In the case of S&B Herba Foods (Case TC001001) the UK Tax Tribunal rejected a claim from an importer seeking a repayment of duties paid when an import quota was exhausted and only part of the import was subsequently covered by the quota.
S & B Herba Foods (“S & B”) imported broken rice from Egypt under quota, the quota being “critical” at the time of import. However, the full amount of the import did not qualify for the reduced duty rate as the quota had been exhausted in the meantime and S&B faced a significant and unexpected duty bill. S&B applied for the repayment of this sum under Article 239 1 of the Customs Code but HMRC refused this request.
S & B
S & B had checked the European Commission website prior to import and had calculated that there was enough of the quota remaining to be able to import all of their rice under quota and thus at the reduced duty rate. They argued that they should be able to reclaim duties paid under Article 239 by pointing to HMRC Public Notice 266 (Rejected Imports: Repayments or Remission of Duty and VAT) that stated:
“You can claim repayment or remission of import duty and VAT on the goods imported when they are…entered to a system of duty relief which is refused through no fault of the consignee… e.g. where relief under a tariff quota is claimed but refused because the quota has been exhausted.”
HMRC argued that quotas are allocated on a daily basis by the Commission and that on the date of the import, the quota had been exhausted to an extent that it was insufficient to cover the entire import. Therefore S & B were liable to a higher duty rate on part of their import.
The Tribunal pointed out that the European Court had ruled that in order to make a claim under Article 239, there must be an “exceptional situation” compared to other operators engaged in the same business (Case T-186/97 Kaufring). The Tribunal also asserted that “exceptional circumstances” does not include exhaustion of the quota as per Commission Decision of 22 December 2006 (REM 02/2006):
“…The fact that that the quota was exhausted…cannot in itself constitute a special situation within the meaning of Article 239 of Regulation (EEC) No 2913/92, since no economic operator can be certain before the Commission carries out the drawing operation that it will benefit from a reduction or exemption from customs duties in connection with the quota concerned.”
The Tribunal also stated that even if exceptional circumstances were found, there was also obvious negligence on S & B’s behalf as they had gone ahead with the import even though they knew that the quota was close to exhaustion.
With regard to HMRC Public Notice 266, the Tribunal stated that the passage that S & B quoted dealt with the situation where for example HMRC had failed to pass on information on a day’s imports to the Commission as a result of which the quota had exhausted.
Therefore the Tribunal ruled that there was no special situation that could bring Article 239 into play. S & B were in the same position as other importers of not knowing until the Commission allocates the quota whether there is any quota left.
Tribunal Comments regarding HMRC Public Notice 266
The Tribunal criticised the wording of Public Notice 266 and in particular with reference to the sentence “through no fault of the consignee” that made no reference to “special” and “exceptional” circumstances that is enshrined in EC Law. The Tribunal also criticised the wording of the Public Notice because what it actually should say is “through HMRC’s fault”. The message that the Tribunal is putting across here is that HMRC Public Notices are not the law but are HMRC’s interpretation of the law. Importers are subsequently taking a huge risk by not referring to EC legislation and case-law.
Although HMRC Public Notices are useful general guide to a topic you should remember that the Notices are not the law but are HMRC’s interpretation of existing law and practice (which as shown above they can change their minds on without notice). The Customs Code and Customs Code Implementing Provisions are the primary legislation that are supported by secondary legislation (European Regulations etc) and are affirmed by a dearth of case-law at both ECJ and National Level.
International Trade Solutions has over fifteen years of experience in European Customs Law. If you have any customs-related queries or require a free first consultation contact us on (01905) 619229 or email us at firstname.lastname@example.org.
1 “Import duties…may be repaid or remitted in situations other than those referred to in Articles 236, 237 and 238…resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned…Repayment or remission may be subject to special conditions”