In a recent judgment, the Supreme Administrative Court (“SAC”) commented on the extension of the basic three-year period for assessing duties in situations where customs authorities considered that the customs debt was incurred due to conduct for which criminal proceedings could be initiated. What were the arguments that led the SAC to adopt the view of the customs authorities?
Circumstances of the case
A company imported goods into the European Union, declaring them as originating from Malaysia and therefore subject to a lower import duty rate. However, following findings by the European Anti-Fraud Office (“OLAF”), the customs authorities concluded that the real origin of the goods was in China. Consequently, the goods should have been subject to a higher rate of duty. According to OLAF’s findings, the goods never left the free trade zone in Malaysia and the certificate of Malaysian origin of the goods from the local authorities was issued based on false documents. Although the basic three-year period for assessing the duty had already expired in this case, the customs authorities assessed the duty on the company within the extended ten-year period. The reason for extending the assessment period was the conduct for which criminal proceedings could be initiated.
SAC’s view on the extension of duty assessment period
In its judgment, the SAC stated that extending the period for assessing duties to ten years is based on specific, reviewable and reasoned considerations by the customs authorities that the customs debt was incurred due to conduct for which criminal proceedings could be initiated. It is irrelevant whether the conduct was or will ultimately be classified as a criminal offence in the course of criminal proceedings. The customs authorities are not criminal prosecuting authorities and therefore are not competent to decide on guilt and punishment. The SAC considers it important for the extension of the time limit for assessing the duty that the customs authorities were able to describe the direct link between the company’s unlawful conduct and the duty assessed.
The good faith of the company
The company contested the duty assessment by arguing that the Customs Code did not allow for an additional duty to be imposed because the Malaysian ministry had erred in issuing a certificate of origin and the company believed in good faith that the goods originated in Malaysia and complied with all customs regulations. The SAC clarified that an additional duty assessment cannot be made if three conditions are met simultaneously, namely:
In this particular case, the SAC concluded that it was not possible to attribute the error to the customs authorities if their decision was based on incorrect information provided by the company and its business partners. Therefore, the company could not rely on good faith and the customs authorities were entitled to additionally assess the duty.
Seminars, webcasts, business breakfasts and other events organized by Deloitte.
