Inward Processing Relief as a way of avoiding Anti-Dumping Duty?

29 June 2009

Case C-158/08 Agenzia Dogane Ufficio delle Dogane de Trieste v Pometon SpA (2009)

The ECJ was recently called upon to decide whether a company had abused the Inward Processing Relief system to avoid paying Anti-Dumping Duty on a product that was subsequently re-exported and then re-imported back into the European Union as a completed article.

The Facts

Between the end of 1998 and 2001, Pometon SpA purchased from Pometon doo, an associated company incorporated in Slovenia, unwrought magnesium ingots of Chinese origin which were liable to anti-dumping duty under Council Regulation (EC) No 2402/98. The product was imported under job-processing contracts on behalf of Pometon doo, a customer established in a non-member country. Pometon SpA applied for and obtained authorisation to use Inward Processing Relief (IPR) with a period of suspension for six months. The goods were processed by Pometron SpA into magnesium granules, which are not subject to anti-dumping duty and were re-exported through the border crossing at Fernetti (Italy).


The goods at issue never reached the establishment in Slovenia and were simply stored in a parking compound and re-introduced by importation into Italy as a product sold by Pometon doo to Pometon SpA. It was later revealed that approximately 87% of the product exported by Pometon SpA immediately re-entered Italy and was released on the European market.


The Arguments of the Parties

The Italian Authorities

The Italian authorities argued that the temporary import of unwrought magnesium ingots of Chinese origin under the IPR procedure were actually definitive imports and therefore they levied additional and amending tax notices against which Pometon SpA Brought an appeal. The Appeal was upheld by the Regional Tax Court in Trieste and the Italian Authorities appealed against this decision. The matter was then referred to the ECJ.

Pometon SpA

Pometon SpA argued that the case was inadmissible on the basis that it sought legal advice from the ECJ rather than interpretation of EU law, that the referring court lacked the jurisdiction to refer the case and that the national court did not indicate which rules of the Community they sought interpretation of.

The Judgement

The ECJ rejected all of the arguments of Pometon SpA. It argued that the IPR was there to allow the processing of goods that would subsequently be re-exported outside of the EU and pointed to the requirement that to gain authorisation for IPR, there had to exist the “actual intention to re-export the goods”. The Court argued that IPR allowed for the temporary import and processing of goods that would ultimately prevent economic activity in the EC from being penalised. The Court further argued that acts consisting merely of sending goods over the border (out of the EU) without an intention to actually re-export them and re-importing them into the EC shortly after would be contrary to the very aim of the IPR procedure and would undermine the effectiveness of Community rules.

The Court was eager to stress that it was for national courts to ascertain whether the facts leading to the dispute constituted such an irregularity. Where the national court decides that it does, the Court stressed that the obligation to give back an advantage improperly received by means of irregular practice does not breach the principle of legality. The obligation to repay is not a penalty but simply the consequence of a finding that the conditions required to obtain the advantage derived from the Community rules were created artificially, thereby rendering the advantage received a payment that was not due and thus justifying the obligation to repay it.

The Court finally argued that an importer who improperly brought himself within the IPR procedure and benefitted “artificially” was obliged to pay the duties on the products concerned, without prejudice, where appropriate, to administrative, civil or criminal sanctions provided for by national law.

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