An interesting judgment from The Netherlands first instance customs court on where dutiable assists begin and ends.

The plaintiff manufactures a range of IT and consumer electronics products, such as mp3 players. These contain memory chips which are sourced by the plaintiff from various producers. The plaintiff issues very expensive test equipment to establish the yield on the produced memory chips (a certain percentage will be defective, and the plaintiff does not want these) on loan to these producers. The equipment belongs to the plaintiff. The approved chips are then consigned by the plaintiff to other producers, who incorporate them into various devices, including mp3 players.

In respect of these mp3 players, Netherlands customs argued that the substantial depreciation cost of the test equipment as incurred by the plaintiff must be added to customs value.

Customs argued:

Principally, the microchips supplied by the plaintiff to the device producers are dutiable assists. Their value, including the depreciation cost for the test equipment, must be added to customs value because these depreciation cost concern components which are ultimately included in the imported mp3 players.

Alternatively: The test equipment are tools for the production of the imported mp3 players and thus dutiable. This is not diminished by the fact that the equipment also tests chips which are used as components of other products, because this was taken into account when determining the value of the depreciation cost added to customs value.

The court held:

The concept of 'the imported goods' does not pertain to the parts of the imported item as confirmed by the ECJ in its judgment of 16 November 2006, case C-306/04 ("Compaq").

The court then considered if the test equipment is goods or services as set out in article 32 (1) sub b EU Customs Code (exhaustive list of dutiable assists), which the plaintiff provided free of charge or at a reduced price, directly or indirectly, to be used for the manufacture and sale of the imported mp3 players. The testing equipment cannot be considered material, component, part and the like of the imported mp3 players, because this equipment is not included (as part/component) in the mp3 players. Likewise, the testing equipment is not a tool, dye, mould or similar items used to produce the imported mp3 players. The testing equipment was not used to manufacture the imported mp3 players, but rather to test the operation of a component of the imported goods.

The value of goods and services consigned to the seller as set out in article 32 (1) sub i through iv EU Customs Code should be assessed separately for each category of assist as set out in sub i through iv of that article. These categories can not be combined or accumulated and then applied to the same product or service. If this were different, it would be possible to adjust the customs value in the manufacturing process of parts from suppliers in every conceivable situation, which the authors of the GATT apparently did not have in mind, in view of the text of Article 8 of the Agreement related to the application of Article VIIGATT.

Haarlem District Court, 7 February 2008.