Extinguishment of a customs debt
A customs debt can be extinguished for various reasons. All reasons are mentioned in article 124 UCC. In this article, we will focus only on the extinguishment of the customs debt based on article 124 sub 1, letter k UCC. This provision states that a customs debt – which has arisen under article 79 UCC – shall be extinguished if evidence is provided that:
- the goods were not used or consumed within the territory of the Union;
- the goods have left the customs territory of the Union; and
- the debtor has not attempted to commit fraud.
Below we
discuss in more detail the above conditions for extinguishment of the customs
debt under article 124 sub 1, letter k UCC.
Irregularities
A customs debt can arise from a regular importation of goods. However, a customs debt can also arise due to non-compliance with obligations or conditions applicable to, for example, placing non-Union goods under a customs procedure. Non-compliance with these obligations or conditions constitutes an irregularity. Failure to regularize the customs procedure and late submission of the regularization account for the customs procedure inward processing are examples of irregularities that can lead to a customs debt under Article 79 UCC.
According to the Customs Handbook, no invitation to pay will be issued if there is a reason to extinguish the customs debt. In principle, a customs debt can only be extinguished if a customs debt actually exists. Given this policy, it is advisable to invoke the extinction of the customs debt under Article 124 UCC at the pre-notification stage and not when the invitation to pay has already been issued.
Goods not used or consumed
If Customs has established a customs debt and issued an invitation to pay, based on article 79 UCC, you can invoke article 124(1)(k) UCC. The goods must not have been used or consumed. The question is what is meant by the definitions “used” and “consumed”?
If a car has been driven, it is clear that the car has been used. But what about non-Union goods that are stored in a customs warehouse? In a customs warehouse, goods may undergo usual treatments / processing as specified in the authorisation. These usual treatments are allowed, so that the goods remain in good condition. The question is whether a usual treatment is considered “used” or “consumed” under Article 124 UCC.
For example, if a machine is stored as non-Union product in a customs warehouse and is periodically turned on to run idle, this action is permitted as a usual treatment in a customs warehouse. It is a stretch to consider this action as “use.” However, this is not clearly stated in the provision. The European Court of Justice will likely need to provide clarification. Given the Combinova judgement (Case C-476/19), it seems unlikely that a usual treatment in a customs warehouse should be considered as use.
In the Combinova case, Combinova placed goods under the inward processing procedure. Customs issued an invitation to pay to Combinova because the regularization account for the customs procedure inward processing was submitted too late. The question was whether the goods had been used, as they were processed under the customs procedure inward processing. The European Court of Justice ruled that there was no use of the goods as they were processed in accordance with the authorisation inward processing. Consequently, it seems unlikely that a usual treatment in a customs warehouse should be considered as use.
Goods have left the customs territory of the Union
If you can prove that the goods have not been used or consumed, you must also prove that the goods have left the customs territory of the Union. This can be demonstrated with an export confirmation (confirmation of exit). An import declaration made in the country of import can also show that the goods have left the customs territory of the Union. Other documents and records (such as a bill of lading and invoices) must show that the goods that were imported into the third country are the same goods that previously left the customs territory of the Union.
No attempt to commit fraud
If it is established that the customs debt was imposed under article 79 UCC, that the goods were not used or consumed, and that the goods have left the customs territory of the Union, the customs debt can still not be extinguished if there was an attempt to commit fraud.
Fraud occurs if the debtor intentionally provides incorrect information to mislead Customs. Providing false invoices to make it appear that the goods were not removed from customs supervision is a clear example of fraud. For instance, if goods are smuggled into the EU, it would be unusual for the smuggler to escape from the customs debt if the debt is extinguished upon subsequent exportation of the unused goods.
The exact definition of fraud under this provision is not specified in the legislation. It is uncertain whether fraud is interpreted in the same manner as a criminally prosecutable act. In the Netherlands, any error in the customs declaration can be considered a criminally prosecutable act. However, the Customs Handbook indicates that repeated carelessness can be considered an attempt to commit fraud.
More information
Have you received an invitation to pay due to an irregularity? Perhaps invoking article 124(1)(k) UCC offers a solution. Customs Knowledge is happy to advise and assist you. For questions or comments, please contact one of our specialists.