‘Avoidably’ Falling Foul of Customs

A couple of German cases which were sent to the European Court of Justice have highlighted the need for all businesses which import and take advantage of Customs Duty & Import VAT suspension reliefs to be very diligent in ensuring that they fully complete the requirements of the relief in order to enjoy the benefits.

This comes on the back of the decisions in both the Eurogate Distribution GmbH v Hauptzollamt Hamburg-Stadt (2012) C-28/11 case  and the Döhler Neuenkirchen GmbH v Hauptzollamt Oldenburg case — Case C-262/10 whereby both companies were denied the relief they sought due to administrative oversights. In Eurogate’s case they failed to note the records of their Customs (Bonded) Warehouse at the right time and although they re-exported goods outside the EU which should have rendered them non-dutiable, because they didn’t complete the administration correctly the ECJ upheld the German Customs’ view that a Customs Debt arose and duty was charged on the exported goods.

In the Dohler case, the ECJ similarly held that because the company had not sent in the correct paperwork showing the re-export of goods under a relief called Inward Processing Relief at the correct time, German Customs were perfectly correct to raise a bill for import duty on the basis that IPR had not be correctly discharged.

In both cases the assessments were wholly avoidable but they both echo recent experiences with UK Customs (who act on behalf of the EU when administering Customs matters), in that the EU are clearly now taking a less forgiving view where businesses fail to strictly follow the, often complex and confusing, rules and are instructing Customs Authorities EU wide (including HMRC) to either issue assessments or not allow reliefs where the rules are not fully met.

This approach seems to have come off the back of the FG Wilson & Caterpillar case where the ECJ reluctantly agreed to Judge Sir Stephen Oliver’s opinion that whilst avoidable, such errors if punished would significantly affect the UK economy to such a degree that leniency and common sense should apply. However, having reluctantly agreed to this it seems that the EU are pushing through their stated view that the leniency was a one-off due to the unusual circumstances of that case.

Such omissions of the rules are often quite small administrative errors from a ‘doing’ point of view but can have significant consequences for a business as they can involve large sums of money that the business has not planned for. One case of which the author is aware involved a Customs Duty & Import VAT bill in excess of £1.2M which whilst eventually withdrawn did cause so significant problems for the company which could all have been avoided if the business had ensured it understood and met the IPR discharge rules at re-export.

From experience businesses fall foul because they are often unaware of the rules and so do not see through to the end their obligations of Customs Reliefs - when this is added to the backdrop that not only are the rules on Customs complex but the EU’s view is that if something is published, then it is taken as granted that importers should know about the rules, it all adds up to a recipe for errors to occur.

Given the EU’s stance, the moral of this piece is that if you or any of your clients take advantage of a Customs Relief, whatever it may be, please make sure you or they are fully aware of what they should do so that they do not fall foul of Customs on an avoidable administration error.