Customs Successfully Challenge Incorrect Preference Documentation (GSP Form A) Again!

27 July 2009

T-219/07 DSV Road v European Commission (2009)

International Trade Solutions reported in May that the ECJ was looking at a number of cases concerned with the Customs Law of the European Union. One of those cases concerned the ongoing issue of the liability of importers when non-EU Customs authorities have made administrative and declarative errors. More specifically the court was faced with two questions:

  • Are importers liable for post-clearance recovery of under-paid duty due to administrative and declarative errors by a non-EU Customs Authority?
  • Do administrative errors by a non-EU Customs Authority qualify as “special circumstances” under Article 239 of Commission Regulation No 2913/92?

The Facts

DSV Road NV, a Belgian company, imported diskettes into the European Union from Thailand between January 1994 and June 1995. The diskettes in question were subject to a preferential tariff treatment under the Generalised System of Preferences (GSP) as long as they were covered by a certificate of Origin Form A. The GSP requires that for goods to benefit from preferential treatment they must:

(a) Originate in the beneficiary country
(b) Be transported directly from the beneficiary country to the EU
© Be accompanied by a certificate of Origin Form A

DSV submitted to the Belgian Customs Authorities the Form A certificate, which they subsequently accepted and the goods were cleared for preferential treatment.

However, following an EC mission to Thailand, it was discovered that the Thai exporters had presented the facts on the certificate incorrectly to the Thai authorities and the certificates were subsequently declared invalid and removed. The importer was therefore presented with a claim for under-payment of duties which eventually led to the case to the ECJ.

This case is therefore concerned with the third of the three rules, the certificate of Origin Form A.

The Arguments of the Parties

DSV argued that the duties should be waived on the basis that the Thai authorities had not fulfilled their obligations regarding the burden of proof of the origin of the goods and that the Thai authorities should have known that the goods didn’t qualify for preferential treatment. DSV argued that Article 220 (b) of the Customs Code stated that there is no need to take into account duties resulting from customs debt if the following conditions were met on a cumulative basis:

  • The amount of duty legally owed failed to be entered in the accounts as a result of an error on the part of the customs authorities;
  • The error could not reasonably have been detected by the person liable for payment and,
    The importer for his part having acted in good faith and complied with all the provisions laid down by the legislation in force as regards the customs declarations.

Essentially, DSV argued that had the Thai authorities done their job properly then the issue would not have arisen. DSV argued that the Belgian Customs Authorities had explicitly stated that there were no doubts as regard the correctness of the certificate Form A certificates at the time and that they had stated that all formalities had been fulfilled and that the legislation had been complied with.

DSV also argued that the current circumstances should be regarded as “special circumstances” under Article 239 of the Customs Code and they should therefore not be liable to pay the required duties.

The Ruling of the Court

The ECJ dismissed both arguments. It argued that the Thai authorities were not aware of all the factual data necessary to implement the relevant regulations. The court argued that the Thai authorities were misled by the Thai exporters regarding the conditions for issuing the certificates Form A. In the specific circumstances, the errors on the certificates consisted of a wrong calculation of the value of the imported goods and the incorrect specification of production costs.

The ECJ drew attention to Article 81(6) of the CC states “the relevant government authorities have the right to call any evidence and to carry out any checks they consider appropriate…it follows that the authorities of the exporting countries have the right, but not the obligation to conduct a preliminary check and can be content if they deem appropriate to accept the information provided by exporters in their applications…”

Therefore, the Court found that in light of the evidence put forward, the Thai authorities were not in the position that they should have known that the goods did not qualify for preferential treatment and therefore rejected DSV’s argument.

With regard to the “exceptional circumstance” argument, the ECJ argued that it is clear that the debtor was in a unique situation compared to other operators engaged in the same activities and that in the absence of these circumstances it would not have suffered the injury it did.

The Court argued that as the Thai authorities had been misled as regards the conditions for issuing Form A certificates by misrepresentations of the exporters, this situation nonetheless did not constitute an “exceptional circumstance”. It argued that this risk was inherent in the work of customs agents and that Article 904 of the Customs Code Implementation Regulations states that:

“…import duties shall not be repaid or remitted where the only grounds relied on in the application for repayment or remission are…(c) [the] presentation for the purpose of obtaining preferential tariff treatment of goods declared for free circulation, of documents subsequently found to be forged, falsified or not valid for that purpose, even where such documents were presented in good faith…”

Therefore, the Court dismissed both of DSV’s arguments as unfounded.

Conclusions

This case is in line with a number of other ECJ and tribunal rulings addressing importers being hit for retrospective duties when it later transpires that the origin rules are not met. If your business enjoys a material advantage from preferential customs arrangements then we recommend you take advantage of the Good Faith procedures. If these are implemented then it becomes difficult for the authorities to take retrospective action to recover customs duties.

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