Case C-58/14, Amazon EU – installing dictionaries to kindle import taxes going up in flames [judgment 2015, ECLI:EU:C:2015:385]

eBook-readers are imported into the EU in considerable quantities. Since 2010, Dutch and English customs have taxed these imports at 3.7%. However, Amazon has now sought to persuade the German courts that its eBook-reader ‘Kindle’ devices should not be subject to any import tax whatsoever because its devices come with a couple of dictionaries pre-installed on them, which makes them ‘Electrical machines with translation or dictionary functions’ for the purposes of the Combined Nomenclature established by EC Regulation No 2658/87, and thus free from import tax.

Facts
Amazon EU imports into the EU a range of eBook-readers known as ‘Amazon Kindle’.

Imports of goods into the EU are governed by the so-called Combined Nomenclature. The CN, established by EC Regulation No 2658/87, is based on the International Harmonised Commodity Description and Coding System drawn up by the Customs Cooperation Council, now the World Customs Organisation.

EU imports are taxed according to which CN ‘heading’ best fits the imported goods’ objective characteristics. The problem here is that the CN does not have a specific heading for eBook readers. Yet, those devices must still be brought under one CN heading or another so the legal question arises as to where should these devices go in the great scheme of the CN?

Amazon EU asserts that its eBook-readers should fall under heading 8543 7010, which covers ‘Electrical machines with translation or dictionary functions’. According to Amazon, its eBook-readers do not just have the software and hardware necessary to read eBooks but they also come with computer programs for text-to-speech options, voice-command options, and a program for displaying audio formats on a dictionary functionality. Furthermore, its Kindles are supplied with the ‘New Oxford American Dictionary’ and the ‘Oxford Dictionary of English’ pre-installed on them (users can install other dictionaries if they so wish).

If Amazon’s interpretation is right that its Kindles fall under heading 8543 7010 CN, then those goods are not subject to import duty.

Amazon’s interpretation of the CN was rejected by German customs. They believed that the devices did not fall under heading 8543 7010 CN; instead, the goods fell under heading 8543 7090 CN, which covers ‘Parts of electrical machines and apparatus, having individual functions’. And devices falling under this heading were subject to a 3.7% import tax.

Litigation ensued as to whether the eBook-readers fell under ’7010′ or ’7090′ CN. The dispute was escalated up to the German Federal Fiscal Court. Once there, the Federal Fiscal Court wondered whether the eBooks would qualify for any heading other than 7010.

After all, the 7010 heading expressly covered ‘Electrical machines with translation or dictionary functions’. Heading 7010 was also a specific heading so it would be better to bring the eBook-readers under that heading rather than squirrelling them away under 7090, whose drafting was more vague in scope. And in any event, the drafting of 7090 was clear: 7090 was only available if goods could not be brought under any other heading – and of course it was quite possible here to bring those goods under the heading of 7010. The implication of the reasoning used by the German Federal Fiscal Court is that heading 7090 was the wrong heading.

The view of the judges at the German Federal Fiscal Court was not altered by the existence of an EU Commission Implementing Regulation 763/2011 which had been expressly devoted to eBooks, and which classified eBooks as falling under heading 7090.

As the German Federal Fiscal Court judges pointed out, the scope of that Regulation was expressly limited to eBooks that did not have ‘translation or dictionary functions’ – but these particular eBook-readers of Amazon did have a dictionary function.

In that context, the judges also remarked that any non-legally binding indication from the Commission that these particular eBooks would fall under 7090 would go against the very wording of an implementing Regulation. And it remained a mystery to the German judges as to why the EU Commission would seek to bring these eBooks within the scope of 7090 when these eBooks fell squarely within the wording of heading 7010 since these devices were in effect mini-computers which possessed primarily, if not exclusively, a translation function.

The above-mentioned considerations prompted the German Federal Fiscal Court to ask Question 1 about whether 7010 was only for those goods which had solely a dictionary or translation function.

But the judges of the German Federal Fiscal then went further with their thinking. If the answer to Question 1 was that heading 7010 was not to be interpreted as including only those goods which have a translation or dictionary function as their sole function, then what needed to be clarified was whether 7010 also included devices in which a translation or dictionary function was not material to the primary function of enabling the act of reading to take place.

In that context, the German Federal Fiscal Court recalled the CJEU’s judgment in Case C-130/02, Krings. In that case, the CJEU had been faced with a dispute in which the Commission had introduced a classification Regulation concerning products with extracts of tea content. The tea products at the heart of the dispute in Krings were not exactly identical to those covered by the Regulation since they had a marginally lower extract of tea content. Nevertheless, the CJEU in Krings had said that the Commission was right to reason by analogy from the Regulation to include products which were similar to those covered by that Regulation since such an interpretation would facilitate a coherent interpretation of the CN and the equal treatment of traders.

In light of that reasoning in Krings, the judges of the German Federal Fiscal Court thought that any analogous application of the Commission’s eBook Implementing Regulation to the present case would mean that to fall under heading 7090, Amazon’s eBooks could only deviate ever so slightly from the eBook device described in the Implementing Regulation since that Regulation was quite clear that the eBook device should have no dictionary or translation function at all.

Indeed, it even seemed plausible to argue – as Amazon had done – that if eBook-readers with a dictionary or translation function were indeed to be brought under heading 7090 by dint of the Commission’s implementing Regulation, then perhaps that Regulation itself should not have been adopted because it would go against heading 7010 of the Combined Nomenclature which was about ‘Electrical machines with translation or dictionary functions’.

The judges of the German Federal Fiscal Court decided to make a reference to the CJEU.

Questions Referred
My unofficial translation of the questions asked by the German Federal Fiscal Court reads:

1. Is the description of goods falling under Heading 8543 7010 CN to be interpreted as including only those devices which exclusively possess translation or dictionary functions?

2. If the answer to the first question is in the negative, then does Heading 8543 7010 CN also cover devices whose translation or dictionary function is not material to the primary function, which in this case is the reading function?