If you want to use the customs procedures inward processing, end-use, temporary admission, outward processing and customs warehousing, you need a customs authorisation. In the application for a customs authorisation, you have state the goods concerned with the corresponding value and quantity per month.
Each month you remain within the specified value and quantity of the authorisation. Yet you receive an invitation to pay from Customs because you have exceeded the value and quantity of the authorisation. The value and quantity do not relate to one month, but to the entire authorisation period of three years! Is this a correct finding by Customs?
As mentioned, before you can use a customs procedure, you must apply for an authorisation from Customs. You do this using the application form.
In the application you state, among other things, which goods you want to place under the customs procedure. You do this on the basis of the CN code and the description. It is important that you fill in this information correctly. Only the goods that are listed in the authorisation – indicated by the CN code or HS code – may be placed under the customs procedure.
If you are dealing with goods for which the CN code changes regularly, you may be able to make agreements with Customs to state the HS code of the goods instead of the CN code. The HS code changes less frequently than the CN code. You can also specify multiple CN codes in the application. This reduces the chance that you will no longer be able to place your goods under the customs procedure due to a change in the Combined Nomenclature.
You also have state the value and quantity of the goods that you want to place under the customs procedure in the application of the authorisation. In the explanation of the application forms for, for example, inward processing and end-use, the following was stated:
“State the estimated quantity and value of the goods to be placed under the customs procedure”
This wording shows that the statement of value and quantity may be an estimation. However, the current application forms state:
“Please note! The data you enter for ‘value’ and ‘quantity’ are the maximum for the goods you place under this authorisation”
Instead of the value and quantity being allowed to be estimated, you will now have to state the value and quantity more specifically when applying for the authorisation.
If you exceed the value or quantity of a certain authorisation, you may no longer place goods under the customs procedure. If you do however place goods under the customs procedure, it will result in a non-compliance with an obligation from the authorisation. This leads to a customs debt. In other words, exceeding the quantity or value is not seen by Customs as a negligence without real consequences.
Customs issues many authorisations. However, not all authorisations are issued in the same way. For example, Customs issues authorisations stating that the issued value and quantity applies per year, per authorisation period and even without mentioning a period.
If Customs has not stated for which period the issued quantity and value applies, Customs takes the position that the issued quantity and value applies per authorisation period. Customs takes this position, even though you stated in the application that the specified value and quantity is per year or per month.
In early 2021, the Court of Haarlem issued five judgements on this issue. In one of the five cases (ECLI:NL:RBNHO:2021:2904), the Court ruled that the authorisation holder could assume that the quantity in the authorisation end-use related to one calendar year rather than the entire duration of the authorisation. The Court therefore ruled that the invitation to pay (“UTB”) had been wrongly imposed by Customs.
The case in this matter is as follows. The interested party applied for a end-use authorisation. In the application, the interested party specified the quantity per calendar year. According to Customs, the quantity stated in the authorisation related to the entire duration of the authorisation, namely three years. According to Customs, the interested party had exceeded the quantity. Customs then issued a UTB.
Following an inspection, Customs drew up an inspection report. This report explicitly stated, among other things, that the requested quantity related to one calendar year. The Court therefore ruled that the authorisation could not reasonably be understood otherwise than that the interested party was allowed to place the requested quantity under special destination per calendar year during the duration of the authorisation. The Court annulled the UTB.
In the other four cases, the Court ruled that the interested parties had placed goods under the customs procedure end-use, but they did not have a valid authorisation for this. As a result, a customs debt had arisen according to the Court.
In 2020, the Amsterdam Court of Appeal also issued a judgement (ECLI:NL:GHAMS:2020:980) on this issue in another case. This case concerned a processing under the customs supervision (“BOD”) authorisation. BOD is no longer known under the UCC. BOD falls under the UCC under the authorisation inward processing. The judgement is therefore relevant to the situations that apply under the UCC.
In this case, the interested party had given a rough estimate of the values and quantities per month when applying for the authorisation. Customs then issued the authorisation for that quantity, without mentioning that this was per month. The authorisation was issued for three years.
Later, the interested party received a UTB, because according to Customs more had been placed under the regime than was included in the authorisation. According to Customs, the issued quantity was per authorisation duration of three years. According to the interested party, the issued quantity was per month.
The Court of Appeal ruled in this case that the value and quantity apply for the entire duration of the authorisation. Although the interested party had stated the quantity per month, the interested party should have known that the quantity was per authorisation duration. The Court of Appeal reached this conclusion because the authorisation did not state “per month”. The fact that the interested party interpreted the quantity stated in the authorisation as a quantity per month must remain at its own risk.
Currently Customs Knowledge is conducting various procedures on this matter. Also at issue in those appeals is whether a customs debt arises at all if values or numbers of customs authorisations are exceeded. Moreover, it is currently still under discussion whether such a customs debt can be extinguished under 124 UCC. The last word has not yet been said about this.
What can you do to reduce the chance of a customs debt incurring? First, you can check your authorisations. Have the quantity and value been issued for the duration as you requested? If this is not the case, you can apply for a new authorisation with a higher quantity. If it is unclear which period applies, we then advice to consult with Customs.
Second, you can specify a larger quantity in the application of the authorisation. If you have an AEO authorisation and the guarantee is lowered to EUR 0, this may be a solution. However, note that, if the guarantee is not lowered to EUR 0, you will have to consider whether increasing the quantity is feasible, as this will also increase the amount of guarantee to be provided. The advantage of specifying a larger quantity is that you reduce the chance of exceeding the quantity.
However, perhaps the most important solution is to carry out internal controls! Periodically monitoring whether you remain within the issued quantity and value is a part of this. In this way, you can find out in time whether you need a new authorisation or have to apply for a change in the current authorisation. You can also have an audit carried out by external parties. We would be happy to carry out this audit for you.
If you have used the full quantity of the authorisation and have not applied for a new authorisation on time, you may still be able to place goods under a customs regime in certain cases. This is possible, for example, with the customs procedure inward processing. You will need to apply for a one-time inward processing authorisation per declaration for each customs declaration. Please note that this option is excluded for agricultural goods as listed in Annex 71-02 of the Delegated Regulation UCC.
Customs is taking a stricter stance on exceeding the quantity and value of the authorisation. For new authorisation applications, it may be better to specify a quantity and value that you do not expect to exceed.
Also, by checking your authorisation and carrying out internal controls, you can reduce the chance of a customs debt. For more information on applying for a customs authorisation, an external audit, an objection or an appeal against a UTB, please get in contact with one of our specialists.
While every care has been taken in the preparation of this publication, Customs Knowledge accepts no liability for any errors or omissions, nor for their consequences. This article is not intended as specific advice. Please also refer to the General Terms and Conditions of Customs Knowledge BV.
