In one of the most surreal cases to have made it to the ECJ, the Court was asked to rule on whether a procedural error that in effect duplicated customs paperwork could result in a customs debt even though the goods against which the debt had arisen didn't physically exist.

Case C-234/09 Skatteministeriet v DSV Road A/S

The Facts

DSV is a transport and logistics company with authorised consignor status in accordance with Implementing Regulation Article 372(1)(e). This means that it could operate simplified procedures for dispatching goods under the external transit procedure. It did not need to present the goods physically at the customs office of departure but merely had to notify electronically, before the goods were dispatched, the transit procedure request to the taxation centre via the new computerised transit system (‘the NCTS'), an electronic system for handling data relating to shipments of goods between Member States.

In 2005 DSV dispatched two consignments of goods to Russia under the external transit procedure. It generated two transit movements in NCTS for each of those consignments by mistake. For shipment of the two actual consignments of goods, it was the later transit document generated by the NCTS which was used in each case. The goods were presented at the customs office of destination in accordance with the rules of the external transit procedure and, accordingly, those two transit procedures were duly discharged.

However, the two extra transit procedures which DSV had generated by mistake could not be duly discharged because they did not relate to actual goods which could be presented at the customs office of destination. After requesting DSV to provide other evidence to prove that the transit operation had ended, which DSV failed to do, the Danish authorities adopted decisions finding that DSV owed customs duties and value added tax (VAT) in respect of those transit operations. According to those decisions, a customs debt had arisen under Article 204 of the Customs Code in relation to both the extra procedures.

The Danish Tribunal upheld the decisions on the ground that there was no legal basis in the customs legislation for a transit document to be cancelled and that, as a consequence, the customs debt had arisen under Article 204(1)(a) of the Customs Code. DSV appealed to the Dutch courts which eventually referred the following questions to the ECJ:

1. Must Article 204(1)(a) [of the Customs Code], read in conjunction with Articles 92 and 96 thereof and with Article 1 and points (9) and (10) of Article 4 thereof, be interpreted as meaning that

(a) A customs debt arises if a transit procedure for goods which do not physically exist is initiated by mistake in the NCTS by an authorised consignor and, as a consequence, the transit procedure cannot subsequently be discharged in accordance with the rules, or that

(b) A customs debt does not arise, since the transit procedure is presumed to apply solely to physically existing goods, so that the mistaken generation of a transit in the NCTS for goods which do not physically exist does not lead to the imposition of customs duties?

2. If Question 1(a) is answered in the affirmative, must the concept of the "importation of goods" in point (10) of Article 4 of [the Customs Code] and the concept of "goods" in Article 204(1)(a) thereof be interpreted as meaning that the concept covers both physically existing goods and goods which do not physically exist?'

The Judgement

The court looked at Article 204(1)(a) of the Customs Code which states:

"A customs debt on importation arises through the non-fulfilment of one of the obligations arising from the use of the customs procedure under which the goods liable to import duties have been placed, unless it is established that those failures have no significant effect on the correct operation of the customs procedure in question."

The Court agreed with the Danish authorities that DSV had failed to fulfil their obligations under the external transit procedure since DSV did not present the goods that were covered by the procedure at the office of office of destination (Article 96(1)(a) CC). Furthermore, the court recognised that the "10 failures" laid down in Article 859 of the Implementing Regulation, where a customs debt does not arise because the failure has no significant effect on the correct operation of the external transit procedure, were also not fulfilled. However, the whole case hinged upon one factor irrespective of these arguments- the "goods" that had triggered the debt didn't actually exist.

Article 204(1)(a) of the Customs Code makes the creation of a customs debt conditional upon a failure relating to ‘goods liable to import duties'. Furthermore, the Court argued that Article 204 of the Customs Code is intended to ensure that the customs rules are correctly applied in order to protect the financial interests of the European Union and its Member States. Article 204 serves to prevent non-EC goods entering the EC market without first being cleared through customs.

However, in the present case two transit procedures were generated by mistake for one and the same consignment of goods. Therefore the objectives of Article 204 were not affected.

Regarding preventing the risk of non-Community goods being introduced into the EC market, there were no goods that existed that could be introduced into the EC market which might lead to unfair competition and the loss of tax revenue. Regarding the rules of customs procedures, the ECJ stated that it is not possible to implement such a procedure correctly when it is applied to goods which do not exist. To enforce the obligation to present the goods at the customs office of destination, in a case where the goods covered by the mistakenly generated transit procedure do not exist, would amount to imposing on the principal a duty which it cannot discharge.

The Court added that although errors such as this could impact upon the authorised status of the person in question, no customs debt could arise for goods that did not exist.

ITS Conclusions

There are a number of occasions when one asks ‘how has this made it to the ECJ?' but this one is perhaps the most surreal of them The purpose of Article 204 is to protect the EC against actual goods and misuse of customs procedures that would damage EC industry rather than goods that do not exist. The facts of the case were relatively straightforward in that the paperwork was effectively duplicated for the same consignments. A ruling to suggest that a customs debt did in fact arise would have resulted in thousands of administrative/procedural errors such as in this case resulting in duty demands from the Customs Authorities of the Member States for goods that physically did not exist. The right of the authorities to examine the competence of companies that are authorised has not been affected nor has the right to strip them of their authorised status if they are deemed to not be fulfilling their obligations but thankfully the Court has ruled sensibly that a debt cannot arise from goods that do not actually exist.