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United Kingdom VAT & Duties Tribunals (Customs) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Customs) Decisions >> Lama Ltd v Customs and Excise [2004] UKVAT(Customs) C00189 (08 June 2004)
URL: http://www.bailii.org/uk/cases/UKVAT/Customs/2004/C00189.html
Cite as: [2004] UKVAT(Customs) C00189, [2004] UKVAT(Customs) C189
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- This is an appeal against a decision of the Respondents contained in letters dated 3 April 2002 and 4 March 2003 on review to uphold a decision to issue a C18 post clearance demand note on 12 July 2001 in the sum of £24,659.79.
- The decision relates to six importations of garments from the Lebanon between 10 November 1998 and 13 July 2000. Those goods were accompanied by EUR.1 movement certificates which if in correct form enable preferential rates of duty to be claimed under a trade agreement between the Lebanon and the European Community. In this case the certificates were not stamped by the Lebanese Customs. The Respondents by a letter dated 31 January 2001 requested from the Lebanese Customs verification of the validity of the certificates and the claim for preferential duty. The Lebanese Customs advised that the certificates had not been endorsed by them, the exporter was no longer in business there and therefore the certificates should be regarded as "null and void". (Letter dated 11 June 2001). Following receipt of this letter, the Respondents issued the post clearance demand note of 12 July 2001.
- On the first day of the hearing it became apparent to the Tribunal that there were several human rights matters which we would have to consider. Because the Appellant was not legally represented, and because of the complexity of the issues involved, we requested Mr Timson-Hunt to set out for the Tribunal all matters relevant to the issue of human rights. This he did following an adjournment for the purpose in a most thorough and helpful manner.
- This being a matter which concerns a decision related to the application of international and/or community law under which the Commissioners have no discretion, it is not an ancillary matter under section 16(4) and Schedule 5 of the Finance Act 1994, but falls to be considered under section 16(5), and the Tribunal has the power to quash or vary the decision and to substitute its own for any decision which has been quashed.
- On 26 September 1978 an agreement was concluded between the Lebanon and the European Economic Community (as then was) ("the Agreement") published in Council Regulation (EEC) 2214/78. This trade agreement was not updated when the European Community came into being. The purpose of the Agreement, as set out in article 8, is to promote trade between the contracting parties.
- The relevant articles are as follows:
- List A in annex II, referred to in article 3, sets out the pre-Harmonised System classification and the relevant two headings are shown as 60.04 "under garments, knitted or crocheted " and the relevant working or processing that confirms the status of originating products is given as "manufacture from yarn".
- The second relevant heading is 61.02 women's, girls and infants outer garments, embroidered. The working or processing which is relevant here is: "manufacture from fabrics, not embroidered, the value of which does not exceed 40% of the value of the finished product." Both are subject to a footnote which reads: "Trimmings and accessories used (excluding linings and inter-lining) which change tariff heading do not remove the originating status of the product obtained if their weight does not exceed 10% of the total weight of all the textile materials incorporated."
- The Combined Nomenclature contains the Customs classification codes to goods and was established by Council Regulation (EEC) 2658/1987. The `heading level' refers to classification of goods at a four-digit level. This system was set up after the pre-Harmonised system classification which is set out in the Agreement at list A.
- The Community Customs Code was established on 12 October 1992 by Council Regulation (EEC) No.2913/92. It was not realised at the time that the decision which is being appealed was made that the Agreement had not been modified when the Harmonised system came into effect. It was not disputed by the Appellant that the relevant new headings for the garments were 61.08 and 62.08. 6108 applies to women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted. 6208 applies to women's or girls' singlets and other vests, slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles. The Respondents set out a table giving the comparison between the new declared heading and the old heading, as follows:
- Commission Regulations (EC) 2454/93 are the implementing regulations to the Customs Code. Under article 899 it provides:
- Where the decision-making customs authority establishes that an application for repayment or remission submitted to it under article 239(2) of the Code:
- In other cases except those in which the dossier must be submitted to the Commission pursuant to article 905, the decision-making customs authority shall itself decide to grant repayment or remission of the import or export duties where there is a special situation resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned.
- European Convention on Human Rights Protocol 1, article 1 provides:
- Article 6 provides:
- Article 13 provides:
- The EC Treaty, Title 1, article F provides:
- The Tribunal heard evidence from both Mr Haytayan and from Mr M J Brewis, the review officer of Customs and Excise. Both parties provided bundles of documents.
- Lama Ltd ("the Appellant") is an importer of garments. The importations in question were nightdresses exported from Lebanon by a company called "La Marquise".
- On 26 September 1978 an agreement had been concluded between the Lebanon and the European Community ("the Agreement") which was published in Council Regulation (EEC) 2214/78. That Agreement provides for a reduced rate of duty for (qualifying) imported goods.
