The Dutch Supreme Court puts aside the WCO classification opinions and upholds the CN-classification of toner cartridges under heading 3707 (toner).
On 29 May 2009, the Supreme Court delivered a judgment referring to the classification in the Combined Nomenclature (“CN”) of toner cartridges for photocopying apparatus. The Supreme Court ruled that the toner cartridge in question is to be classified under CN heading 3707 and furthermore explicitly stipulated that the classification opinions of the World Customs Organisation (“WCO”) are to be set aside as far as these are incompatible with the wording of the concerned heading of the CN or if they go manifestly beyond the discretion conferred on the WCO.
Factual background
The matter concerned the CN classification of a toner cartridge containing a chemical substance (i.e. toner) necessary for the photographic process in specific photocopying apparatus.
In specific, the toner cartridge in question has the following objectives and characteristics:
“The product is a toner cartridge, comprising of a plastic housing in the form of a cylinder (approximate measurements: length of 23 cm and cross-cut of 9 cm), filled with powder i.e. the toner. The upper side of the product has a conical form and a narrow filling opening at its end, which can be sealed by a screw top. The under side of the product is fitted on the outside and breadthwise with agigator ramps which ensure that the toner can flow from the cartridge. The product can solely be used in specific copying apparatus of Ricoh. Inside the copying apparatus, a green bracket holds the cartridge firmly to the copying apparatus. Due to an electrical motor in the copying apparatus, the cartridge is able to move clockwise enabling it to equally disparage the toner on to the magnetic roll.”
The complainant classified the stated toner cartridge under CN heading 9009 90 00 (as being parts and accessories of photocopying apparatus), comprising a zero tariff duty in the year 2000. Due to an examination by the tax/customs authorities, the inspector concluded that the toner cartridge was to be classified under CN heading 3707 90 30 (as being chemical substances for photographic use), comprising a duty of 6%, and accordingly issued a demand for payment of customs duties. The Dutch Regional Court of Appeal ruled in favour of the inspector by confirming classification of the toner cartridge under CN heading 3707 90 30.
The Supreme Court
The complaints put forward at the Supreme Court referred among others to the fact that the Regional Court of Appeal, while basing its judgment, did not take into consideration the cited classification opinions of the WCO related to CN heading 9009 which refer to (toner) cartridges similar to those in question.
With that regard, the Supreme Court stipulated that the notes and opinions of the WCO are an important aid to the interpretation of the scope of the various tariff headings but do not have legally binding effect to the contracting parties. These notes and opinions are to be put aside, as far as these are incompatible with the wording of the concerned heading of the CN or if they go manifestly beyond the discretion conferred on the WCO.[1]
Moreover, the Supreme Court referred to the judgments of the European Court of Justice (“ECJ”) in the Turbon-cases[2], ruling that the stated classification reasoning in those judgments, by classifying ink cartridges under CN heading 3215, is equally applicable to the toner cartridges in question. This reasoning is applicable although the ECJ judgments in the Turbon-cases concern a different product (ink instead of toner) and different CN headings. Therefore, the Supreme Court concludes that the WCO classification opinions, which are dated before the ECJ judgments in the Turbon-cases, do not carry sufficient weight for the Supreme Court to rule otherwise.
Conclusion
The Supreme Court draws a clear line on the force in law of a classification opinion of the WCO in connection with the classifying of a product in the CN. In that regard, it can be concluded that an opinion issued by the WCO, on the classification of a certain product in its Harmonised System has no legally binding force and is no more than an indication assisting in the interpretation of the scope of the various tariff headings of the CN. If such a classification opinion is contrary to the wording of the heading in the CN, it must therefore be disregarded.
[1] ECJ, judgment of 19 January 2005, SmithKline Beecham plc, C-206/03, par. 24; and ECJ, judgment of 17 April 2006, Kawasaki Motors Europe N.V., C-15/05, par.36.
[2] ECJ, judgment of 7 February 2002, Turbon International GmbH, C-276/00; and ECJ, judgment of 26 October 2006, Turbon International GmbH, C-250/05.
Friday, July 10, 2009
Thursday, July 09, 2009
Recast EU Dual Use Export Controls Regulation
Introduction
The European Union (“EU”) has adopted a Recast of Regulation (EC) 1334/2000 (“EU Dual Use Regulation”) by adoption Regulation (EC) No 428/2009. The Recast provides for new legislation on controlling exports, transfers, brokering and transit of dual-use items for, within or through the EU. Furthermore, Annex I of the EU Dual Use Regulation which provides for the common EU control list of dual-use items has been amended. Regulation (EC) 428/2009 comes into force on the 27th August 2009.
New Controls on brokering services
The Recast provides for authorisations for persons providing brokering services in relation to dual-use items listed in Annex I of the EU Dual Use Regulation. An authorisation shall be required for brokering services of dual-use items listed in Annex I if the broker has been informed by the competent authorities of the EU Member States in which the broker is established or resident that the items are or may be intended for Weapons of Mass Destruction (“WMD”) end-use. Furthermore, when the broker is aware that such items are intended for WMD end-use he must notify the competent authorities who will decide whether an authorisation is needed.
The Recast provides for a model that is to be used for broker services authorisations.
EU Member States may adopt national provisions to impose an authorisation for brokering services of dual-use items that are not listed in Annex I and that are or may be intended for WMD or military end-use. Furthermore, EU Member States may adopt national provisions providing for an authorisation requirement if the broker has grounds that the dual-use items in question are or may be intended for WMD end-use. EU Member States have to notify the European Commission of these measures.
Controls on transit
The Recast imposes controls on transit of dual-use items. Transit is being defined as “transport of a non-Community dual-use items entering and passing through the customs territory of the Community with a destination outside the Community”.
The EU Dual Use Regulation provided only for an authorisation on export of items listed in Annex I of the EU Dual-Use Regulation. Export was defined as “export within the meaning of Article 161 of Regulation (EEC) No 2913/92 (the Community Customs Code, “CCC”), a “re-export within the meaning of Article 182 CCC” and “transmission of software or technology by electronic media, including by fax, telephone, electronic mail or any other electronic means to a destination outside the European Community”. The definition for “export” will be the same with the exception that export is also re-export within the meaning of Article 182 CCC but not including items in transit”.
The transit controls include that EU Member States may prohibit a transit of dual-use items if the items are or may be intended for WMD end-use. Furthermore, EU Member State may impose an authorisation requirement during the period that the competent authorities need to decide whether they will prohibit the transit. This will enable the entity or person involved to show that the items are intended for civil end-use rather than WMD end-use.
Finally, EU Member States may adopt national provisions to extend the prohibition and authorisation requirement to transit of dual-use items that are not listed in Annex I of the EU Dual Use Regulations that are or may be intended for WMD or military end-use. EU Member States have to notify the European Commission of these provisions.
Amendment of Annex I
Annex I has been amended. Amendments include export control classification numbers (“ECCNs”) in all categories. Certain amendments include new or old definitions, but also new controls have been added. The European Commission has made a summary of changes listing all amendments. In order to review this summary, please visit the following link. (http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143396.en09%20CN07_03.pdf).
Annex IV that lists dual-use items that are subject to an intra-Community license has not been amended.
Consequences Recast for the Netherlands
The Dutch Decision on strategic goods, which is based on the General Custom Law, will have to be amended to include amendments in relation to the movement of dual-use items. However, amendments in relation to dual-use services require the adoption of a new law in the Netherlands, because the Dutch General Customs law is limited to export controls of dual-use items and does not include strategic services.
For that purpose, the Law on Strategic Services (in Dutch: Wet strategische diensten) will be adopted. This law will include the already existing legislation on strategic services, but will also include new controls.
The law on strategic services will make a difference between services for dual-use items and military items. The proposal distinguishes three forms of strategic services: non-physical transfer of software and technology, technical assistance and brokering.
With respect to dual-use items, the non-physical transfer of software and technology was already included in the EU Dual Use Regulation. The provisions related to brokering have been added in the Recast. The controls related to technical assistance are laid down in Council Joint Action of 22 June 2000 concerning the control of technical assistance related to certain military end-uses (2000/0401/CFSP).
The State Secretary of the Dutch Ministry of Economic Affairs aims to finalise the proposal to adopt the Law on Strategic Services in 2010. Within that context, the State Secretary will verify to what extent this law will have to include extra-territorial elements.
The European Union (“EU”) has adopted a Recast of Regulation (EC) 1334/2000 (“EU Dual Use Regulation”) by adoption Regulation (EC) No 428/2009. The Recast provides for new legislation on controlling exports, transfers, brokering and transit of dual-use items for, within or through the EU. Furthermore, Annex I of the EU Dual Use Regulation which provides for the common EU control list of dual-use items has been amended. Regulation (EC) 428/2009 comes into force on the 27th August 2009.
New Controls on brokering services
The Recast provides for authorisations for persons providing brokering services in relation to dual-use items listed in Annex I of the EU Dual Use Regulation. An authorisation shall be required for brokering services of dual-use items listed in Annex I if the broker has been informed by the competent authorities of the EU Member States in which the broker is established or resident that the items are or may be intended for Weapons of Mass Destruction (“WMD”) end-use. Furthermore, when the broker is aware that such items are intended for WMD end-use he must notify the competent authorities who will decide whether an authorisation is needed.
