Tobacco Imports: EU Court of Justice Rules against France

Source from:  Europolitics  03/15/2013

On 14 March 2012, the EU Court of Justice found to be illegal the provisions of the French general tax code that limit the amount of tobacco individuals can bring into the country duty-free. Paris has already planned its response.

Articles 575G and 575H of the French General Tax Code, implemented in 2006 when cigarette purchases in certain countries neighbouring France rose sharply due to lower taxation, set strict quantitative limits on the movement and holding of manufactured tobacco products - cigarettes, smoking tobacco, cigars, etc – from another member state.

Travellers may bring five cartons of cigarettes (ie one kg of tobacco) into France, but for a quantity of six to ten cartons they must present a simplified accompanying document. In the absence of this document, travellers risk seizure of the tobacco and a penalty, unless they abandon the goods. Bringing more than ten cartons of cigarettes (or two kg of tobacco) into France is prohibited in all cases. A person who undergoes checks and is found to be in violation risks sanctions (seizure and penalty).

In its ruling (Case C-216/11, pitting the European Commission against France), the court holds that France failed to fulfil its obligations under Directive 92/12/EEC on the holding, movement and monitoring of products subject to excise duty, which allows individuals to buy products subject to excise duty (such as manufactured tobacco) in a member state and to transport them to another member state without paying additional taxes, provided the products are for their own personal use and are transported by the individuals themselves.

Several criteria are used to determine whether goods brought in are intended for personal use (in which case the excise duties are collected in the state where they are bought) or, on the contrary, are held for commercial purposes (in which case the excise duties must be paid in the state where they are held). The quantity of tobacco is one of these many criteria, but member states may only set guide levels per type of product (X cigarettes, X cigars, etc).

The European Commission referred the case to the EU Court of Justice on 10 May 2011. It argued that the French rules are incompatible with the directive since Paris uses only one criterion – quantity – to determine whether the tobacco is being imported for private or commercial use.

It also pointed out that the threshold applies to all products acquired and not to each type of product (cigarettes, cigars, smoking tobacco) and to each vehicle rather than each person considered individually.

The court upheld all the Commission's arguments. It ruled that France failed to fulfil its obligations by using a purely quantitative criterion to assess the commercial nature of individuals' holding of manufactured tobacco products from another member state, by applying the criterion per vehicle rather than per individual and by applying it to all tobacco products acquired taken globally.

Paris has already planned its response.

On 8 March, the French Economy and Budget Ministers, Pierre Moscovici and Jérôme Cahuzac, announced that France would "immediately put in place, on the instructions of the customs administration, new monitoring methods to ensure compliance with the prohibition on duty-free imports of cigarettes intended for resale in violation of the sales monopoly of tobacconists".

French tobacconists suffer from competition from their foreign counterparts and illegal tobacco purchases (contraband and internet). According to the French customs services, legal and illegal purchases in other member states account for some 20% of tobacco consumption in the country, which also results in an estimated €2.5 billion annual loss of tax revenues for the French state. Enditem