The European Court of Justice (“ECJ”) has recently issued its long-awaited judgment in the joined cases of Terex Equipment Ltd and FG Wilson/Caterpillar EPG Ltd (“Appellants”), concerning the incorrect use of Customs Procedures Codes (“CPCs”) when re-exporting goods originally imported under duty suspension.
The Appellants in the combined cases have a long-standing history of importing goods into the United Kingdom (“UK”) under the Inward Processing Relief (“IPR”) procedure. The IPR procedure makes sure that the customs duties, which would normally be due on the importation of goods, are suspended pending processing and subsequent re-exportation of the goods.
The goods, imported under the IPR, were in both cases subsequently exported. However, the customs agents acting on behalf of the Appellants declared incorrect CPCs on the export declarations of the concerned goods. The customs agents used the incorrect 10 00 code, conferring erroneously the status of Community goods on the goods concerned, instead of code 31 51, which should have been used for the re-export of the concerned goods under IPR.
Whilst accepting that the goods had been exported from the UK, Her Majesty’s Revenue & Customs (“HMRC”) asserted that the use of incorrect CPCs on export declarations, by conferring on the goods the customs status of Community goods, effectively resulted in a customs debt. Accordingly, HMRC issued post-duty assessments to the Appellants.
Both Appellants sought a revision of its export declarations in order to regularise the situation pursuant to Article 78(3) of the Customs Code (“CC”). With that regard, Article 78 CC sees to the possibility in which the customs authorities ‘may’, on their own initiative or at the request of the declarant, amend the declaration, that is to say re-examine it. Paragraph 3 of Article 78 CC prescribes in particular that if this revision of the declaration indicates that the provisions governing the customs procedure concerned have been applied on the basis of incorrect or incomplete information, the customs authorities shall take the necessary measures to regularise the situation, taking account of the new information available to them.
HMRC refused in both cases to apply Article 78 CC on the grounds that Appellant’s applications do not fall under the scope of Article 78 CC as the issue was not a correction of the export declarations but a change in the customs procedure and, moreover, the situation could not be regularised because it was impossible to present, after the event, a prior notification of re-export of goods required by Article 182(3) CC.
On appeal, the VAT and Duties Tribunal in Edinburgh stayed proceedings and referred preliminary questions to the ECJ, which in essence involved the following two issues:
- Were the goods in the cases unlawfully removed from customs supervision within the meaning of Article 203(1) CC and if so, does a customs debt incur?
- Does Article 78 CC permit revision of the export declaration to correct the customs procedure code and if so, are HMRC required to amend the declaration and to regularize the situation?
The ECJ ruled in the combined cases by issuing a judgment which can be split into two parts as described here under.
Firstly, the ECJ argued that the declaration of incorrect CPCs on the export declarations must be classified as ‘removal’ of those goods from customs supervision as it directly affected the ability of the customs authorities to carry out controls. With that regard, the ECJ made a reference to the strict interpretation of the existing case-law by reaffirming that for there to be ‘removal’ from customs supervision, it is sufficient that the goods in question have been objectively removed from possible controls, whether or not such controls have actually been carried out by the competent authority.
Therefore, the ECJ concluded that the erroneous declaration of CPCs does indeed give rise to a customs debt pursuant to Article 203(1) CC.
Secondly, the ECJ rejected the argument by HMRC that Article 78 CC could not remedy the lack of the prior notification required by Article 182(3) CC. In contrary, Article 78 CC is intended to bring the customs procedure into line with the actual situation. Article 78(3) CC does not make a distinction between errors or omissions which may be corrected and others which may not. The words ‘incorrect or incomplete information’ must be interpreted as covering both technical errors or omissions and errors of interpretation of the applicable law.
Therefore, the ECJ went on to rule that Article 78 CC permits the revision of the export declaration of the goods in order to correct the customs code given to them by the declarant, and that the customs authorities are obliged, first, to assess whether the rules governing the customs procedure concerned have been applied on the basis of incorrect or incomplete information and whether the objectives of the inward processing regime have not been threatened, in particular in that the goods subject to that customs procedure have actually been re-exported, and, second, where appropriate, to take the measures necessary to regularise the situation, taking account of the new information available to them.
With that regard, the ECJ clarified that the measure necessary to regularise the situation, in case the import duties were not legally owed when they were entered in the accounts, can consist only in remission of the import duties. That remission is to be made in accordance with Article 236 CC if the conditions laid down by that provision are fulfilled, in particular that there has been no manipulation by the declarant and that the application for remission has been submitted within the time-limit, which is in principle three years.
The ECJ clearly indicated that even an erroneous insertion of CPCs into export declarations is to be seen as ‘removal’ of goods from customs supervision and gives rise to a customs debt pursuant to Article 203(1) CC.
However, the ECJ also stated that Article 78 CC does permit revision of such an incorrect declaration. This may eventually lead that, unless the declarants are guilty of obvious negligence in submitting the incorrect declaration, and provided the customs authorities are able to verify that the compensating products had been exported, Article 78 CC requires the customs authorities to regularise the situation by remission of duties.