Customs (European Union)

• Author: International Law Group
• Pages: 3-5

Page 3

Compaq Computer International Corporation (Plaintiff) is a company set up under Netherlands law and a subsidiary of Compaq Computer Company (CCC), a United States company. Plaintiff sells Compaq data processing equipment in Europe and has, for that purpose, a distribution centre in the Netherlands.

Under a contract between CCC and Microsoft Corporation, CCC can install software consisting of the MS-Dos and MS Windows operating systems (MSOS) on its computers. Microsoft sells these operating systems to run the Compaq hardware for a payment of $31.00 to Microsoft for every computer equipped with an MSOS.

CCC bought a number of laptop computers from two Taiwanese computer manufacturers. As part of this sale, the parties agreed that the seller would install the MSOS's on the hard drives of the computers when they were delivered. To that end, CCC made these systems available free of charge to the manufacturers, who then installed them on those computers.

Plaintiff then bought the Taiwanese laptops from CCC and had them shipped f.o.b. from Taiwan to the Netherlands. Upon their arrival, Plaintiff declared to Dutch customs that the computers were for "free circulation." When officials were calculating their customs value under Article 29 of the Community Customs Code, Plaintiff used the selling price between the Taiwanese manufacturers and CCC, which did not include the value of the MSOS's.

In 1999, a customs authorities' National Valuation Team (NVT) got in touch with Plaintiff to check on the accuracy of the declared customs value of the computers in question. The NVT decided that the custom value should include the value of the MSOS's installed on these computers. Based on Article 32(1)(b) of the Customs Code, the customs authority adjusted the customs value of every computer upward by the value of the MSOS's installed. It then sent two demands for payment to Plaintiff for the higher amounts as additional customs duties on the imports of laptop computers declared for free circulation during the period from January 1, 1995 to December 31, 1997.

Plaintiff sued in the Gerechtshof te Amsterdam (GTA) against the customs authorities' decisions to dismiss the objections lodged against its demands for payment. During those proceedings, the following legal question came up before the GTA: for the purposes of determining customs value, were the customs authorities justified under Article 32(1)(b) of the Customs Code in marking up the transaction...