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On the constitutionality of provisions of the Customs Code of the Republic of Lithuania

Case No. 4/02

 

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF ITEM 2 OF PARAGRAPH 1 OF ARTICLE 30 OF THE CUSTOMS CODE OF THE REPUBLIC OF LITHUANIA WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

 

27 January 2005

Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Armanas Abramavičius, Egidijus Jarašiūnas, Egidijus Kūris, Kęstutis Lapinskas, Zenonas Namavičius, Augustinas Normantas, Jonas Prapiestis, Vytautas Sinkevičius, and Stasys Stačiokas

The court reporter—Daiva Pitrėnaitė

Vilija Račkauskienė, a senior specialist at the Legal Department of the Office of the Seimas, acting as the representative of the Seimas of the Republic of Lithuania, the party concerned

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, on 26 January 2005, in its public hearing, considered case No. 4/02 subsequent to the petition of the Vilnius Regional Administrative Court, the petitioner, requesting an investigation into whether Item 2 of Paragraph 1 of Article 30 of the Customs Code of the Republic of Lithuania is not in conflict with Paragraphs 1 and 4 of Article 48 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

The Constitutional Court

has established:

I

1. The Vilnius Regional Administrative Court, the petitioner, considered an administrative case. By its ruling, the court suspended the consideration of the case and applied to the Constitutional Court with the petition requesting an investigation into whether Item 2 of Paragraph 1 of Article 30 of the Customs Code (Official Gazette Valstybės žinios, 1996, No. 52-1239) is not in conflict with Paragraphs 1 and 4 of Article 48 of the Constitution and the constitutional principle of a state under the rule of law.

2. According to Item 2 of Paragraph 1 of Article 30 of the Customs Code, the contractual value is not considered to be the customs value of imported goods, if the sales of the goods or their price was impacted by certain conditions or circumstances, where one cannot establish the impact upon the price of contract on the sales of goods.

3. The petitioner’s doubt concerning the compliance of Item 2 of Paragraph 1 of Article 30 of the Customs Code with the Constitution is based on the fact that, in his opinion, a person, while being engaged in economic activity and while concluding contracts, has no guarantee that in the course of establishment of the customs value of imported goods and not applying the method of contractual value, the contract concluded by him with other subjects will not be revised, although such a contract is not contested or annulled under established procedure. The petitioner had doubts as to whether the individual freedom of economic activity and initiative entrenched in Paragraph 1 of Article 46 of the Constitution, the protection of freedom of fair competition entrenched in Paragraph 4 of the said article, and the constitutional principle of a state under the rule of law are not violated by the legal regulation established in Item 2 of Paragraph 1 of Article 30 of the Customs Code.

II

In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations of V. Račkauskienė, the representative of the Seimas, the party concerned, were received.

1. V. Račkauskienė noted that the list of cases where the method of contractual value is not applied, which is consolidated in the Customs Code, is final. One of these cases is provided for in Item 2 of Paragraph 1 of Article 30 of the Customs Code. According to it, the method of contractual value is not applied when the sales of goods or their price was impacted by certain conditions or circumstances, where one cannot establish the impact upon the price of contract on the sales of goods. By the impugned legal regulation, one seeks to ensure the common interest. By this legal regulation no persons are discriminated, none of them is granted privileges, no economic subject or group of persons is granted exceptional rights to act in a certain area, the freedom and initiative of economic activity is not limited, but conditions for fair competition are created.

In the opinion of the representative of the party concerned, Item 2 of Paragraph 1 of Article 30 of the Customs Code is not in conflict with Paragraphs 1 and 4 of Article 48 of the Constitution and the constitutional principle of a state under the rule of law.

2. V. Račkauskienė also drew attention to the fact that the legal regulation, which is basically identical to the one established in Item 2 of Paragraph 1 of Article 30 of the Customs Code, is entrenched also in legal acts of the World Trade Organisation and the European Union.

III

In the course of preparation of the case for the Constitutional Court’s hearing written explanations were received from D. Grybauskaitė, the Minister of Finance of the Republic of Lithuania, P. Čėsna, the Minister of Economy of the Republic of Lithuania, P. Koverovas, the State Secretary to the Ministry of Justice of the Republic of Lithuania, V. Vadapalas, the Director General of the European Law Department under the Government of the Republic of Lithuania, R. Klevečka, the Director General of the Customs Department under the Ministry of Finance of the Republic of Lithuania, as well as Assoc. Prof. A. Laurinavičius, the Head of Customs Activity Department at the Police Faculty of the Law University of Lithuania.

IV

At the Constitutional Court’s hearing, the representative of the Seimas, the party concerned, who was V. Račkauskienė, virtually reiterated the arguments set forth in her written explanations.

The Constitutional Court

holds that:

I

1. On 18 April 1996, the Seimas adopted the Customs Code in Article 236 whereof it stipulated that the terms and procedure of coming into effect of this code and its implementation are set down in the Law on Implementation of the Customs Code.

On 4 June 1996, the Seimas adopted the Republic of Lithuania’s Law on Implementation of the Customs Code. It was established in Article 1 of this law that the Customs Code shall become effective as from 1 January 1998. The Customs Code has been amended and supplemented more than once.

