The Dutch Supreme Court has requested the European Court of Justice (“ECJ”) to give a preliminary ruling following a dispute involving recovery of an amount of the customs debt for goods delivered under the condition ‘delivered duty paid’ (“DDP”). The case concerns a situation where the seller and buyer have agreed to deliver goods under DDP and have stated so on the customs declaration. However, when determining the transaction price, they wrongly assumed that import duties were not due for the import of the goods and consequently stated no amount related to customs duties on the invoice or customs declaration. Taking this into account, the Dutch Supreme Court adjourned the proceedings in order to assess from ECJ whether, in the matter at hand, it is to be assumed that import duties have been included in the stated transaction price and are to be deducted according to Article 33 of Community Customs Code (“CCC”), which stipulates that import duties are not part of the customs value.
The matter involves a shipping agent in the Netherlands (“the applicant”) who was acting by order of a transporter in Iceland. The transporter in Iceland was, on his turn, acting by order of a shipping agent in Iceland. The applicant submitted in the period of 1998 to 2000, in his own name and account, several declarations for release of fish products (hereafter “the goods”) into free circulation. The applicant submitted with each declaration of import, invoices stipulating origin as being ‘European Economic Area’ (“EEA”) and requested for the application of the preferential zero duty tariff for import duties. The invoices related to the transaction between the shipping agent in Iceland and a customer in Spain. The invoices further stated ‘DDP’ as condition of delivery, as well as the following (invoice) declaration: “The Exporter of products covered by this document (…) declares that, except where otherwise clearly indicated, these products are of EEA preferential origin”. The condition of ‘DDP’ was also stated in box 20 of the Single Administrative Document. Accordingly, the goods were released by the custom authorities into free circulation, having applied the requested preferential zero duty tariff.
However, a subsequent investigation by the customs authorities related to the origin of the goods concluded that the preferential zero duty tariff was not to be applied because the goods were of origin from third countries. As a consequence, the customs authorities imposed the recovery of the amount of the customs debt by determining the customs value on the basis of the transaction price(s) stipulated on the declaration(s) of import without deducting any applicable import duties.
The District Court and Court of Appeal
The District Court and Court of Appeal ruled in favour of the customs authorities by concluding that there was no apparent reason to attribute a part of the transaction price to import duties which, according to Article 33 of CCC, are to be excluded from the customs value. In specific, the Court of Appeal stated in its judgment that the applicant failed to reasonably convince that the transaction price, stipulated on each declaration of import, comprises a certain amount related to import duties. Moreover, the condition that the deliveries occurred under ‘DDP’ to a Spanish customer, is not sufficient to determine that for each delivery a certain amount of import duties was included in the transaction price of the goods. Moreover, the Court of Appeal ruled that it is plausible that the contracting parties, when determining the price of the goods, assumed that no import duties were due for the importation of the goods so as to exclude any amounts of import duties in the transaction price.
Memorandum of appeal
The applicant appealed to the Supreme Court and contested in its memorandum of appeal that the Court of Appeal based its judgment on an incorrect interpretation of Article 33 sub f) of the CCC considering that the matter involves a shipment under ‘DDP’ to a customer in the European Community (“EC”). This is, according to the applicant, sufficient to establish that the customs value should be set by deducting the import duties, and other applicable (import) taxes in the EC, from the transaction price.
The applicant further stipulated that the proportion of the import duties is not to be seen as being dependent on the assumption of the contracting parties with regard to the their transaction. In that regard, the applicant referred to the agreed liability of the seller in relation to import duties which implies that the seller had agreed to receive a lower amount for the goods.
The applicant further substantiated his view by referring to Advisory Opinion 3.1 of The Technical Committee on Customs Valuation of the World Customs Organisation (“WCO”) and point 8 of Commentary 5, section ‘customs value’, of the Customs Code Committee. These imply, according to the applicant, that for the application of Article 33 sub f) of the CCC the amount of import duties does not need to be stated on the invoice of the seller, but that it is sufficient if one of the accompanying documents shows that the seller is liable for any import duties, no matter how high these may be. Moreover, the applicant stated that it is in the interest of the Customs Code Committee that the contracting parties showed that, at the time of the conclusion of the agreement, the parties were aware that the transaction price covered in part the costs due with regard to import duties.
The Supreme Court
The Supreme Court affirmed, on one hand, that in the underlying transactions between the seller and buyer, it was agreed that the seller was liable for payment of import duties for the concerned goods. Moreover, the seller and buyer assumed, when concluding the agreement, that the import duties for the concerned goods were not due. Therefore, it is uncertain for which price the seller would have sold the goods to the buyer if the contracting parties (at least the seller) had a correct conception of the import duties due. Such an uncertainty provides, in the eyes of the Supreme Court, an argument in favor of the view that the sole reference to ‘DDP’ is not sufficient to assume that import duties have been included in the price actually paid or payable for the imported goods.
On the other hand, the Supreme Court determined that if Article 33 sub f) of the CCC is not to be applied, import duties may be levied over a transaction price including import duties which is in contradiction with Article 33 sub f) of the CCC. Moreover, it can also be argued that in cases where the seller and buyer did assume that import duties were due, it is difficult for the contracting parties to determine the right amount of import duties to be charged to the seller, for example if there is uncertainty with regard to the classification of goods in the Combined Nomenclature or if the customs authorities assume a different amount than the seller to calculate the payable amount of import duties, which can lead to miscalculations. This leads, according to the Supreme Court, to the conclusion that for the application of Article 33 sub f) of the CCC, it would not matter whether the import duties are levied directly after the submission of the declaration for free circulation or any time afterwards, provided that at the time of import it is clear that the seller is liable for the import duties.
Taking the above into account, the Supreme Court determined that a clear answer could not be derived from Articles 29 – 33 of the CCC or ECJ’s jurisprudence and accordingly requested the ECJ to give a preliminary ruling.