The Recast provides for a model that is to be used for broker services authorisations.
EU Member States may adopt national provisions to impose an authorisation for brokering services of dual-use items that are not listed in Annex I and that are or may be intended for WMD or military end-use. Furthermore, EU Member States may adopt national provisions providing for an authorisation requirement if the broker has grounds that the dual-use items in question are or may be intended for WMD end-use. EU Member States have to notify the European Commission of these measures.
Controls on transit
The Recast imposes controls on transit of dual-use items. Transit is being defined as “transport of a non-Community dual-use items entering and passing through the customs territory of the Community with a destination outside the Community”.
The EU Dual Use Regulation provided only for an authorisation on export of items listed in Annex I of the EU Dual-Use Regulation. Export was defined as “export within the meaning of Article 161 of Regulation (EEC) No 2913/92 (the Community Customs Code, “CCC”), a “re-export within the meaning of Article 182 CCC” and “transmission of software or technology by electronic media, including by fax, telephone, electronic mail or any other electronic means to a destination outside the European Community”. The definition for “export” will be the same with the exception that export is also re-export within the meaning of Article 182 CCC but not including items in transit”.
The transit controls include that EU Member States may prohibit a transit of dual-use items if the items are or may be intended for WMD end-use. Furthermore, EU Member State may impose an authorisation requirement during the period that the competent authorities need to decide whether they will prohibit the transit. This will enable the entity or person involved to show that the items are intended for civil end-use rather than WMD end-use.
Finally, EU Member States may adopt national provisions to extend the prohibition and authorisation requirement to transit of dual-use items that are not listed in Annex I of the EU Dual Use Regulations that are or may be intended for WMD or military end-use. EU Member States have to notify the European Commission of these provisions.
Amendment of Annex I
Annex I has been amended. Amendments include export control classification numbers (“ECCNs”) in all categories. Certain amendments include new or old definitions, but also new controls have been added. The European Commission has made a summary of changes listing all amendments. In order to review this summary, please visit the following link. (http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143396.en09%20CN07_03.pdf).
Annex IV that lists dual-use items that are subject to an intra-Community license has not been amended.
Consequences Recast for the Netherlands
The Dutch Decision on strategic goods, which is based on the General Custom Law, will have to be amended to include amendments in relation to the movement of dual-use items. However, amendments in relation to dual-use services require the adoption of a new law in the Netherlands, because the Dutch General Customs law is limited to export controls of dual-use items and does not include strategic services.
For that purpose, the Law on Strategic Services (in Dutch: Wet strategische diensten) will be adopted. This law will include the already existing legislation on strategic services, but will also include new controls.
The law on strategic services will make a difference between services for dual-use items and military items. The proposal distinguishes three forms of strategic services: non-physical transfer of software and technology, technical assistance and brokering.
With respect to dual-use items, the non-physical transfer of software and technology was already included in the EU Dual Use Regulation. The provisions related to brokering have been added in the Recast. The controls related to technical assistance are laid down in Council Joint Action of 22 June 2000 concerning the control of technical assistance related to certain military end-uses (2000/0401/CFSP).
The State Secretary of the Dutch Ministry of Economic Affairs aims to finalise the proposal to adopt the Law on Strategic Services in 2010. Within that context, the State Secretary will verify to what extent this law will have to include extra-territorial elements.
EU Commission to propose new duties on mobile phones with increased functionality
Introduction
The new draft of the Combined Nomenclature’s (“CN”) Explanatory note for multifunctional devices with mobile phone function (subheading 8517 12 00) was recently presented at the 2nd meeting of the Customs Code Committee (“CCC”) held in Brussels. In addition, a draft Regulation relating to three particular products with a mobile phone function was also presented by the Chair of the CCC.
The Chair of the CCC commenced by explaining that the exclusions contained in the previous version of the draft CN Explanatory note, which removed certain ‘sophisticated’ phones from the Information Technology Agreement’s zero tariff status into a dutiable customs category, had disappeared due to the strong opposition of the Member States of the European Union (“Member States”).
However, during the 2nd meeting of the CCC, remarks were still made by Member States to introduce exclusions for the GPS and television reception functions from the essential characteristics of a mobile phone. The adoption of these exclusions could entail that mobile phones with increased functionality, such as GPS receivers and mobile TV would face a tax of up to 14% upon entry to the European Union.
In the end, it follows from the summary report of 2nd meeting of the CCC that a consensus has yet to be reached on the wording, legal reasoning and aim of the new presented draft texts of the CN Explanatory note and Regulation for multifunctional devices with mobile phone function. This is to be derived from the following issues which were raised during the meeting.
The new draft CN Explanatory note: Multifunctional devices with mobile phone function
With regard to the wording of the new presented draft text of the CN Explanatory note, suggestions were made as to introducing the exact dimensions of what “pocket-size” is for nomenclature purposes as these dimensions already exist in the current nomenclature.
As to the definition of a mobile phone, several Member States considered the wording in the new draft of what constitutes the principal function to be unhelpful as it does not state when and under what conditions the mobile telephony function has priority over the other functions; on the contrary, it rather gives the impression that any product with a mobile telephony function remains a mobile phone independently of the number and quality of the other functions present in the product. In this respect, it was suggested to state that the principal function is due to the fact that incoming calls are notified irrespective of the other functions used. It was further explained that a specific function cannot constitute an objective characteristic of a product and that therefore a separate paragraph, reflecting the legal reasoning, should be introduced in the draft Explanatory note in relation to the product's principal function.
Moreover, if the aim of the new draft CN Explanatory note is to classify any device with mobile telephony function as a mobile phone, one Member State asked what are the objective characteristics of the products on which such classification is based as there is no legal text giving precedence to heading 8517 over other headings in the CN.
As to the functions of a mobile phone, one Member State suggested including the PDA function to the other functions that can be performed by a “pocket-size” device with mobile telephony function. On the other hand, one Member State argued that the GPS and television reception functions should be taken out from the essential characteristics of a mobile phone as according to that Member State they would influence the classification of the device. This Member State suggested introducing exclusions for these 2 competing headings in the current draft. This would entail that mobile phones with GPS and mobile TV functions would face a tax of up to 14% upon entry to the European Union.
The draft Regulation: Multifunctional devices with mobile phone function
As to the draft Regulation relating to three particular products, the legal reasoning of the draft Regulation was the main focus of attention for many Member States.
Several Member States asked further clarification on the reasons for giving the mobile telephony function precedence over the other function of the apparatus. It was explained that by deciding that a device equipped with a SIM card is a mobile phone, the draft regulation is giving an overall precedence to heading 8517 without any consideration of the other functionalities present in the device or the quality of these functionalities.
Moreover, one Member State also underlined that the draft Regulation was not providing any guidance as to the classification of other multifunctional devices performing without an activated SIM card or without a mobile telephony function.
As to the GPS function of a mobile phone, Member States could not agree as to whether a mobile phone having both the antenna and GPS module should be classified under heading 8517 or be moved into a dutiable customs category.
Conclusion
Overall, a clearer wording and legal reasoning of the draft text of the CN Explanatory note and Regulation were asked for by the Member States. On the other hand, Member States were asked to reflect and provide the Customs Code Committee with other criteria supporting classification of mobile phones under heading 8517. The Customs Code Committee will now reflect upon the comments made during the meeting and a measure for vote will be presented at a future meeting.
The proposed measure might state that ‘sophisticated’ mobile phones are to be moved into a dutiable customs category in the CN. This would entail that mobile phones with increased functionality, such as GPS receivers and mobile TV, would face a tax of up to 14% upon entry into the European Union.
If the European Union decides to go ahead with a duty rate of up to 14% for ‘sophisticated’ mobile phones, the decision might be perceived by other World Trade Organisation (“WTO”) members as being in total contradiction to the European Union’s commitments under the Information Technology Agreement, signed by WTO members in 1996, which requires duty-free treatment for most information technology products.
The new draft of the Combined Nomenclature’s (“CN”) Explanatory note for multifunctional devices with mobile phone function (subheading 8517 12 00) was recently presented at the 2nd meeting of the Customs Code Committee (“CCC”) held in Brussels. In addition, a draft Regulation relating to three particular products with a mobile phone function was also presented by the Chair of the CCC.
The Chair of the CCC commenced by explaining that the exclusions contained in the previous version of the draft CN Explanatory note, which removed certain ‘sophisticated’ phones from the Information Technology Agreement’s zero tariff status into a dutiable customs category, had disappeared due to the strong opposition of the Member States of the European Union (“Member States”).
However, during the 2nd meeting of the CCC, remarks were still made by Member States to introduce exclusions for the GPS and television reception functions from the essential characteristics of a mobile phone. The adoption of these exclusions could entail that mobile phones with increased functionality, such as GPS receivers and mobile TV would face a tax of up to 14% upon entry to the European Union.
