Sanctions on imports

 1.      Introduction

 Since the invasion of Ukraine, the sanctions have been significantly expanded by several packages. The various packages initially only affected companies that traded directly with Russian parties. However, from 30 September 2023 additional an obligation applies that also affects a large group of importers who do not trade directly with Russian parties. The import of a number of items must be shown not to contain 'Russian-made' parts, regardless of origin. Below is an explanation of the obligation under Article 3g of the regulation.

2.       Which goods are covered by the obligation?

Briefly, the ban means that release into free circulation of goods of iron and steel products - from HS headings 7206 to 7229 and 7301 to 7326 - is not allowed if it cannot be proved that the semi-finished or finished products do not have raw materials from Russia. In principle, the importer or the (customs) representative can provide evidence with a Mill Test Certificate (hereinafter: MTC). If the importer is in possession of a (full) MTC, he enters the document code 'Y824' in box 44 of the customs declaration. With this he declares that the imported products comply with the sanctions imposed and that he is in possession of the necessary evidence.

 3.       Mill Test Certificate

A MTC is a document that contains a description of the chemical and physical proportions of any material. The certificate plays an important role in communication between manufacturers. This because the document is a common way used in the industry to record essential characteristics of a product.

 Typically, a MTC contains the following information: 

·         Name of the facility where production took place;

·         Country of the ladle of melting;

·         Product-related information such as standards, values, heat number and quantity;

·         Results of material-related tests;

·         Chemical composition of the product.

 4.       Explanations by the European Commission

To further explain the obligation of Article 3g, among others, the European Commission has prepared a document with 'frequently asked questions' (FAQ). This FAQ contains 349 pages of explanations on the application of the regulation. The European Commission states, regarding the documents required when importing semi-finished products, that an MTC can be presented if the following conditions are met:

 (a) In the case of semifinished products: 

The mill test certificate (MTC) (there i no concrete standardized format):

- establishing the name of the facility where the production is taking place, the name of the country corresponding to the heat number (country of the ladle of melting) together with the classification at subheading level (six-digit code) of the product.

This text shows that there is no standardised 'format' of the MTC. If the name of the producer, the country where the ladle of melting is located with corresponding heat number and the HS-code are included, this would seem to be sufficient. However, this is a hasty conclusion. In fact, these proposed elements collectively constitute the most summary version of an MTC and it will be necessary to submit additional documentation to meet the obligation to provide evidence.

 On the documentation required, when importing finished products, the Commission writes as follows:

 b) In the case of finished products:

The mill test certificate (MTC) or mill test certificates (MTC’s) – if all relevant information cannot be summarized in one single MTC or the MTC accompanied with other documents:

 - establishing the name of the country and the name of the facility corresponding to the heat number (country of the ladle of melting) together with the classification at subheading level (six-digit code),

and

 - the name of the country and the name of the facility where the following processing operations are carried out, as relevant:

·         Hot-rolling

·         Cold-rolling

·         Hot-dipped metallic coating

·         Electrolytic metal coating

·         Organic coating

·         Welding

·         Piercing/extruding

·         Drawing/Pilgering

·         ERW/SAW/HFI/Laser welding

It seems the same requirements apply to imports of finished products as to semi-finished products, although in certain cases, the proof is provided by multiple documents.

The explanation in the FAQ regarding the content of the documents concludes with the disclaimer that the importer is responsible for the content of the MTC. In doing so, Customs may - in case of reasonable doubt - require additional proof.

 The manner in which the importer can fulfil his duty to provide proof is not explained. However, the committee does reiterate the fact that the importer must apply 'due diligence' on the information - supplied by the producers -. This is quite a responsibility, do not underestimate it. So a lot of weight is given to the documents supplied by a producer and also assumes that the importer has knowledge of the content. Therefore, as an importer, be aware of this obligation and the potential consequences in case of inaccuracy.

5.       Additional documentation for evidence

If a MTC is not available or does not contain sufficient information, it is also possible to prove the composition of the product with other documents. Again, the European Commission leaves a lot of room to the Member State customs authorities. Examples of possible documents, according to the FAQ, are:

Invoices, delivery notes, supplier's declarations, including supplier's declarations covering several consignments (long term supplier's declarations) business correspondence, product descriptions, quality certificates and clauses in implemented purchase orders or contracts, provided that they include information of the origin of goods, etc. The type of document(s) may also vary depending on the nature of the product, in particular for finished products (e.g. sewing needles, tubes, etc.).

Of course, it is not sufficient to submit only these documents if they do not show the required information.

6.       So when is it good enough?

In recent weeks, we have received several question from clients with files for review asking whether sufficient information and documents have been submitted to meet the criteria. We then first assess whether a clear connection exists between the goods and the documents on the one hand, as well as the documents themselves. We then establish whether the documents contain the required information. This is often - initially - not the case. This does not mean that the shipment cannot be imported, because in several cases additional evidence turns out to be available after requesting. To perform these steps properly, we have developed a best practice. Although the rules to which documents must comply are not very specific, the best practice does enable the importer (and possibly his logistics service provider) to make a careful and reasoned determination that the required level of due-dilligence has been met.

7.       What are the risks?

If you fail to comply, you are making an incorrect declaration. That is, of course, a criminal offence under customs legislation. Further more, because the regulation falls under the category criminal law, it also qualifies as an economic crime. Economic offences often receive media attention. In addition, these offences may have severe consequences for - among other things - applying for or keeping the AEO authorisation.

8.       Exceptions

The obligation under Article 3g of the regulation does not apply if the goods were produced before 24 June 2023 or (customarily) presented before 30 September. In both cases, of course, it must be proved. Additionally, for goods of CN codes 7207 11, 7207 12 10 or 7224 90, other dates than 30 September 2023 apply.

9.       Now what?

An additional legal obligation is - generally - not received with much enthusiasm. This is no different now either. After all, there are already so many obligations the importer - or the (in)direct representative - has to comply with. However, you simply cannot evade them. We expect that sooner or later Customs will start checking, and if that happens, you better be well prepared. Keep in mind Customs may check declarations retrospectively. Complying with all obligations - including 'Article 3g' - is not a choice and Customs will keep a close eye on that too.

10.   In conclusion

You are not alone. As far as we are concerned, this obligation does not establish an uneven playing field. All importers in the European Union of products from the aforementioned chapters are obliged to provide this proof. However, this does not mean that Customs deal with the duty of proof in the same way. We also see that other member states sometimes impose different conditions. All this can be either annoying or positive, but does not change the substance of the obligation. Incidentally, in practice we also see general declarations with indemnities. Although such a declaration may have some value under civil law, such a declaration has little effect on the obligations a forwarder or importer has towards the (customs) authorities.

If you have doubts about the correctness of the documentation, do not file a declaration, but request a supplement or call an expert for assistance. If you have any questions as a result of this article, feel free to contact us!