EC Regulation 972/2006 allows for certain types of Basmati rice from India and Pakistan to be imported free of duty provided that the importer had a suitable licence and certificate of authenticity (which is issued by approved bodies in India and Pakistan and needs to be presented to the licence issuing authority (the Rural Payments Agency) at the time of applying for the licence). Most Common Agricultural Policy (CAP) licenses have a 5% tolerance which means for example that if you are applying to import 20,000 kilograms of rice, the licence will show 21,000 as it accounts for the 5% tolerance.

However, HMRC has come across an example whereby basmati rice was imported under the regulation and the quantity for which a licence was applied for was that shown on the certificate of authenticity and the licence was issued for 5 per cent more than this for the reason explained above. However, the quantity actually imported was more than that shown on the certificate of authenticity but within the 5 per cent licence tolerance and the whole amount was shown on the customs entry as being free of customs duty.

HMRC will now adopt the position that any quantities of basmati rice imported in excess of the amount shown on certificates of authenticity but within the 5 per cent licence tolerance should have customs duty at the full rate applied to them. HMRC based its decision on legal advice received and an opinion of the EC Commission which both stated that Article 48.1 of EC Regulation 376/2008 should apply:

'Where imports of a product are subject to presentation of an import licence and where that licence also serves to determine eligibility under preferential arrangements, the quantities imported within the tolerance in excess of the quantity shown on the import licence shall not qualify under the preferential arrangements.'

Although this article refers to preferential arrangements and that the "basmati Regulation" makes no such reference, it nevertheless believes that this same principle should be applied to basmati rice imports.

What must importers do next?

Importers and agents should ensure that any imports of basmati rice under the regulation are declared in accordance with the policy outlined above. Any quantity in excess of that referred to on the certificate of authenticity should be shown on entries with the full duty rate declared. To do this it will be necessary to complete two lines on the C88 Customs Declaration one for the bulk of the import showing a zero duty rate and one for the amount within the tolerance showing the full duty rate.