In the end, it follows from the summary report of 2nd meeting of the CCC that a consensus has yet to be reached on the wording, legal reasoning and aim of the new presented draft texts of the CN Explanatory note and Regulation for multifunctional devices with mobile phone function. This is to be derived from the following issues which were raised during the meeting.
The new draft CN Explanatory note: Multifunctional devices with mobile phone function
With regard to the wording of the new presented draft text of the CN Explanatory note, suggestions were made as to introducing the exact dimensions of what “pocket-size” is for nomenclature purposes as these dimensions already exist in the current nomenclature.
As to the definition of a mobile phone, several Member States considered the wording in the new draft of what constitutes the principal function to be unhelpful as it does not state when and under what conditions the mobile telephony function has priority over the other functions; on the contrary, it rather gives the impression that any product with a mobile telephony function remains a mobile phone independently of the number and quality of the other functions present in the product. In this respect, it was suggested to state that the principal function is due to the fact that incoming calls are notified irrespective of the other functions used. It was further explained that a specific function cannot constitute an objective characteristic of a product and that therefore a separate paragraph, reflecting the legal reasoning, should be introduced in the draft Explanatory note in relation to the product's principal function.
Moreover, if the aim of the new draft CN Explanatory note is to classify any device with mobile telephony function as a mobile phone, one Member State asked what are the objective characteristics of the products on which such classification is based as there is no legal text giving precedence to heading 8517 over other headings in the CN.
As to the functions of a mobile phone, one Member State suggested including the PDA function to the other functions that can be performed by a “pocket-size” device with mobile telephony function. On the other hand, one Member State argued that the GPS and television reception functions should be taken out from the essential characteristics of a mobile phone as according to that Member State they would influence the classification of the device. This Member State suggested introducing exclusions for these 2 competing headings in the current draft. This would entail that mobile phones with GPS and mobile TV functions would face a tax of up to 14% upon entry to the European Union.
The draft Regulation: Multifunctional devices with mobile phone function
As to the draft Regulation relating to three particular products, the legal reasoning of the draft Regulation was the main focus of attention for many Member States.
Several Member States asked further clarification on the reasons for giving the mobile telephony function precedence over the other function of the apparatus. It was explained that by deciding that a device equipped with a SIM card is a mobile phone, the draft regulation is giving an overall precedence to heading 8517 without any consideration of the other functionalities present in the device or the quality of these functionalities.
Moreover, one Member State also underlined that the draft Regulation was not providing any guidance as to the classification of other multifunctional devices performing without an activated SIM card or without a mobile telephony function.
As to the GPS function of a mobile phone, Member States could not agree as to whether a mobile phone having both the antenna and GPS module should be classified under heading 8517 or be moved into a dutiable customs category.
Conclusion
Overall, a clearer wording and legal reasoning of the draft text of the CN Explanatory note and Regulation were asked for by the Member States. On the other hand, Member States were asked to reflect and provide the Customs Code Committee with other criteria supporting classification of mobile phones under heading 8517. The Customs Code Committee will now reflect upon the comments made during the meeting and a measure for vote will be presented at a future meeting.
The proposed measure might state that ‘sophisticated’ mobile phones are to be moved into a dutiable customs category in the CN. This would entail that mobile phones with increased functionality, such as GPS receivers and mobile TV, would face a tax of up to 14% upon entry into the European Union.
If the European Union decides to go ahead with a duty rate of up to 14% for ‘sophisticated’ mobile phones, the decision might be perceived by other World Trade Organisation (“WTO”) members as being in total contradiction to the European Union’s commitments under the Information Technology Agreement, signed by WTO members in 1996, which requires duty-free treatment for most information technology products.
Commission to propose new tax on mobile phones with increased functionality
Introduction
The new draft of the Combined Nomenclature’s (“CN”) Explanatory note for multifunctional devices with mobile phone function (subheading 8517 12 00) was recently presented at the 2nd meeting of the Customs Code Committee (“CCC”) held in Brussels. In addition, a draft Regulation relating to three particular products with a mobile phone function was also presented by the Chair of the CCC.
The Chair of the CCC commenced by explaining that the exclusions contained in the previous version of the draft CN Explanatory note, which removed certain ‘sophisticated’ phones from the Information Technology Agreement’s zero tariff status into a dutiable customs category, had disappeared due to the strong opposition of the Member States of the European Union (“Member States”).
However, during the 2nd meeting of the CCC, remarks were still made by Member States to introduce exclusions for the GPS and television reception functions from the essential characteristics of a mobile phone. The adoption of these exclusions could entail that mobile phones with increased functionality, such as GPS receivers and mobile TV would face a tax of up to 14% upon entry to the European Union.
In the end, it follows from the summary report of 2nd meeting of the CCC that a consensus has yet to be reached on the wording, legal reasoning and aim of the new presented draft texts of the CN Explanatory note and Regulation for multifunctional devices with mobile phone function. This is to be derived from the following issues which were raised during the meeting.
The new draft CN Explanatory note: Multifunctional devices with mobile phone function
With regard to the wording of the new presented draft text of the CN Explanatory note, suggestions were made as to introducing the exact dimensions of what “pocket-size” is for nomenclature purposes as these dimensions already exist in the current nomenclature.
As to the definition of a mobile phone, several Member States considered the wording in the new draft of what constitutes the principal function to be unhelpful as it does not state when and under what conditions the mobile telephony function has priority over the other functions; on the contrary, it rather gives the impression that any product with a mobile telephony function remains a mobile phone independently of the number and quality of the other functions present in the product. In this respect, it was suggested to state that the principal function is due to the fact that incoming calls are notified irrespective of the other functions used. It was further explained that a specific function cannot constitute an objective characteristic of a product and that therefore a separate paragraph, reflecting the legal reasoning, should be introduced in the draft Explanatory note in relation to the product's principal function.
Moreover, if the aim of the new draft CN Explanatory note is to classify any device with mobile telephony function as a mobile phone, one Member State asked what are the objective characteristics of the products on which such classification is based as there is no legal text giving precedence to heading 8517 over other headings in the CN.
As to the functions of a mobile phone, one Member State suggested including the PDA function to the other functions that can be performed by a “pocket-size” device with mobile telephony function. On the other hand, one Member State argued that the GPS and television reception functions should be taken out from the essential characteristics of a mobile phone as according to that Member State they would influence the classification of the device. This Member State suggested introducing exclusions for these 2 competing headings in the current draft. This would entail that mobile phones with GPS and mobile TV functions would face a tax of up to 14% upon entry to the European Union.
The draft Regulation: Multifunctional devices with mobile phone function
As to the draft Regulation relating to three particular products, the legal reasoning of the draft Regulation was the main focus of attention for many Member States.
Several Member States asked further clarification on the reasons for giving the mobile telephony function precedence over the other function of the apparatus. It was explained that by deciding that a device equipped with a SIM card is a mobile phone, the draft regulation is giving an overall precedence to heading 8517 without any consideration of the other functionalities present in the device or the quality of these functionalities.
Moreover, one Member State also underlined that the draft Regulation was not providing any guidance as to the classification of other multifunctional devices performing without an activated SIM card or without a mobile telephony function.
As to the GPS function of a mobile phone, Member States could not agree as to whether a mobile phone having both the antenna and GPS module should be classified under heading 8517 or be moved into a dutiable customs category.
Conclusion
Overall, a clearer wording and legal reasoning of the draft text of the CN Explanatory note and Regulation were asked for by the Member States. On the other hand, Member States were asked to reflect and provide the Customs Code Committee with other criteria supporting classification of mobile phones under heading 8517. The Customs Code Committee will now reflect upon the comments made during the meeting and a measure for vote will be presented at a future meeting.
The proposed measure might state that ‘sophisticated’ mobile phones are to be moved into a dutiable customs category in the CN. This would entail that mobile phones with increased functionality, such as GPS receivers and mobile TV, would face a tax of up to 14% upon entry into the European Union.
If the European Union decides to go ahead with a duty rate of up to 14% for ‘sophisticated’ mobile phones, the decision might be perceived by other World Trade Organisation (“WTO”) members as being in total contradiction to the European Union’s commitments under the Information Technology Agreement, signed by WTO members in 1996, which requires duty-free treatment for most information technology products.
The new draft of the Combined Nomenclature’s (“CN”) Explanatory note for multifunctional devices with mobile phone function (subheading 8517 12 00) was recently presented at the 2nd meeting of the Customs Code Committee (“CCC”) held in Brussels. In addition, a draft Regulation relating to three particular products with a mobile phone function was also presented by the Chair of the CCC.
The Chair of the CCC commenced by explaining that the exclusions contained in the previous version of the draft CN Explanatory note, which removed certain ‘sophisticated’ phones from the Information Technology Agreement’s zero tariff status into a dutiable customs category, had disappeared due to the strong opposition of the Member States of the European Union (“Member States”).
However, during the 2nd meeting of the CCC, remarks were still made by Member States to introduce exclusions for the GPS and television reception functions from the essential characteristics of a mobile phone. The adoption of these exclusions could entail that mobile phones with increased functionality, such as GPS receivers and mobile TV would face a tax of up to 14% upon entry to the European Union.
