of the regulation on customs value.
26 It should be noted that under Article 1(1)(g) of the regulation on customs value the phrase "the material time for valuation for customs purposes" means, in the case of goods declared for direct entry into free circulation, the date of acceptance by the customs authorities of the declarant' s statement of his intention that the goods should enter into free circulation.
27 It is clear from Article 1(1) of Commission Regulation (EEC) No 1496/80 of 11 June 1980 on the declaration of particulars relating to customs value and on documents to be furnished (Official Journal L 154, p. 16) that the declaration relating to customs value must accompany the entry form for release for free circulation made in respect of the goods in question. Under Article 3(1) of Council Directive 79/695/EEC of 24 July 1979 on the harmonization of procedures for the release of goods for free circulation (Official Journal L 205, p. 19), that entry form must contain the particulars necessary for the identification of the goods and for the application of import duties. Article 3(2) of that directive further requires that the entry form shall be accompanied by all the documents required for the correct application of import duties.
28 Article 8 of Directive 79/695/EEC permits the declarant to correct entries accepted by the customs authority on condition inter alia that such correction is requested before the goods are released for free circulation.
29 It follows that, as the Court ruled in Case C-11/89 (Unifert v Hauptzollamt Muenster [1990] ECR I-2275), once an importer has omitted in his customs declaration to distinguish the assembly costs from the price actually paid or payable, he may not amend his declaration or, consequently, the particulars regarding the customs value, after the customs authority has released the goods for free circulation - that is, after the material time for valuation for customs purposes.
30 That rule applies notwithstanding the fact that under Article 6(2) of Directive 79/695/EEC the customs authority may, at the declarant' s request, accept an entry form which does not contain certain of the particulars referred to in Article 3(1), or to which some of the documents referred to in Article 3(2) are not attached.
31 Any incomplete declaration must include a reference to the missing particulars or documents. Furthermore, the evidence subsequently supplied to supplement such a declaration must relate solely to circumstances in existence before the entry form was lodged and cannot extend to circumstances arising thereafter.
32 Finally, under Article 7 of Council Directive 79/623/EEC of 25 June 1979 on the harmonization of provisions laid down by law, regulation or administrative action relating to customs debt (Official Journal L 179, p. 31) the amount of the import duties payable on goods must be determined on the basis of the taxation elements appropriate to the goods at the moment when the customs debt in respect of them is incurred. However, according to Articles 2(a) and 3(a) of that directive, a customs debt is incurred, in the case of goods put in free circulation, at the moment when the competent authorities accept the entry of those goods for free circulation, which is to say, at the material time for customs valuation purposes.
33 Contrary to BBC' s assertions, Council Regulation (EEC) No 1430/79 of 2 July 1979 on the repayment or remission of import or export duties (Official Journal L 175, p. 1) has no bearing on this question. Article 2 of that regulation provides that import duties are to be repaid or remitted in so far as it is shown that the amount of such duties exceeds for any reason the amount lawfully payable.
34 The import duties are assessed on the basis of the customs value as determined pursuant to the regulation on customs value. If an importer cannot furnish the necessary evidence to ensure that certain items are left out of account in the calculation of the customs value, in accordance with the provisions of Community law, then the amount of duty charged cannot in any event be considered to exceed the amount lawfully payable.
35 The answer to be given to Question 2 is therefore that, in order to be excluded from the customs value in accordance with Article 3(4)(a) of the regulation on customs value, assembly costs must be distinguished in the declaration of the customs value from the price actually paid or payable for the goods. Pursuant to Article 8 of Directive 79/695/EEC, that declaration cannot be corrected after the material time for valuation for customs purposes, which is to say, after the goods have been released for free circulation.
Costs
36 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. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT (First Chamber),
in answer to the questions referred to it by the Bundesfinanzhof by order of 13 February 1989, hereby rules as follows:
1. In 1982, Article 3 of Council Regulation (EEC) No 1224/80 of 28 May 1980 on the valuation of goods for customs purposes was to be interpreted as meaning that the transaction value of carrier media containing at the time of importation recorded software in respect of which the supplier had invoiced a comprehensive price to the declarant had to be the invoiced price.
2. In order to be excluded from the customs value in accordance with Article 3(4)(a) of Regulation No 1224/80, assembly costs must be distinguished in the declaration of the customs value from the price actually paid or payable for the goods. Pursuant to Article 8 of Council Directive 79/695/EEC of 24 July 1979 on the harmonization of procedures for the release of goods for free circulation, that declaration cannot be corrected after the material time for valuation for customs purposes, which is to say, after the goods have been released for free circulation.
