HMRC Exploiting an Uneven Playing Field

28 June 2011

The customs authorities are frequently circumventing due process and seeking to impose unfavourable classification regulations on businesses by taking disputed items to a closed Committee for decision by their peers from other Member States.

One of the corner-stones of the customs regulations is uniform application across the EU in matters of classification, origin, valuation and duty relief etc. Important steps have been taken over the years to support the principle of uniformity and certainty, including setting up a database of classification rulings so that businesses and customs authorities across Europe can view all Legal Classification Rulings (otherwise known as BTI).There are times when customs authorities in the various Member States hold different views on customs matters and in these cases there is a forum for them to meet and resolve these differences and formulate a unified EU response to complex classification issues. These deliberations can eventually result in Classification Statements, amendments to the CN Explanatory Notes and Customs Regulations. The first two are non-binding, classification regulations are binding, directly applicable law.

In principle we support the idea of consistency throughout the EU. However, we have some grave misgivings on how this mechanism works in practice.Our misgivings include:

• The fact that the customs authorities do not need to notify the business it is taking a matter to the committee even when the item under discussion is the subject of dispute between that business and the customs authority

• That the business does not have any right to make representations to the committee and the customs authority is not obliged to put forward any arguments the business has raised

• The business has no opportunity to question any submissions made by the customs authorities

• That the discussions are not made public. Buried in the depths of the EU Commission website are agenda’s of matters discussed by these Committees and Summary Meeting Notes but I would challenge you to find these

In our view these Committees are unfair and give rise to some questionable output.

A recent Tribunal (Photron Europe TC01194) shines a light on HMRC’s conduct in taking matters before the Committee which it describes as “a process that falls short of the standards we expect of the Commissioners as a public body”. HMRC used an expert report in support of its position on a classification matter at Committee. The tribunal drew attention to: HMRC

• Instructing an expert someone who was not an expert in the highly technical and specialist field relevant to the case

• Submitting a report full of technical errors and short comings

• Presenting the report in support of their contentions at Committee without any reference to the challenges it knew about

Because of the secrecy of the Committee procedure we do not know whether the shortcomings highlighted in this instance are rare or the norm. If you have had similar experiences then we would welcome your feedback.

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