When Do Additional Duties or Penalty Measures Come into Effect?

29 April 2009

Additional customs duties, retaliatory measures and anti-dumping duties etc are all published in the Official Journal and often come to the attention of the importer at very short notice. These costs are typically a very high percentage of the value of the goods and can turn otherwise profitable deals into loss-making deals. One key point to address is when do such measures come in to effect?

 

In Hauptzollamt Bremen v J.E. Tyson Parketthandel GmbH (Case C-134/08) the ECJ gave a preliminary ruling concerning the interpretation of Article 2(1) of Council Regulation 2193/2003 establishing additional customs duties on imports of certain products originating in the United States of America. The first indent of Article 2(1) provides:

“…An ad valorem duty additional to the customs duty applicable under Regulation (EEC) No 2913/92 shall be imposed on the products originating in the United States of America…as follows…

- 5% from 1 March 2004 to 31 March 2004…”

The Facts

In March 2004, the German taxpayer declared for release for free circulation a consignment of cherry-wood floorboards in subheading 4409 20 98 of the Combined Nomenclature, a consignment from the United States that had been loaded for shipping on 20 February 2004. By a tax notice of the same day, the German Customs imposed an additional ad valorem rate of 5% customs duty in accordance with Article 2(1) of the Regulation).

Article 4(2) is critical in determining which consignments are caught by the additional duties and provides that:

“Products for which it can be demonstrated that they are already on their way to the Community on the date of entry into force of this Regulation and whose destination cannot be changed shall not be subject to the additional duty…”

The taxpayer appealed and the national court decided to refer the following question to the ECJ:

“Was Article 4(2) of Regulation 2193/2003 to be interpreted, contrary to its wording, as meaning that products for which it could be demonstrated that they were on their way to the EC on the date of first application of the original duties and whose destination could not be changed were not affected by the additional duty?”


The Judgement

The National Court was essentially asking the ECJ to clear up a lack of consistency in the wording between the preamble of the regulation (“products for which it can be proved that they have been exported from the United States to the Community prior to the date of first application of the additional customs duties should not be subject to duty”) and Article 4(2) (“products for which it can be demonstrated that they are already on their way to the Community on the date of entry into force of that regulation, are not to be subject to those duties.”) In that regard, the Court argued that the preamble to a Community act has no binding legal force and cannot be validly relied on either as a ground for derogating from the actual provisions of the act in question or for interpreting those provisions in a manner clearly contrary to their wording (see, inter alia, Case C-136/04 Deutsches Milch-Kontor [2005] ECR.

The Court therefore ruled that Article 4(2) for which it could be demonstrated that they were already on their way to the EC on the date of entry into force of that regulation and whose destination could not be changed, were not to be subject to the additional duty.

Why is this case important?

This case is important for two reasons. One it clearly shows that a preamble of a regulation is important in interpreting the meaning of a customs regulation (teleological approach). However, where the legal position set out under a specific article of the regulation is clear then any contradictory position in the preamble must be ignored.

Secondly, it emphasises the importance of looking at the detail of a regulation to ascertain what movements it covers and whether there are any grace periods. Regulations typically refer to:

• the date of shipment;
• date when contracts of sale were entered in to
• date of entry (in which case date of shipment is irrelevant), and;
• date release to free circulation

Other Steps

There are a number of steps businesses can take to minimise the risk of being hit with additional duty costs including:

• Reviewing whether your goods are caught by the provisions. Such measures are usually limited to certain commodity codes or countries of origin. Classification and origin rules are complex and so it is worth getting certainty that these are correct;
• Applying for exemptions. These regulations often include mechanisms for exempting qualifying imports;
• Inserting price review or break clauses in supplier contracts in event of additional duties being introduced; or,
• Switching to Delivered Duty Paid (DDP) terms on imports you perceive to be at risk of additional import duties.

We have worked with a number of clients on to negate the impact of additional duties and delivering a competitive advantage over others in their industry. If you would like further information on the above then please call 01905 619229 or e-mail mail@internationaltradesolutions.co.uk

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