ITS reported last month that the EU had suffered a significant defeat at the World Trade Organisation. The WTO decided that the EU had breached its obligations under the GATT 94 International Technology Agreement (ITA) by levying customs duties on certain technology products including multi-functioning devices, monitors and set top boxes. The EU has decided not to appeal against this ruling.
What Happens Next?
There are likely to be a number of twists and turns in this ongoing saga. All that has come out from the EU Commission so far is a statement to the Electrical Mechanical Customs Code Committee (attended by customs authorities of the 27 Member States) stating that:
- The EU Commission will issue a Commission Report within the next month about the ruling.
- The EU is entitled to a “reasonable time-limit” to implement the findings (it is allowed up to 12 months)
- WTO law is not retrospective
- WTO has no direct effect under EU law (meaning that is cannot be relied on by individuals or companies)
- Member States are advised not to alter their classification practices and not to rely on the WTO ruling until the EU advises them of the future course of action
We have spoken to HM Revenue & Customs and they say that have been given no indication of time-scales for implementation at this time.
Until the European Commission issue the report there is no way of knowing what the timescale for change will be, nor whether there will be a classification regulation specifically classifying the products to a certain commodity code. However, we are in a position to be able to offer an opinion on three specific points:
- The position on the retrospective and direct effects of WTO law is not as clear cut as the EU Commission is stating. There are currently a couple of cases waiting to be heard at the European Court of Justice (ECJ) seeking further clarification of this point.
The position is further complicated due to the fact that the Information Technology Agreement is transposed into EU law which does have direct effect. There is case law supporting the argument that classification regulations confirm what the law is and has always been rather than create new law. This leaves the door potentially open to retrospection. If the EU attempts to curtail the scope of the decision then we do expect companies to begin legal actions that will more than likely end up at the ECJ. However, with the current pace of trials being heard, this issue may rumble on for the next couple of years at least.
Until the regulation comes out it is unlikely that any customs authority will issue a BTI classifying products to commodity codes free of duty (if these codes indeed exist). If businesses seek to classify goods to duty free headings in advance of the new regulation then this is likely to result in collection of full duty and possible penalties.
We recommend that importers submit a protective claim to recover customs duties paid in the last three years so that if the EU Regulation implementing the WTO ruling is held to have retrospective effect (either in the Regulation or by the courts). This way you will maximise any duty recovery. If this matter goes through the courts then the matter may take another two years to resolve. Until the EU Commission Guidance is published, importers should carry on with their existing practices.
For more customs-related advice please contact us on (01905) 619229 or email us at email@example.com