In the end, it follows from the summary report of 2nd meeting of the CCC that a consensus has yet to be reached on the wording, legal reasoning and aim of the new presented draft texts of the CN Explanatory note and Regulation for multifunctional devices with mobile phone function. This is to be derived from the following issues which were raised during the meeting.
The new draft CN Explanatory note: Multifunctional devices with mobile phone function
With regard to the wording of the new presented draft text of the CN Explanatory note, suggestions were made as to introducing the exact dimensions of what “pocket-size” is for nomenclature purposes as these dimensions already exist in the current nomenclature.
As to the definition of a mobile phone, several Member States considered the wording in the new draft of what constitutes the principal function to be unhelpful as it does not state when and under what conditions the mobile telephony function has priority over the other functions; on the contrary, it rather gives the impression that any product with a mobile telephony function remains a mobile phone independently of the number and quality of the other functions present in the product. In this respect, it was suggested to state that the principal function is due to the fact that incoming calls are notified irrespective of the other functions used. It was further explained that a specific function cannot constitute an objective characteristic of a product and that therefore a separate paragraph, reflecting the legal reasoning, should be introduced in the draft Explanatory note in relation to the product's principal function.
Moreover, if the aim of the new draft CN Explanatory note is to classify any device with mobile telephony function as a mobile phone, one Member State asked what are the objective characteristics of the products on which such classification is based as there is no legal text giving precedence to heading 8517 over other headings in the CN.
As to the functions of a mobile phone, one Member State suggested including the PDA function to the other functions that can be performed by a “pocket-size” device with mobile telephony function. On the other hand, one Member State argued that the GPS and television reception functions should be taken out from the essential characteristics of a mobile phone as according to that Member State they would influence the classification of the device. This Member State suggested introducing exclusions for these 2 competing headings in the current draft. This would entail that mobile phones with GPS and mobile TV functions would face a tax of up to 14% upon entry to the European Union.
The draft Regulation: Multifunctional devices with mobile phone function
As to the draft Regulation relating to three particular products, the legal reasoning of the draft Regulation was the main focus of attention for many Member States.
Several Member States asked further clarification on the reasons for giving the mobile telephony function precedence over the other function of the apparatus. It was explained that by deciding that a device equipped with a SIM card is a mobile phone, the draft regulation is giving an overall precedence to heading 8517 without any consideration of the other functionalities present in the device or the quality of these functionalities.
Moreover, one Member State also underlined that the draft Regulation was not providing any guidance as to the classification of other multifunctional devices performing without an activated SIM card or without a mobile telephony function.
As to the GPS function of a mobile phone, Member States could not agree as to whether a mobile phone having both the antenna and GPS module should be classified under heading 8517 or be moved into a dutiable customs category.
Conclusion
Overall, a clearer wording and legal reasoning of the draft text of the CN Explanatory note and Regulation were asked for by the Member States. On the other hand, Member States were asked to reflect and provide the Customs Code Committee with other criteria supporting classification of mobile phones under heading 8517. The Customs Code Committee will now reflect upon the comments made during the meeting and a measure for vote will be presented at a future meeting.
The proposed measure might state that ‘sophisticated’ mobile phones are to be moved into a dutiable customs category in the CN. This would entail that mobile phones with increased functionality, such as GPS receivers and mobile TV, would face a tax of up to 14% upon entry into the European Union.
If the European Union decides to go ahead with a duty rate of up to 14% for ‘sophisticated’ mobile phones, the decision might be perceived by other World Trade Organisation (“WTO”) members as being in total contradiction to the European Union’s commitments under the Information Technology Agreement, signed by WTO members in 1996, which requires duty-free treatment for most information technology products.
Wednesday, May 06, 2009
Principle of equal treatment succeeds in relation to conflicting BTI-rulings
The Customs court in Haarlem (“Customs court”) has recently upheld the applicability of the principle of equal treatment in relation to a Binding Tariff Information (“BTI”) ruling issued in The Netherlands which was conflicting with a BTI-ruling issued in Slovenia for the same product.
Factual background
The dispute concerned two conflicting BTI-rulings, which have been issued in The Netherlands and Slovenia, in relation to the same product, namely an XX daylight-system. The conflicting BTI-rulings classified the XX daylight-system differently in the Combined Nomenclature (“CN”).
The customs authorities in The Netherlands issued a BTI-ruling concluding that the XX daylight-system was to be classified under CN code 9013 8090. The plaintiff disagreed and argued, in the action brought before the Customs court, that the appropriate CN classification should be CN code 9405 5000 90 by referring to the BTI-ruling issued by the Slovenian customs authorities which classified the XX daylight-system under CN code 9405 5000 90.
During the proceedings before the Customs court, the plaintiff raised pleas on the basis of the principle of protection of legitimate expectations, principle of legal certainty and principle of equal treatment. With regard to the principle of equal treatment, the plaintiff stated that the reasoning behind the initiative to start proceedings before the Customs court was based on the fact that the plaintiff was confronted with importers/customs agents who imported the same product, for which the plaintiff had the exclusive rights, in Member States other than the Benelux, for using the BTI-ruling issued by the Slovenian customs authorities.
This article will not cover all the aspects of the judgment. Instead, we provide a synopsis of the Customs court’s conclusions with regard to the principle of equal treatment.
The judgment of the Dutch Customs court
Firstly the Customs court tackled the CN classification of the XX daylight-system. The Customs court determined that, on the basis of the objective characteristics of the XX daylight-system and Commission Regulation (EC) No 457/2008 concerning the classification of certain goods in the CN, the XX daylight-system was to be classified under CN code 9013 8090.
Secondly, the Customs court dismissed plaintiff’s arguments based on the principles of the protection of legitimate expectations and the principle of legal certainty.
However, the Customs court did uphold the applicability of the principle of equal treatment by determining that there was a breach of the principle of non-discrimination, as established in Community law. The non-discrimination principle stipulates that, without prejudice to an objective justification, equal situations are not to be treated differently and different situations are not to be treated equally. In that regard, the Customs court found it plausible that:
“The plaintiff has unequivocally stated that he was told at several meeting occasions of the said importers that, in relation to the releasing of the product in free circulation, the product at issue was to be classified under CN code 9405.5000. The plaintiff has found in the European BTI database (EBTI) the BTI-ruling issued by the Slovenian customs authorities in which the product at issue was classified under CN code 9405.5000.”
Moreover, the Customs court stated that the XX daylight-system was imported during the same period by others than the plaintiff, in Member States other than Benelux, in which cases the XX daylight-system was classified under CN code 9405.5000. In that regard, the Customs court assumed that the BTI-ruling was used by its stated holder.
Consequently, the Customs court referred to Article 9 of Regulation (EEC) No 2454/93 laying down provisions for the implementation of the Community Customs Code (“IPCCC”) which comprises a procedure for uniform application of the CN in regard to conflicting BTI-rulings relating to the same product. With that regard, the Customs court took the view that, considering that this procedure encompasses a time period of one to two months before the item is placed on the agenda of the Committee and another six months before a measure is adopted for uniform application of the CN, this specific procedure cannot prevent that during a certain period of time equal cases can be treated differently in Member States, which is exactly the situation in the case at hand.
In this connection, the Customs court found that in this case there is no objective justification for the different treatment of the equal cases considering that the Slovenian customs authorities have not initiated the procedure laid down in Article 9 of IPCCC. The Slovenian customs authorities could have consulted the EBTI beforehand and concluded that the Dutch customs authorities issued a BTI-ruling for the XX daylight-system under CN code 9013 8090. Accordingly, if the Slovenian customs authorities would have disagreed with the Dutch BTI-ruling, then the Slovenian customs authorities could have suspended the issuance of their own BTI-ruling for the XX daylight-system under CN code 9405 5000 and could have started the procedure under Article 9 of IPCCC. This course of action could have prevented a breach of the rule that equal cases are to be treated equally. Taking this into account, the Customs court concluded that this course of action was not initiated as a result of which there is no objective justification for different treatment in the case at issue.
Conclusion
The judgment of the Customs court is of importance considering that a plea on the basis of the principle of equal treatment can succeed in relation to conflicting BTI-rulings which have been issued in different Member States for the same product.
However, this is to be determined on a case-by-case basis by establishing a breach of the principle of non-discrimination, as provided for in Community law, without having an objective justification.
Such an objective justification can rise if one of the Member States initiated the procedure laid down in Article 9 of IPCCC in relation to conflicting BTI-rulings. This course of action would justify that equal cases be treated differently.
Thus, a plea to the principle of equal treatment, in relation to conflicting BTI-rulings, can succeed if there is, without prejudice to an objective justification, a breach of the principle of non-discrimination as established in Community law.
By Goran Danilovic
Factual background
The dispute concerned two conflicting BTI-rulings, which have been issued in The Netherlands and Slovenia, in relation to the same product, namely an XX daylight-system. The conflicting BTI-rulings classified the XX daylight-system differently in the Combined Nomenclature (“CN”).
