International Trade & Regulatory – Customs

Customs formalities and measures play an important role in international trade and in business transformation. Harmonization of customs legislation within the EU is virtually complete, and various chapters of customs legislation, such as those pertaining to customs valuation and the origin of goods, have been standardized around the world. There are nevertheless fundamental differences in the interpretation of these rules, both inside and outside the EU.

Please find below some interesting recent developments concerning EU customs law.

Assessments for end-use and inward processing authorisations

Dutch customs imposes additional claims for import duties if volumes, values and/or time-limits specified in end-use authorisations and authorisations for inward processing are exceeded.

Following audits by customs, the past year several holders of end-use authorizations (in Dutch: vergunningen bijzondere bestemming) as well as holders of authorizations for inward processing (in Dutch: vergunningen actieve veredeling) have been unpleasantly surprised with assessment for additional customs duties in cases where customs established that the volumes, values and/or time-limits for discharge of the procedure specified in the authorizations have been exceeded.

End-use and inward processing are special procedures that require an authorization of the customs authority. Under the end-use procedure, goods may be released for free circulation under a duty exemption or at a reduced rate of duty on account of their specific use. Under the inward processing procedure non-Union goods may be used in the customs territory of the Union in one or more processing operations without such goods being subject to import duty, other charges as provided for under other relevant provisions in force or commercial policy measures, insofar as they do not prohibit the entry or exit of goods into or from the customs territory of the Union.

Claiming that Brussels forces the customs authorities of the member states to strictly enforce the observance of authorisation requirements, Dutch customs seems to have abandoned its prior permissive attitude and in these cases now maintains the position that volumes, values and time-limits specified in the authorisations are autorisation requirements. Noncompliance (i.e. exceedances) results in a customs claim on the basis of article 79 of the Union Customs Code (customs debt incurred through noncompliance). This can have appreciable financial consequences. Kneppelhout’s customs team has been engaged to assist several affected parties.

Limitation of recovery of customs debts: new vs. old legislation

With the Union Customs Code (Regulation (EU) No 952/2013) entering into force on 1 May 2016 some new rules have been introduced (for example on interest on arrears) or changed (for example provisions on limitation) compared to the ‘old’ Community Customs Code (Regulation (EC) 2913/92). This has raised questions in respect of the application of the UCC with import declarations submitted and customs debts incurred before 1 May 2016. Which rules apply?

Distinction between substantive rules and procedural rules

A distinction is made between substantive rules and procedural rules. For facts that incurred before 1 May 2016 the substantive provisions set out in the CCC are in principle still applicable. However, the procedural rules as set out in the CCC do no longer apply. Instead the procedural provisions included in the UCC are applicable. This leads to discussions between (Dutch) customs and customs debtors on whether a provision should be considered as substantial or procedural.

An illustrative example is the provision on limitation. The provision on limitation of recovery of customs debts as set out in the UCC differs from the old provision in the CCC. Both under the CCC and the UCC a limitation period of 3 years in principle applies. However, with the new limitation provision under the UCC the limitation period will be suspended from the date of communication to the debtor of the grounds on which customs intends to notify the customs debt until the end of the period within which the debtor is given the opportunity to express his or her point of view. Dutch customs generally gives the debtor a term of 30 days to reply to the intended decision. Therefore the limitation period could be suspended with 30 days. Consequently, the limitation period could in fact become in total 3 years and 30 days. The old limitation provision of the CCC did, however, not include a suspension of the limitation period after sending an intended decision to impose a tax assessment.

The new limitation provision is in principle not applicable on debts incurred prior to 1 May 2016

The question arose whether debtors of customs debts that have incurred before 1 May 2016 needed to be aware and take into account the suspension of the limitation period by sending an intended decision to recover customs duties. With reference to European case law the Court of Appeal of Amsterdam has recently decided in a decision of 27 February 2018 (ECLI:NL:GHAMS:2018:605) that the limitation provision must be considered as a substantive provision since it concerns a provision on the extinction of a customs debt. Therefore the provision set out in the CCC can in principle not be applied with recovery of a customs debt incurred prior to 1 May 2016.

However, there is an exception to every rule. The limitation provision of the UCC may according to the Court of Appeal exceptionally be interpreted as applying to situations existing before their entry into force in so far as it follows clearly from their terms, objectives or general scheme that such effect must be given to them. The limitation provision would in that case have retroactive effect for customs debts incurred prior to 1 May 2016. This can of course not undermine the fundamental principles of the Community, in particular the principles of legal certainty and the protection of legitimate expectations. The effect of Community legislation, and in this case particular the UCC, must be clear and predictable for those who are subject to it, in this case debtors. Per individual case the court will need to determine whether the effect of new (substantive) provisions was clear and predictable. The Court of Appeal of Amsterdam recently decided that the effect of the suspension rule in the new limitation provision as set out under the UCC is in any case not clear and predictable for a debtor when it concerns a customs debt incurred prior to publication of the UCC. The UCC was only published on 10 October 2013, therefore the debtor could not be aware or take into account the new limitation provision with a customs debt incurred on 4 July 2013. The Court of Appeal of Amsterdam therefore concluded that, even though the procedure for recovery of the debt was commenced after 1 May 2016, the old limitation provision under the CCC was applicable and not the new provision on the UCC. Since the customs debt had been notified more than 3 years after the debt had incurred, the customs debt had been time-barred under the CCC.

Based on the above mentioned decision of the Court of Appeal of Amsterdam it can be concluded that substantive provisions under the UCC are not applicable with customs debts incurred prior to 1 May 2016. Moreover, it can be argued that substantive provisions under the UCC cannot exceptionally be interpreted to be applicable before their entry into force on 1 May 2016 in case of customs debts incurred prior to publication of the UCC on 10 October 2013. The Court of Appeal of Amsterdam has, however, not decided on the applicability of substantial provisions with retroactive effect with customs debts incurred after publication of the UCC but before implementation thereof. It will be interesting to see how Dutch national courts will decide on that specific matter.

Anti-dumping duties on steel and cables from China, Morocco and Republic of Korea

The Commission has advised by Council Regulation (EU) No 2018/607, OJ L101 of the continuation of the current anti-dumping duty, imposed on imports of certain steel ropes and cables, originating in People’s Republic of China (‘PRC”) and extended to imports consigned from Morocco and Republic of Korea, for a further 5 years. This regulation takes effect from 21 April 2018.

The request for review was lodged on 7 November 2016 by the Liaison Committee of E.U. Wire Rope Industries (‘the applicant’) on behalf of producers representing more than 25 % of the total Union production of steel ropes and cables (‘SRC’). The request was based on the grounds that the expiry of the measures with regard to the PRC would be likely to result in continuation of dumping and recurrence of injury to the Union industry. The applicant did not provide sufficient evidence that the expiry of measures in force against Ukraine would likely result in a continuation or recurrence of dumping and injury

The products concerned are currently classified in the following commodity codes.

  • Consigned from Morocco: 7312 1081 12 / 7312 1083 12 / 7312 1085 12 / 7312 1089 12 / 7312 1098 12
  • Consigned from Korea: 7312 1081 13 / 7312 1083 13 / 7312 1085 13 / 7312 1089 13 / 7312 1098 13
  • China: 7312 1081 19 / 7312 1083 19 / 7312 1085 19 / 7312 1089 19 / 7312 1098 19

The rate of the definitive anti-dumping duty applicable to the CIF net, free-at-Union-frontier price, before duty, of the product described in paragraph 1 and originating in the PRC, Morocco or the Republic of Korea shall be 60,4%.

Tim Hesselink - Partner / International Trade & Regulatory