The unauthorised transfer of goods from one customs warehouse to another

22 September 2009

Over the past few months, International Trade Solutions has been reporting various cases and judgements from the various courts and tribunals. Recently, in the case of Cycle Citi Corporation Ltd , the First-Tier tax tribunal issued a judgement concerning the unauthorised transfer of goods from one authorised customs warehouse holder to another.


The Facts

Cycle Citi appealed against a decision on review by HM Revenue and Customs upholding a post-clearance demand for customs duty of £4,833.29 and import VAT of £11,317.96. Cycle Citi was an importer of bicycles and bicycle parts and held a type C private customs warehouse. It employed a company called “CFSP Services Ltd” to make customs declarations on its behalf.

In November 2005, Cycle Citi’s warehouse was badly damaged by fire and as a result it was considered unsafe to store high-value parts on the premises covered by the customs warehouse authorisation. At the time of the fire, Cycle Citi had a consignment of bicycle parts in transit from Taiwan that could not be stopped. The consignment arrived in the UK on 10 December 2005 and CFSP Services made three separate declarations to clear the imports and declared the goods to Cycle Citi’s customs warehouse.

However, the goods were actually transferred to another trader, Ingenuiti Ltd which also held an authorisation to operate a customs warehouse. At no time was HMRC authorisation sought to transfer the goods from one customs warehouse to another and as a result an HMRC assurance visit, this was discovered. Ingenuiti Ltd soon after entered into administration and Cycle Citi were unable to provide copies of Ingenuiti’s warehouse records showing that the goods in question were properly entered to Ingenuiti’s customs warehouse or into their warehouse records and could only supply a letter from a former director saying that Cycle Citi’s goods were received in December 2005 and “entered into the records”. CFSP’s records showed the goods as having been transferred from Cycle Citi to Ingenuiti.

As a result, HMRC issued a post-clearance demand for customs duty of £4,833.29 and import VAT of £11,317.96.

The arguments

Cycle Citi argued that the freight forwarders (CFSP) should never have entered the consignment in question in Cycle Citi’s name in the first place. They also argued that they had rectified CFSP’s error by subsequently transferring the consignment into Ingenuiti’s records saying that there was correspondence to confirm that. They argued that as far as they were concerned, the transfer had been legal and proper.

HMRC argued that Cycle Citi was liable for the failure to notify HMRC of the transfer of goods to Ingenuiti’s warehouse as it was a failure to follow correct HMRC procedures. Furthermore, HMRC argued that Cycle Citi was liable for any errors made by CFSP as CFSP was acting as its agent and liability lies, under law, with the principal (i.e. the importer rather than the agent).


The Tribunal held that despite the unfortunate circumstances of the warehouse fire and having considerable sympathy for Cycle Citi, they nevertheless found that they had been in breach of HMRC procedures and were ordered to pay the customs duty and VAT required. The Tribunal stated that Cycle Citi may have a case of negligence against CFSP but that was not the matter at hand in this hearing.

What does this mean for you?

There are two lessons to be taken from this case:

Firstly, if you are authorised to use a customs warehouse (or any other duty-relief procedure) you are obliged to notify HMRC of any change in circumstances. There are specific procedures in place for such as changes as the transfer of goods from one duty-relief scheme to another that must be strictly adhered and with the authorisation of HMRC. In this particular case, had Cycle Citi notified HMRC about transferring its goods into Ingenuiti’s customs warehouse then HMRC would have explained the correct procedure to follow and Cycle Citi would not have been faced with a £15,000 duty and VAT bill.

Secondly, if you employ a freight forwarder to make your customs declarations, you are still nonetheless liable for any errors or failures to comply correctly with procedures. We strongly advise that you review your customs procedures if you use a freight forwarder to ensure that the correct procedures are being followed. International Trade Solutions has saved businesses hundreds of thousands of pounds by highlighting errors in customs declarations and amending them as well as advising clients on how to instruct their freight forwarders to follow procedures correctly.

This case is part of a recent trend to seek to collect customs duties when businesses fail to meet their customs obligations to the letter. We recommend you review your customs activities to gain a full understanding of your obligations and whether these are met in advance of HMRC carrying out its checks as there is greater potential to correct errors when the business is being proactive.

For more information or to arrange a free first consultation meeting email us at: or alternatively call us on 01905 619229

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