The customs authorities in The Netherlands issued a BTI-ruling concluding that the XX daylight-system was to be classified under CN code 9013 8090. The plaintiff disagreed and argued, in the action brought before the Customs court, that the appropriate CN classification should be CN code 9405 5000 90 by referring to the BTI-ruling issued by the Slovenian customs authorities which classified the XX daylight-system under CN code 9405 5000 90.
During the proceedings before the Customs court, the plaintiff raised pleas on the basis of the principle of protection of legitimate expectations, principle of legal certainty and principle of equal treatment. With regard to the principle of equal treatment, the plaintiff stated that the reasoning behind the initiative to start proceedings before the Customs court was based on the fact that the plaintiff was confronted with importers/customs agents who imported the same product, for which the plaintiff had the exclusive rights, in Member States other than the Benelux, for using the BTI-ruling issued by the Slovenian customs authorities.
This article will not cover all the aspects of the judgment. Instead, we provide a synopsis of the Customs court’s conclusions with regard to the principle of equal treatment.
The judgment of the Dutch Customs court
Firstly the Customs court tackled the CN classification of the XX daylight-system. The Customs court determined that, on the basis of the objective characteristics of the XX daylight-system and Commission Regulation (EC) No 457/2008 concerning the classification of certain goods in the CN, the XX daylight-system was to be classified under CN code 9013 8090.
Secondly, the Customs court dismissed plaintiff’s arguments based on the principles of the protection of legitimate expectations and the principle of legal certainty.
However, the Customs court did uphold the applicability of the principle of equal treatment by determining that there was a breach of the principle of non-discrimination, as established in Community law. The non-discrimination principle stipulates that, without prejudice to an objective justification, equal situations are not to be treated differently and different situations are not to be treated equally. In that regard, the Customs court found it plausible that:
“The plaintiff has unequivocally stated that he was told at several meeting occasions of the said importers that, in relation to the releasing of the product in free circulation, the product at issue was to be classified under CN code 9405.5000. The plaintiff has found in the European BTI database (EBTI) the BTI-ruling issued by the Slovenian customs authorities in which the product at issue was classified under CN code 9405.5000.”
Moreover, the Customs court stated that the XX daylight-system was imported during the same period by others than the plaintiff, in Member States other than Benelux, in which cases the XX daylight-system was classified under CN code 9405.5000. In that regard, the Customs court assumed that the BTI-ruling was used by its stated holder.
Consequently, the Customs court referred to Article 9 of Regulation (EEC) No 2454/93 laying down provisions for the implementation of the Community Customs Code (“IPCCC”) which comprises a procedure for uniform application of the CN in regard to conflicting BTI-rulings relating to the same product. With that regard, the Customs court took the view that, considering that this procedure encompasses a time period of one to two months before the item is placed on the agenda of the Committee and another six months before a measure is adopted for uniform application of the CN, this specific procedure cannot prevent that during a certain period of time equal cases can be treated differently in Member States, which is exactly the situation in the case at hand.
In this connection, the Customs court found that in this case there is no objective justification for the different treatment of the equal cases considering that the Slovenian customs authorities have not initiated the procedure laid down in Article 9 of IPCCC. The Slovenian customs authorities could have consulted the EBTI beforehand and concluded that the Dutch customs authorities issued a BTI-ruling for the XX daylight-system under CN code 9013 8090. Accordingly, if the Slovenian customs authorities would have disagreed with the Dutch BTI-ruling, then the Slovenian customs authorities could have suspended the issuance of their own BTI-ruling for the XX daylight-system under CN code 9405 5000 and could have started the procedure under Article 9 of IPCCC. This course of action could have prevented a breach of the rule that equal cases are to be treated equally. Taking this into account, the Customs court concluded that this course of action was not initiated as a result of which there is no objective justification for different treatment in the case at issue.
Conclusion
The judgment of the Customs court is of importance considering that a plea on the basis of the principle of equal treatment can succeed in relation to conflicting BTI-rulings which have been issued in different Member States for the same product.
However, this is to be determined on a case-by-case basis by establishing a breach of the principle of non-discrimination, as provided for in Community law, without having an objective justification.
Such an objective justification can rise if one of the Member States initiated the procedure laid down in Article 9 of IPCCC in relation to conflicting BTI-rulings. This course of action would justify that equal cases be treated differently.
Thus, a plea to the principle of equal treatment, in relation to conflicting BTI-rulings, can succeed if there is, without prejudice to an objective justification, a breach of the principle of non-discrimination as established in Community law.
By Goran Danilovic
Recent Dutch seizures of generic drugs add fire to the WTO dispute regarding seizure of goods in transit
The dispute regarding goods in transit has been highlighted in recent months due to several seizures of generic drugs in transit by the Dutch customs authorities. The seizures taken by the Dutch customs authorities, the latest involving a consignment of Indian-made medicines destined for distribution to clinics in Nigeria, are in particular reflecting the ‘friction’ between the European Union ("EU") legislation to counterfeit fake medicines and the World Trade Organization ("WTO") rules providing for freedom of transit of goods. The seizures have raised a growing concern among the developing countries that the continuous EU seizures of generic drugs in transit could have an indirect impact on trade flows and also impede developing countries’ access to essential medicines.
Intervention by Brazil
In that regard, Brazil is already considering a WTO disputes suit after the Dutch customs authorities detained, in December 2008, a consignment of Losartam Potassum, an active pharmaceutical ingredient used in the production of medicines for arterial hypertension. The consignment of these generic drugs against high blood pressure was being traded between the Indian company DR. REDDY’s and the Brazilian importer EMS. At the time it was seized, the consignment was officially in transit. Apparently, the seizure was initialised due to the contact between the Dutch customs authorities and Merck & Co, Dupont Co and Merck Sharp & Dohme, which jointly hold the patent for Losartan’s trade-name equivalent Cozaar. The particular ingredient is not patented in India or Brazil. In the end, the consignment was released back to the Indian owner, who decided at that point to return the shipment to India.
As a consequence of the action taken by the Dutch customs authorities, Brazil has intervened at the WTO General Council stating that the measure taken by the Dutch customs authorities clearly violated the freedom of transit, which is a right enshrined in Article V of the General Agreement on Tariffs and Trade ("GATT"). Article V of the GATT provides among others that "traffic coming from or going to the territory of other contracting parties shall not be subject to any unnecessary delays or restrictions and shall be exempt from customs duties and from all transit duties or other charges imposed in respect of transit".
Moreover, Brazil takes the view that under the existing intellectual property legal structure, which includes the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement"), patents are territorial and protected according to each country’s national law and system. Therefore, the medicines seized are generic under the law of the market in which they were meant to be commercialised, namely Brazil, and not the country of transit, such as the Netherlands. In that regard, Brazil is mostly concerned that the Dutch seizures will set a precedent for extraterritorial enforcement of intellectual property ("IP") rights which would affront the fundaments of the multilateral trade system, in particular the established principle of territoriality which is one of the pillars of the international IP regime. Brazil stated that the Doha Declaration on TRIPS and Public Health, adopted on 14 November 2001, stipulates that the TRIPS Agreement "can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and (…) to promote access to medicines for all". With that regard, Brazil recalled that the protection of public health and the promotion of public interest are still part of the TRIPS fundamental principles.
Brazil also raised its concerns about growing trade in counterfeit medicines and pledged its full commitment, in the light of the TRIPS Agreement, to IP protection. However, Brazil argued that IP protection should only be enforced to goods destined for a Member’s own market and should not affect goods in transit. In that regard, Brazil requested for conformity of the legislation of the Netherlands and/or the European Community ("EC") with the WTO rules and disciplines in order to ascertain safe transit of generic intellectual property-free medicines.
EC intervention
In reaction to Brazil’s intervention, the EC took the stage at the WTO General Council in order to clarify the issue at stake, recalling in the first place that none of the WTO’s Members would wish the EC to allow the flow of counterfeit goods to their populations.
In this connection, the EC clarified that the current provisions of the TRIPS Agreement neither mandate nor forbid the seizure of goods in transit. However, in the matter at hand, the EC clarified that, following the request of the company having patent rights over the generic medicines in the Netherlands, the Dutch customs authorities temporarily detained (which does not mean seize, confiscate or destroy) the consignment in order to control it. The EC further stipulated that the action taken by Dutch customs authorities was in accordance with both the EU legislation and WTO rules, in particular Article V of GATT and Article 51 of TRIPS.
a) TRIPS Agreement
The TRIPS Agreement requires in Article 51 that Members shall adopt procedures to enable a right holder, who has valid grounds for suspecting that the importation of counterfeit trade mark or pirated copyright goods may take place, to lodge an application in writing with competent authorities, administrative or judicial, for the suspension by the customs authorities of the release into free circulation of such goods. However, there is no obligation to apply such procedures to imports of goods put on the market in another country by or with the consent of the right holder, or to goods in transit. In that case, Members are free to determine whether or not to apply such procedures to goods in transit. In the case that a Member does apply such procedures, Article 41 of the TRIPS Agreement states that these procedures shall be fair and equitable. Moreover, the procedures shall not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays.
