The Customs Union

Article 23 makes it clear that the customs union has both internal and external aspects. The external aspect involves the adoption of the common customs tariff. The internal aspect requires the elimination of customs duties and charges having equivalent effect on goods in free circulation within the Community.

The prohibition on customs duties on intra-Community trade is achieved by virtue of Article 25 of the Treaty. The Court has interpreted the prohibition contained in Article 25 strictly in ruling unlawful national levies imposed on imported or exported goods. In Commission v Italy (case 7/68) the Court considered the compatibility with Article 25 of an Italian tax on the export of art treasures. It was unarguable that a duty was levied on items crossing the Italian frontier. None the less, the Italian Government presented two arguments based on the Treaty rules on customs duties in order to persuade the Court that its system was compatible with Community law. Neither argument proved successful. Firstly, it was argued that the items on which the levy was raised were of artistic and cultural, not commercial, significance, and that for the purposes of Community law they did not count as 'goods' at all. The argument failed because the Court insisted that even items of artistic merit that can be valued in money and that are capable of forming the subject matter of commercial transactions do not escape the ambit of Article 25. The Court's ruling was supported by the fact that the Italian authorities were prepared to make an economic assessment of the value of goods concerned in order to fix the amount of tax demanded, which revealed that even Italian law acknowledged the commercial nature of the items.

Secondly, it was submitted that the purpose of the tax was not to raise money for the national exchequer, but instead to retain national cultural artefacts within Italy. This function, it was argued, took the system outside the ambit of Article 25. The Court declined to follow this line of reasoning and found Italy in violation of the Treaty. It explained that Article 25 applied where the price of goods was inflated by a tax imposed by reason of the crossing of a frontier and where, accordingly, transfrontier trade was impeded. The purpose behind the tax could not alter the application of Article 25. As a matter of policy this seems entirely in accordance with the Treaty objective of market integration. In fact, an emphasis on effect, not purpose, is a stance that pervades EC trade law.

Cee: the Charge Having Equivalent Effect

The scope of Article 25 has been widened by the Court through its interpretation of the prohibited 'charge having equivalent effect' (CEE) to a customs duty. The Court has used the notion of the CEE to secure the abolition of charges imposed at frontiers even where those charges would not be classified as customs duties in the normal sense. In this way the Court has promoted the cause of market integration. It has already been seen in Commission v Italy (case 7/68), the art treasures case, and in the Sociaal Fonds (cases 2, 3/69) decision that the Court analyses national rules with reference to their effect on trade rather than their object, and this theme underlies decisions on the meaning of the CEE.

In a later Commission v Italy (case 24/68) action, which concerned not a levy on art treasures but a simple charge imposed on exports and imports, the Court defined the CEE in the following terms:

Any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect . . . even if it is not imposed for the benefit of the State, is not discriminatory or protective in effect and if the product on which the charge is imposed is not in competition with any domestic product.