G12: Import/customs duties demands

Waiver due to HMRC error

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“As already noted, Article 220(2)(b) lays down four conditions, all of which must be satisfied:
(1)          HMRC must have made an error;
(2)          the error could not have been reasonably detected;
(3)          the appellant acted in good faith; and
(4)          the appellant complied with all the provisions laid down by the legislation in force as regards the customs declaration…It was common ground that the burden of proof to establish that the conditions of Article 220(2)(b) were satisfied lay upon the appellant.” (Euro Packaging Ltd v. HMRC [2017] UKFTT 160 (TC), §111).

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“There are a number of elements of Article 220(2)(b) that fall to be considered:
(1)  Was there an error?
(2)  Was the error made by the “customs authorities”?
(3)  Was the failure to enter in the accounts the amount of duty legally owed a result of the error?
(4)  If (1), (2) and (3) are established,
(a) Is it the case that the error could not reasonably have been detected by the person liable for the payment?
(b) Did that person act in good faith?
(c) Did that person comply with all the provisions laid down by the legislation in force as regards the customs declaration?” (Beko plc v HMRC [2014] UKFTT 60 (TC), §43, Judge Berner).

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See UCC Article 119

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Error by a competent authority

 

“… it follows from the wording of [Article 220(2)(b)] itself that the legitimate expectations of the person liable attract the protection provided for in that article only if it was the competent authorities ‘themselves’ which created the basis for those expectations.  Thus, only errors attributable to acts of the competent authorities confer entitlement to the waiver of post-clearance recovery of customs duties …” (R v Customs and Excise Commissioners ex p Faroe Seafood Co Ltd C-153/94, §91).

 

Includes any authority competent to furnish information relevant to recovery of customs debts

 

“In this context, the question of the definition of “customs authorities” or “competent authorities” has been considered by the ECJ, the case law of which includes within this description not only the authorities competent for taking action for recovery but any authority which, acting within the scope of its powers, furnishes information relevant to the recovery of customs duties and which may cause the person liable to entertain legitimate expectations.  This would therefore include both the Turkish central customs authorities and the Turkish customs authorities which issued the A.TR.1 certificates (Ilumitrónica – Iluminação e Electrónica Ldª v Chef da Divisão de Procedimentos Aduaneiros e Fiscais and others, Case C-251/00, ECJ, 14 November 2002. at [40] – [41]).” (Beko plc v HMRC [2014] UKFTT 60 (TC), §51, Judge Berner).

 

Authority must assume responsibility in relation to erroneous statement

 

“The letter from the Turkish authorities of 1 November 2002 made quite clear that the certificate was concerned only with free circulation of goods, and that the customs officials did not take declarations of origin into account when endorsing a certificate.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §54, Judge Berner).
 

Error by HMRC: telephone advice not sufficient where visual inspection required

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“The latter code depends on a visual examination of the goods. HMRC could not, therefore, confirm that the goods fell outside this code in a telephone conversation in absence of a visual examination.” (Euro Packaging Ltd v. HMRC [2017] UKFTT 160 (TC), §116).

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Error by non-EU customs officials

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“…it is clear from Article 220(2)(b) that the issue of a certificate from a third country can only amount to an official error where there is a system of administrative cooperation in place between that country and the EU which is not the position in the present case.” (Cyproveg Ltd v. HMRC [2018] UKFTT 538 (TC), §134, Judge Brooks).

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Does not apply where authorities misled

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“The Court went on to  find [in Faroe Seafood Co Ltd] that this condition could not be regarded as fulfilled where the competent authorities have been misled, in particular as to the origin of the goods, by incorrect declarations on the part of the exporter whose validity they do not have to check or assess.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §50, Judge Berner).

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But not sufficient that exporter made incorrect declaration

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“We do not consider the fact that Beko AS itself made the incorrect declaration of origin is decisive of the question whether the customs authority made an error.  We accept that, according to Article 199 of the Implementing Regulation, it is for the declarant to ensure that its declarations are correct, and that on the basis of Faroe Seafood at [94] the mere certification of declarations of origin by the competent authorities is not sufficient for there to be an error on the part of those authorities, but it is equally the case (Ilumitrónica, at [45]) that it is not sufficient to rely on an incorrect declaration by the exporter in order to exclude any possibility of an error by the competent authorities.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §56, Judge Berner).

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Error must cause non-collection of duty

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“It is not sufficient that there be an error on the part of the customs authorities.  It is necessary that the non-collection of the duty legally due should have been due to that error.  It is only when it is the error of the customs authority that has the causative effect that the proper duty is not collected that Article 220(2)(b) can have effect.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §57, Judge Berner).
 

Error not reasonably detectable:

 

Depends on complexity

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“As regards the precise nature of the error, the question to be determined each time is whether the rules concerned are complex or simple enough for an examination of the facts to make an error easily detectable. It should be stated that, in a case such as this, where the trader twice received confirmation that the erroneous view upon which the customs treatment was based was correct, the repetition of the error by the customs authority is evidence that the problem to be resolved was a complex one.” (Deutsche Fernsprecher C-64/89, §20)

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“…we consider that the one passive error and one active error made by HMRC could reasonably have been detected by the appellant. In our view, the naked eye test required to be performed was a simple test. Both HMRC and the appellant accepted that it was a simple test designed for speedy customs clearance.” (Euro Packaging Ltd v. HMRC [2017] UKFTT 160 (TC), §138).
 

Looks to knowledge and experience of particular taxpayer

 

“we are not persuaded that Rokit could not reasonably have detected the error.  As explained in Beko, this requirement looks to the knowledge and experience of the particular taxpayer.  Rokit gave evidence that, prior to the apportionment agreement it had imported all of its clothing under heading 6309.  We agree with HMRC that this suggests that Rokit had the experience and knowledge to independently assess tariff classification.  As an experienced importer over a considerable period, Rokit could have taken positive steps to confirm the apportionment by reference to the Official Journal, or by asking HMRC specifically to reconfirm the apportionment in writing.” (Rokit Ltd v. HMRC [2017] UKFTT 447 (TC), §101, Judge Thomas Scott).

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“In our view the Beko group, and Beko UK, ought reasonably to have detected that the origin statement on the A.TR.1 certificates was incorrect.  Any exporter and importer of goods must take care to understand the origin of the goods in which it is trading.  The rules for the origin of the particular goods in question were clearly spelled out in Annex 11 of the Implementing Regulation.  It cannot, in our view, be argued that it is unreasonable to expect an exporter and importer of goods specified in Community legislation to have in place processes to identify the origin of goods by reference to the criteria set out in those regulations.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §65, Judge Berner).

 

Lack of expertise counts against taxpayer

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“In our view, the argument that Beko AS did not have the relevant expertise is a powerful one, not in favour of Beko UK’s position, but against it.  It was in our view not reasonable for a company such as Beko, engaged as it was in regulated interenational trade, and in the knowledge that questions of origin had been raised in the context of anti-dumping duties, not to have put in place the appropriate infrastructure to enable it to detect errors in the origin classification of its goods.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §69, Judge Berner).
 

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