Therefore, the EC justified the action taken by the Dutch customs authorities as having detained the consignment of generic medicines temporarily on the basis of valid suspicious grounds of the right holder that the generic medicines in transit infringed an intellectual property right. In addition, the EC recalled that compensation will be entitled if the detention has been done on the basis of an unsubstantiated complaint.
b) The EU Anti Piracy Regulation
Taking into account the above stated, it should be noted that, in July 2008, the Court of The Hague in preliminary relief proceedings ruled in the case of Sosecal v. Sisvel that the "fiction of the deemed place of manufacturing" is still to be applied under the new Anti Piracy Regulation ("APR") . The APR contains this so-called legal fiction which entails that counterfeit goods which originate from outside the European Union ("EU") and are in transit in a Member State, should be considered as if they had been manufactured in the Member State where the goods are in transit. This means that if such goods are counterfeit under the laws of the transit Member State, their transit can be prohibited. Thus, it is legally justified to assess, on the basis of the law of the transit Member State, whether the goods in transit infringe an IP right of the patent holder.
Conclusion
It can be concluded that the detentions and seizures reflect ‘friction’ between the EU legislation and WTO rules. The difficulty lies in, among others, drawing a clear line between counterfeit medicines and approved generic drugs. The temporary detentions or seizures by the customs authorities in the EU could impede quick access to essential medicines destined for developing countries without sufficient or no manufacturing capacities in the pharmaceutical sector. The application of enforcement procedures to medicines in transit will remain for now an issue to be dealt with by the World Customs Organization, World Health Organization and WTO.
By Goran Danilovic
Intervention by Brazil
In that regard, Brazil is already considering a WTO disputes suit after the Dutch customs authorities detained, in December 2008, a consignment of Losartam Potassum, an active pharmaceutical ingredient used in the production of medicines for arterial hypertension. The consignment of these generic drugs against high blood pressure was being traded between the Indian company DR. REDDY’s and the Brazilian importer EMS. At the time it was seized, the consignment was officially in transit. Apparently, the seizure was initialised due to the contact between the Dutch customs authorities and Merck & Co, Dupont Co and Merck Sharp & Dohme, which jointly hold the patent for Losartan’s trade-name equivalent Cozaar. The particular ingredient is not patented in India or Brazil. In the end, the consignment was released back to the Indian owner, who decided at that point to return the shipment to India.
As a consequence of the action taken by the Dutch customs authorities, Brazil has intervened at the WTO General Council stating that the measure taken by the Dutch customs authorities clearly violated the freedom of transit, which is a right enshrined in Article V of the General Agreement on Tariffs and Trade ("GATT"). Article V of the GATT provides among others that "traffic coming from or going to the territory of other contracting parties shall not be subject to any unnecessary delays or restrictions and shall be exempt from customs duties and from all transit duties or other charges imposed in respect of transit".
Moreover, Brazil takes the view that under the existing intellectual property legal structure, which includes the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement"), patents are territorial and protected according to each country’s national law and system. Therefore, the medicines seized are generic under the law of the market in which they were meant to be commercialised, namely Brazil, and not the country of transit, such as the Netherlands. In that regard, Brazil is mostly concerned that the Dutch seizures will set a precedent for extraterritorial enforcement of intellectual property ("IP") rights which would affront the fundaments of the multilateral trade system, in particular the established principle of territoriality which is one of the pillars of the international IP regime. Brazil stated that the Doha Declaration on TRIPS and Public Health, adopted on 14 November 2001, stipulates that the TRIPS Agreement "can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and (…) to promote access to medicines for all". With that regard, Brazil recalled that the protection of public health and the promotion of public interest are still part of the TRIPS fundamental principles.
Brazil also raised its concerns about growing trade in counterfeit medicines and pledged its full commitment, in the light of the TRIPS Agreement, to IP protection. However, Brazil argued that IP protection should only be enforced to goods destined for a Member’s own market and should not affect goods in transit. In that regard, Brazil requested for conformity of the legislation of the Netherlands and/or the European Community ("EC") with the WTO rules and disciplines in order to ascertain safe transit of generic intellectual property-free medicines.
EC intervention
In reaction to Brazil’s intervention, the EC took the stage at the WTO General Council in order to clarify the issue at stake, recalling in the first place that none of the WTO’s Members would wish the EC to allow the flow of counterfeit goods to their populations.
In this connection, the EC clarified that the current provisions of the TRIPS Agreement neither mandate nor forbid the seizure of goods in transit. However, in the matter at hand, the EC clarified that, following the request of the company having patent rights over the generic medicines in the Netherlands, the Dutch customs authorities temporarily detained (which does not mean seize, confiscate or destroy) the consignment in order to control it. The EC further stipulated that the action taken by Dutch customs authorities was in accordance with both the EU legislation and WTO rules, in particular Article V of GATT and Article 51 of TRIPS.
a) TRIPS Agreement
The TRIPS Agreement requires in Article 51 that Members shall adopt procedures to enable a right holder, who has valid grounds for suspecting that the importation of counterfeit trade mark or pirated copyright goods may take place, to lodge an application in writing with competent authorities, administrative or judicial, for the suspension by the customs authorities of the release into free circulation of such goods. However, there is no obligation to apply such procedures to imports of goods put on the market in another country by or with the consent of the right holder, or to goods in transit. In that case, Members are free to determine whether or not to apply such procedures to goods in transit. In the case that a Member does apply such procedures, Article 41 of the TRIPS Agreement states that these procedures shall be fair and equitable. Moreover, the procedures shall not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays.
Therefore, the EC justified the action taken by the Dutch customs authorities as having detained the consignment of generic medicines temporarily on the basis of valid suspicious grounds of the right holder that the generic medicines in transit infringed an intellectual property right. In addition, the EC recalled that compensation will be entitled if the detention has been done on the basis of an unsubstantiated complaint.
b) The EU Anti Piracy Regulation
Taking into account the above stated, it should be noted that, in July 2008, the Court of The Hague in preliminary relief proceedings ruled in the case of Sosecal v. Sisvel that the "fiction of the deemed place of manufacturing" is still to be applied under the new Anti Piracy Regulation ("APR") . The APR contains this so-called legal fiction which entails that counterfeit goods which originate from outside the European Union ("EU") and are in transit in a Member State, should be considered as if they had been manufactured in the Member State where the goods are in transit. This means that if such goods are counterfeit under the laws of the transit Member State, their transit can be prohibited. Thus, it is legally justified to assess, on the basis of the law of the transit Member State, whether the goods in transit infringe an IP right of the patent holder.
Conclusion
It can be concluded that the detentions and seizures reflect ‘friction’ between the EU legislation and WTO rules. The difficulty lies in, among others, drawing a clear line between counterfeit medicines and approved generic drugs. The temporary detentions or seizures by the customs authorities in the EU could impede quick access to essential medicines destined for developing countries without sufficient or no manufacturing capacities in the pharmaceutical sector. The application of enforcement procedures to medicines in transit will remain for now an issue to be dealt with by the World Customs Organization, World Health Organization and WTO.
By Goran Danilovic
Friday, March 13, 2009
EU Recast of Dual Use Export Controls
The EU has been preparing a recast of the EU Dual Use Regulation over the last years.
On 26 January 2009, a conference was held in Brussels in order to allow exporters to comment on the current proposals. The proposed changes of the EU Dual Use Regulation can be found here, though this proposal does not yet reflect the results of ongoing discussions with the EU member states. A report of the conference can be found here as well.
Also, a presentation at C5's 3rd Annual Export Controls conference held in London on 10 and 11 MArch 2009 on the recast can be found in Jasper Helder's Linked In profile (follow the link left of this posting).
On 26 January 2009, a conference was held in Brussels in order to allow exporters to comment on the current proposals. The proposed changes of the EU Dual Use Regulation can be found here, though this proposal does not yet reflect the results of ongoing discussions with the EU member states. A report of the conference can be found here as well.
Also, a presentation at C5's 3rd Annual Export Controls conference held in London on 10 and 11 MArch 2009 on the recast can be found in Jasper Helder's Linked In profile (follow the link left of this posting).
Thursday, February 26, 2009
Export Controls Seminar on March 31st, The Hague, NL
Over the last years, the regulatory aspects in the field of international trade increasingly attract the awareness of businesses to focus on safety and security in relation to their supply chain. One of the hot topics is export controls on dual use goods.
Thise Export Controls Seminar, jointly organised by the American Chamber of Commerce in the Netherlands and the international law firm Bird & Bird, intends to create an open forum for businesses and organizations that are relatively new in the field of US, EU and national export controls and sanctions. The seminar will provide a balanced overview of legislative and business related aspects of this regulated area. It will cover issues such as a contemporary introduction to US and EU export controls, a review of the nonproliferation policy, EU and Dutch policy regarding export controls and discuss the compliance aspects of export controls in day-to-day business practice.