2. The Vilnius Regional Administrative Court, the petitioner, had doubts whether Item 2 of Paragraph 1 of Article 30 of the Customs Code was not in conflict with Paragraphs 1 and 4 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

3. On 27 April 2004, the Seimas adopted the Republic of Lithuania’s Law on Recognising the Customs Code and Laws Amending It as No Longer Effective. Article 1 of this law recognised, inter alia, the Customs Code as no longer effective, and in Article 2 one stipulated that this law shall become effective as from 1 May 2004. After the Law on Recognising the Customs Code and Laws Amending It As No Longer Effective came into force, the Customs Code became no longer effective, thus, Item 2 of Paragraph 1 of Article 30 thereof became no longer effective as well.

The recognition of the Customs Code as no longer effective is related to the membership of the Republic of Lithuania in the European Union; the Republic of Lithuania became a member of the European Union on 1 May 2004.

4. On 27 April 2004, the Seimas adopted the Republic of Lithuania’s Law on Customs. It is established in Paragraph 1 of Article 110 of the Law on Customs that this law (save certain articles or parts thereof) becomes effective as from 1 May 2004. It is established in Paragraph 2 of Article 1 of the Law on Customs that by this law the legal acts of the European Union specified in the annex to the law shall be implemented.

5. According to Paragraph 4 of Article 69 of the Law on the Constitutional Court the annulment of the impugned legal act shall be grounds to adopt a decision to dismiss the instituted legal proceedings. In its rulings the Constitutional Court has held more than once that according to the Constitution, in the cases where the Constitutional Court is addressed by a court that considers a case and has doubts concerning the compliance of the law applicable in that case with the Constitution or laws, the Constitutional Court has a duty to consider the petition of the court irrespective of the fact whether the impugned law or other legal act is in force or not.

II

On the compliance of Item 2 of Paragraph 1 of Article 30 of the Customs Code with Paragraphs 1 and 4 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

1. It was established in Paragraph 1 of Article 30 “Application of the Method of Contractual Value” of the Customs Code:

It is considered that the customs value of imported goods shall be contractual value, i.e. the sum paid or due to be paid for the goods sold in order to export them to the territory of custom duties of the Republic of Lithuania, which shall, if needed, be specified in more detail in accordance with provisions of Articles 33 and 34 of this Code. The contractual value shall not be considered to be customs value, where: <…>

2) certain conditions or circumstances had impact upon the sales of goods or price thereof, where one cannot establish the impact upon the price of contract on the sales of goods <…>”

2. In Paragraph 1 of Article 30 of the Customs Code the procedure of the calculation of the customs value of imported goods was consolidated by applying the method of contractual value as the major method of calculation of customs value. In this paragraph one established also that, if needed, the value may be specified in more detail in accordance with the rules established in Articles 33 and 34 of the Customs Code. Moreover, one established on which basis the contractual value was not considered to be customs value and when other methods provided for in Articles 31 and 32 of the Customs Code must be applied in order to calculate the customs value of goods.

One of the cases where the contractual value is not considered to be the customs value of goods is set down in the impugned by the petitioner Item 2 of Paragraph 1 of Article 30 of the Customs Code: “certain conditions or circumstances had impact upon the sales of goods or price thereof, where one cannot establish the impact upon the price of contract on the sales of goods”.

3. When deciding whether the impugned item was not in conflict with the Constitution it should be noted that there may exist cases where the declared customs value of goods differs from the customs value of similar or identical goods, and the importer fails to specify reasons of origin of such difference. In such cases it is important that the customs officials establish as to what conditions or circumstances had impact upon the value of the sales contract and what particular impact it was. If it is impossible to establish the impact of such circumstances or conditions upon the sales contract, other methods of calculation of the customs value of imported goods are applied. Application of methods other than the method of contractual value when establishing the customs value of imported goods does not mean that the contract concluded is impugned, annulled, revised, etc.

4. It should be noted that the objective of the impugned legal regulation is to create legal prerequisites for the correct calculation of the customs value of imported goods and customs duty, as well as to ensure that persons perform their constitutional duty to pay taxes. Item 2 of Paragraph 1 of Article 30 of the Customs Code had to be applied in all cases, where it was impossible to establish as to what impact was made upon the price of the sales contract by certain conditions or circumstances. In this regard all persons are treated equally.

It should also be noted that decisions of the customs office (its officials), including decisions concerning application or non-application of the methods provided for in the Customs Code in the course of the calculation of the customs value of imported goods may be appealed against under procedure established by law, they may be appealed against in court as well.

5. Thus, the impugned legal regulation did not violate the freedom of economic activity and initiative entrenched in Paragraph 1 of Article 46 of the Constitution, the protection of freedom of fair competition entrenched in Paragraph 4 of the said article, as well as the constitutional principle of a state under the rule of law.

6. It should be noted that the legal regulation consolidated in Item 2 of Paragraph 1 of Article 30 of the Customs Code, which was previously in force, is basically identical to the one entrenched in the legal act of the European Union—the Community Customs Code—established on 12 October 1992 by the Council Regulation (EEC) No. 2913/92, international legal acts (Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade of 1994), as well as laws of other countries.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55, and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

To recognise that Item 2 of Paragraph 1 of Article 30 of the Customs Code of the Republic of Lithuania was not in conflict with the Constitution of the Republic of Lithuania.

This ruling of the Constitutional Court is final and not subject to appeal.

The ruling is pronounced in the name of the Republic of Lithuania.

Justices of the Constitutional Court:          Armanas Abramavičius

                                                                               Egidijus Jarašiūnas

                                                                               Egidijus Kūris

                                                                               Kęstutis Lapinskas

                                                                               Zenonas Namavičius

                                                                               Augustinas Normantas

                                                                               Jonas Prapiestis

                                                                               Vytautas Sinkevičius

                                                                               Stasys Stačiokas