PROGRAM:
14.00 – 14.30 Reception and registration
14.30 – 14.35 Word of welcome by the Chairman
14.35 – 15.20 A general overview of the legislative and regulatory aspects of EU and US export controls by Brian Mulier (senior associate Bird & Bird Trade & Customs)
15.20 – 15.40 Coffee break
15.40 – 16.40 A general introduction to the Non-Proliferation policy and current EU and Dutch policy in relation to export controls by Kees Jan Steenhoek (senior policy advisor on export controls at the Ministry of Economic affairs in the Netherlands)
16.40 – 17.25 Export controls in the business practice by Wolter Boerman (Vice President Philips International, Corporate Legal, Corporate Export Controls & Supply Chain Security)
17.25 – 17.30 Closing remarks
17.30 – onwards Drinks
Registration: jasper.helder@twobirds.com
Thise Export Controls Seminar, jointly organised by the American Chamber of Commerce in the Netherlands and the international law firm Bird & Bird, intends to create an open forum for businesses and organizations that are relatively new in the field of US, EU and national export controls and sanctions. The seminar will provide a balanced overview of legislative and business related aspects of this regulated area. It will cover issues such as a contemporary introduction to US and EU export controls, a review of the nonproliferation policy, EU and Dutch policy regarding export controls and discuss the compliance aspects of export controls in day-to-day business practice.
PROGRAM:
14.00 – 14.30 Reception and registration
14.30 – 14.35 Word of welcome by the Chairman
14.35 – 15.20 A general overview of the legislative and regulatory aspects of EU and US export controls by Brian Mulier (senior associate Bird & Bird Trade & Customs)
15.20 – 15.40 Coffee break
15.40 – 16.40 A general introduction to the Non-Proliferation policy and current EU and Dutch policy in relation to export controls by Kees Jan Steenhoek (senior policy advisor on export controls at the Ministry of Economic affairs in the Netherlands)
16.40 – 17.25 Export controls in the business practice by Wolter Boerman (Vice President Philips International, Corporate Legal, Corporate Export Controls & Supply Chain Security)
17.25 – 17.30 Closing remarks
17.30 – onwards Drinks
Registration: jasper.helder@twobirds.com
Thursday, February 19, 2009
European Court of Justice rules on classification of LCD monitors
By Chiara Klaui, Bird & Bird LLP
On 19 February 2009, a judgment was given by the European Court of Justice ("ECJ") in the 'Kamino' case (C-376/07). This case concerned the classification of LCD monitors with the following specifications: screensize of 53.48 x 46.55 x 24.84 cm (w x h x d) with a 58.42 cm (23 inch) diagonal measurement; maximum resolution of 1 920 x 1 200 pixels; screen aspect ratio of 16:10; horizontal picture frequency of 30 to 81 kHz; vertical picture frequency of 50 to 76 Hz; brightness of 250 candela per square metre; 16.7 million colours and a contrast ratio of 500:1.
According to the Dutch customs authorities, these LCD monitors had to be classified under subheading 8528 21 90 (14% duty rate) whilst Kamino took the view that these monitors were classifiable under subheading 8471 60 90 (0% duty rate).
Questions referred for a preliminary ruling
The Dutch Supreme Court decided to refer the following questions to the ECJ for a preliminary ruling:
Must Note 5 to Chapter 84 of the ... CN ... be interpreted as meaning that a colour monitor which can display both signals from an automatic data-processing machine as referred to in heading 8471 ... and from other sources is excluded from classification under heading 8471 ...?
If classification in heading 8471 ... of the ... monitor referred to in the first question above is not excluded, on the basis of which criteria must it then be determined whether it is a unit of the sort that is solely or principally used in an automatic data-processing system?
Does the scope of application of .. Regulation ... No 754/2004 ... extend to the monitor at issue and, if so, in light of the answers to the first and second questions, is that regulation valid?
Judgment of the ECJ
1. The ECJ ruled that classification of the monitors such as those at issue in subheading 8471 60 90, as units of the kind used 'principally' in an automatic data-processing system within the meaning of Note 5(B)(a) to Chapter 84 of the CN is not precluded on the sole ground that they are capable of displaying signals coming from both an automatic data-processing machine and from other sources.
In other words, LCD monitors which can not only display signals from a computer but also from other sources (e.g. DVD player, games console, etc) can not for this reason alone be precluded from being classified under subheading 8471 60 90 since they may still be of a kind used 'principally' with a computer.
On 19 February 2009, a judgment was given by the European Court of Justice ("ECJ") in the 'Kamino' case (C-376/07). This case concerned the classification of LCD monitors with the following specifications: screensize of 53.48 x 46.55 x 24.84 cm (w x h x d) with a 58.42 cm (23 inch) diagonal measurement; maximum resolution of 1 920 x 1 200 pixels; screen aspect ratio of 16:10; horizontal picture frequency of 30 to 81 kHz; vertical picture frequency of 50 to 76 Hz; brightness of 250 candela per square metre; 16.7 million colours and a contrast ratio of 500:1.
According to the Dutch customs authorities, these LCD monitors had to be classified under subheading 8528 21 90 (14% duty rate) whilst Kamino took the view that these monitors were classifiable under subheading 8471 60 90 (0% duty rate).
Questions referred for a preliminary ruling
The Dutch Supreme Court decided to refer the following questions to the ECJ for a preliminary ruling:
Must Note 5 to Chapter 84 of the ... CN ... be interpreted as meaning that a colour monitor which can display both signals from an automatic data-processing machine as referred to in heading 8471 ... and from other sources is excluded from classification under heading 8471 ...?
If classification in heading 8471 ... of the ... monitor referred to in the first question above is not excluded, on the basis of which criteria must it then be determined whether it is a unit of the sort that is solely or principally used in an automatic data-processing system?
Does the scope of application of .. Regulation ... No 754/2004 ... extend to the monitor at issue and, if so, in light of the answers to the first and second questions, is that regulation valid?
Judgment of the ECJ
1. The ECJ ruled that classification of the monitors such as those at issue in subheading 8471 60 90, as units of the kind used 'principally' in an automatic data-processing system within the meaning of Note 5(B)(a) to Chapter 84 of the CN is not precluded on the sole ground that they are capable of displaying signals coming from both an automatic data-processing machine and from other sources.
In other words, LCD monitors which can not only display signals from a computer but also from other sources (e.g. DVD player, games console, etc) can not for this reason alone be precluded from being classified under subheading 8471 60 90 since they may still be of a kind used 'principally' with a computer.
2. In order to determine whether monitors such as those at issue are units of the kind used principally in an automatic data-processing system, the national authorities, including the courts, must refer to the indications given in the Explanatory Notes relating to heading 8471 of the HS, in particular to points 1 to 5 of Part One, Chapter I(D), relating to display units of automatic data-processing machines:
* standard connection sockets for computers
* intended to be viewed close up
* cannot display television signals
* low magnetic field emissions
* display pitch starts at 0.41 mm for medium resolution and gets smaller as the resolution increases
* bandwith (video frequency) is 15 MHz or greater
* dimension of the pixels on the screen is smaller thatn for video monitors in heading 8528
* convergence of computer monitors is greater than for video monitors
3. With regard to the applicability of Regulation 754/2004 ("Regulation") to the monitors at issue, the ECJ decided that this Regulation did not apply. According to the ECJ, the plasma monitors mentioned in the Regulation are not identical nor sufficiently similar to apply this Regulation to the monitors at issue. The monitor mentioned in the Regulation concerned a plasma screen with a diagonal screen measurement of 41.73 inch and a resolution of 852 x 480 pixels and 1 024 x 1 024 pixels respectively, whilst the monitor at issue concerned an LCD screen with a diagonal screen measurement of 23 inch and a resolution of 1 920 x 1 200 pixels.
Conclusion
With its judgment that monitors which can display signals from computers as well as from other sources can not for this reason alone be excluded from classification under subheading 8471 60 90, the ECJ has clarified part of the ongoing dispute on the proper classification of LCD monitors. It is now up to the national courts and the customs administrations of the different Member States to apply the criteria as set out in the Explanatory Notes to heading 8471 of the HS, in particular points 1 to 5 of Part One, Chapter I(D) when determining whether these LCD monitors are to be considered of the kind used 'principally' with a computer.
Sunday, February 01, 2009
Placing embedded videos on commercial website no longer free of charge in Netherlands
Last year, Buma/Stemra, the Dutch music copyright organisation, started to send out invoices to hosts of private as well as of commercial websites which displayed embedded videos obliging them to pay EUR 26 and EUR 65 per month respectively for the displaying of these videos. This initiative was heavily criticised which eventually led to Buma/Stemra withdrawing its plans. Now however, Buma/Stemra has decided to restart the public debate on the possibility of imposing copyright remunerations on the placement of embedded videos on websites by announcing that these remunerations will be payable if the embedded videos are placed on a commercial website. Private individuals who have placed an embedded video on their own weblog, for example, are thus not required to pay the copyright remuneration. The same applies to commercial websites who merely provide a link to a certain video. Only in the situation where an embedded video is placed on a commercial website (e.g. a website on which advertisements are placed around the embedded video) will a copyright remuneration be payable. The rates of the copyright remunerations as well as the date of commencement of these remunerations will be announced on the website of Buma/Stemra (http://www.bumastemra.nl/en-US/Home.htm) in February.
EU Court of First Instance rules in favour of disclosure of the minutes of the Working Group assisting the Nomenclature Committee
In the case of Pablo Muñiz v the Commission of the European Communities (Case T-144/05), on 18 December 2008 the Court of First Instance (“CFI”) annulled the decision of the Commission of the European Communities (“Commission”) refusing access to requested documents of the Working Group assisting the Nomenclature Committee. The judgment will increase transparency in the Commission’s decision-making process regarding the adoption of classification rules of products under the Combined Nomenclature (“CN”) and TARIC.
The Muñiz judgment
On 13 October 2004, Pablo Muñiz, a lawyer specialising in advising on customs related issues, submitted a request to the Commission for access to the minutes of the Working Group assisting the Nomenclature Committee as well as for access to certain TAXUD (Taxation and Customs Union Directorate-General) documents. The request was based on Regulation 1049/2001 (“Regulation”) which enables access, under certain conditions, to documents of the European Parliament, Council and Commission. The Commission refused access on the basis of Article 4.3 of the Regulation contesting that the requested documents related to matters where a decision had not yet been taken by the Commission, and that disclosure would seriously undermine the Commission’s decision-making process. Accordingly, Pablo Muñiz brought his action at the CFI.
a) Main arguments
Pablo Muñiz argued in the first place that the contested decision infringed Article 4.3 of the Regulation by refusing full access to the requested documents. Pablo Muñiz argued that the dismissing grounds are not valid grounds for dismissal under Article 4.3 of the Regulation. Pablo Muñiz claimed that the content of the Commission’s decision for refusal erroneously reasoned by reference to a category of documents rather than evaluate the content of each one of the requested documents.
In the second place, Pablo Muñiz argued that the contested decision infringed Article 2.1 of the Regulation by leading to a systematic refusal to disclose internal documents, on the sole ground that the relevant file is not closed.
On the other hand, the Commission relied on a number of grounds which can be split into two groups.
In the first group of arguments, the Commission emphasised the characteristics of the Commission’s decision-making process. The Commission relied amongst other factors, on the preliminary nature of the analysis of technical matters contained in the requested documents, on the informal nature of the Working Group, and on the fundamental nature of that ‘space to think’ in its decision-making process. In that regard, the Commission contended that the disclosure of the views expressed within the Working Group would be premature, considering that some of the views would not be followed when considered in the context of the Nomenclature Committee. In this connection, the Working Group was created to support the work of the Nomenclature Committee and carries out a preliminary analysis of technical matters for subsequent discussion in the meetings of the Nomenclature Committee. Therefore, it is the Nomenclature Committee, according to the Commission, that delivers opinions on the measures to be adopted by the Commission. The Commission further emphasised the informal character of the Working Group considering that there is no legal basis, mandate or formal decision creating it. Therefore, the Working Group cannot give official opinions to the Commission, regarding the adoption of draft implementing measures.
In the second group of arguments, the Commission put the emphasis on the consequences of possible access to the requested documents. The Commission argued that the disclosure would expose the Nomenclature Committee to “unnecessary and detrimental pressure” which would restrict the Commission’s staff and experts to express their views considering the possibility of disclosure of their opinions.
b) Court of First Instance
The CFI rejected all the arguments put forward by the Commission.
As regards the first group of arguments, the CFI decided that neither the preliminary nature of the analysis contained in the requested documents, nor the informal nature of the Working Group justified the refusal to disclose the requested documents. In that regard, the CFI ruled that the exception in Article 4.3 of the Regulation does not preclude by its wording or reason that it protects, the possibility of requesting access to documents for internal use containing a preliminary analysis. The CFI further emphasised that the Commission’s arguments as to the informal nature of the Working Group do not alter in the slightest the fact that documents emanating from the Working Group ‘can be disclosed’ subject to the exception provided for in the first subparagraph of Article 4.3 of the Regulation.
With regard to the second group of arguments, the CFI ruled that the risk of external pressure was unsubstantiated. The CFI decided that the mere possibility of external pressure, on account of the significant commercial interests in matters of customs tariff classification, cannot per se constitute a legitimate ground for restricting access to documents since the exception provided for in Article 4.3 of the Regulation must be interpreted and applied strictly. Conclusion
The Muñiz judgment is of importance for the Commission’s decision-making process regarding the adoption of classification rules of products under the CN and TARIC. In that regard, the Muñiz judgment provides for more transparency and offers to all stakeholders the possibility to acquire, under the conditions provided for in Article 4.3 of the Regulation, a preliminary view of future classification initiatives and rules.
Moreover, the increase in transparency will not only contribute to a better flow of information towards all stakeholders but also to a better preparation as stakeholders have the possibility to request documents relating to, for example, discussions regarding new classification rules.
The Muñiz judgment
On 13 October 2004, Pablo Muñiz, a lawyer specialising in advising on customs related issues, submitted a request to the Commission for access to the minutes of the Working Group assisting the Nomenclature Committee as well as for access to certain TAXUD (Taxation and Customs Union Directorate-General) documents. The request was based on Regulation 1049/2001 (“Regulation”) which enables access, under certain conditions, to documents of the European Parliament, Council and Commission. The Commission refused access on the basis of Article 4.3 of the Regulation contesting that the requested documents related to matters where a decision had not yet been taken by the Commission, and that disclosure would seriously undermine the Commission’s decision-making process. Accordingly, Pablo Muñiz brought his action at the CFI.
a) Main arguments
Pablo Muñiz argued in the first place that the contested decision infringed Article 4.3 of the Regulation by refusing full access to the requested documents. Pablo Muñiz argued that the dismissing grounds are not valid grounds for dismissal under Article 4.3 of the Regulation. Pablo Muñiz claimed that the content of the Commission’s decision for refusal erroneously reasoned by reference to a category of documents rather than evaluate the content of each one of the requested documents.
In the second place, Pablo Muñiz argued that the contested decision infringed Article 2.1 of the Regulation by leading to a systematic refusal to disclose internal documents, on the sole ground that the relevant file is not closed.
On the other hand, the Commission relied on a number of grounds which can be split into two groups.
In the first group of arguments, the Commission emphasised the characteristics of the Commission’s decision-making process. The Commission relied amongst other factors, on the preliminary nature of the analysis of technical matters contained in the requested documents, on the informal nature of the Working Group, and on the fundamental nature of that ‘space to think’ in its decision-making process. In that regard, the Commission contended that the disclosure of the views expressed within the Working Group would be premature, considering that some of the views would not be followed when considered in the context of the Nomenclature Committee. In this connection, the Working Group was created to support the work of the Nomenclature Committee and carries out a preliminary analysis of technical matters for subsequent discussion in the meetings of the Nomenclature Committee. Therefore, it is the Nomenclature Committee, according to the Commission, that delivers opinions on the measures to be adopted by the Commission. The Commission further emphasised the informal character of the Working Group considering that there is no legal basis, mandate or formal decision creating it. Therefore, the Working Group cannot give official opinions to the Commission, regarding the adoption of draft implementing measures.
In the second group of arguments, the Commission put the emphasis on the consequences of possible access to the requested documents. The Commission argued that the disclosure would expose the Nomenclature Committee to “unnecessary and detrimental pressure” which would restrict the Commission’s staff and experts to express their views considering the possibility of disclosure of their opinions.
b) Court of First Instance
The CFI rejected all the arguments put forward by the Commission.
As regards the first group of arguments, the CFI decided that neither the preliminary nature of the analysis contained in the requested documents, nor the informal nature of the Working Group justified the refusal to disclose the requested documents. In that regard, the CFI ruled that the exception in Article 4.3 of the Regulation does not preclude by its wording or reason that it protects, the possibility of requesting access to documents for internal use containing a preliminary analysis. The CFI further emphasised that the Commission’s arguments as to the informal nature of the Working Group do not alter in the slightest the fact that documents emanating from the Working Group ‘can be disclosed’ subject to the exception provided for in the first subparagraph of Article 4.3 of the Regulation.
With regard to the second group of arguments, the CFI ruled that the risk of external pressure was unsubstantiated. The CFI decided that the mere possibility of external pressure, on account of the significant commercial interests in matters of customs tariff classification, cannot per se constitute a legitimate ground for restricting access to documents since the exception provided for in Article 4.3 of the Regulation must be interpreted and applied strictly. Conclusion
The Muñiz judgment is of importance for the Commission’s decision-making process regarding the adoption of classification rules of products under the CN and TARIC. In that regard, the Muñiz judgment provides for more transparency and offers to all stakeholders the possibility to acquire, under the conditions provided for in Article 4.3 of the Regulation, a preliminary view of future classification initiatives and rules.
Moreover, the increase in transparency will not only contribute to a better flow of information towards all stakeholders but also to a better preparation as stakeholders have the possibility to request documents relating to, for example, discussions regarding new classification rules.
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