- The imported goods which comprised knitted and unknitted garments falling under Customs tariff headings 6108 and 6208, and were accompanied by EUR.1 movement certificates were all accepted at importation by Customs at a preferential rate of duty. Some but not all of the garments were embroidered. There was no direct evidence before the tribunal of the origin of the fabric from which they were manufactured in the Lebanon, or of the exact nature of the garments. The certificates were not stamped by the Lebanese customs authorities as required by the Agreement.
- In their letter of 31 January 2001, which was written to the Lebanese Customs by the Respondents pursuant to the Agreement, the Respondents requested verification of eight certificates relating to importations by the Appellant. The response from Lebanese Customs received on 11 June 2001 was in Arabic which when translated states:
- The first two certificates were found to have been submitted by the Respondents outside the time limit and are not the subject of this appeal. The post clearance demand was then issued in respect of the other six, the certificates in respect of them having been voided, the full as opposed to the reduced rate of duty became payable.
- In a letter of 9 July 2001 the Respondents stated inter alia that:
- On 18 July 2001 a formal departmental review of this decision was requested on behalf of the Appellant. On 28 September 2001 a facsimile was received by the Respondents in Arabic which, translated, reads:
- By their letter of 18 July 2001 the Appellant's then representatives had informed the Respondents that the Lebanese Customs had been contacted and they were preparing paperwork to substantiate the Appellant's claim. It was pointed out by the representatives that the EUR.1 certificates were issued by the Beirut Chamber of Commerce and Industry and signed by the Foreign Minister, and the certificates would not have been so signed had there been a problem with either the factory or the origin status of the goods at the time. Because the factory had been closed since July 2000 the Customs office in Lebanon was not able to clarify that the factory was located at the address shown on the certificates.
- A formal departmental review was carried out and the Appellant was informed of the decision by a letter dated 3 April 2002. In their letter of 3 April 2002 the Respondents rejected the Appellant's arguments stating inter alia that the proper authority in the Lebanon was the Directorate General of Lebanese Customs, and that the Directorate General had advised UK Customs that they had not endorsed the EUR.1 movements certificates and were unable to verify the origin status of the goods. In that letter it was also said that: "It is the policy of the Commissioners to accept the statements and decisions of overseas authorities in cases such as this."
- Following the letter of 3 April 2002 the officer concerned requested the tariff preference unit to consider the documentation. That unit had maintained the view that none of the documentation bore the authentic stamp of the proper Customs authority in the Lebanon.
- Further telephone conversations and correspondence between the parties followed. In the course of these communications the Appellant repeated that much time and money had been spent by it, although the specific amount was not quantified. The Respondents' decision was ultimately upheld in their letter of 4 March 2003, which is the subject of this appeal. It was the Respondents' view that the documents provided did not demonstrate that the Lebanese Customs were satisfied that the goods did qualify for preferential treatment and that this was because they referred to the goods having been manufactured from fabric imported into Lebanon for manufacture into garments. "The qualifying process for goods of Chapter 61 and 62 is manufacture from yarn or fibre, depending on the method of manufacture. Processing imported fabric, therefore, is not sufficient for the goods to qualify for preferential treatment."
- In a telephone conversation with the Respondents on 10 March 2003 two possibilities on the question of the nature of the fabric referred to in the first production statement were discussed. It was considered by the Appellant that the fabric was of EU origin, such that the garments would have qualified for preference or that the garments may have been sufficiently embroidered to qualify as originating in Lebanon under the alternative origin rule for embroidered goods. It was the Respondents' position that in either case the matter would have to be taken up with the Lebanese Customs who were unable to satisfy themselves as to the originating status of the garments.
- The relevance of whether or not the garments were embroidered derives from the difference between headings 6108 and 6208.
- As a consequence of the Respondents' letter of 10 March 2003 confirming that telephone conversation, the Appellant employed a representative in the Lebanon in order to demonstrate, and to satisfy Lebanese Customs of, the originating status of the garments, it was this meeting which led to a second production statement.
- The Appellant lodged his appeal on 24 April 2003. On 21 November 2003 the Respondents advised that the Appellant might apply to the Lebanese Customs for duplicate EUR.1 movement certificates. A senior lawyer from the Respondents' solicitors office stated:
- a supplier's declaration from the EC supplier or manufacturer of the fabric, demonstrating that the goods were entitled to claim EC originating status. The declaration is particularly important and should be in the format specified
- copies of the EUR.1s or Invoice Declarations, issued in the EC and covering the exported fabric.
- any correspondence with the manufacturer in Lebanon, confirming that the appropriate Origin Rules were met. For instance, such confirmation should be dated and include details of the origin of the materials and the manufacturing processes undertaken.
- Having received this letter, and having made further enquiries of the Lebanon, the Appellant submitted the second production statement which stated inter alia:
- The Tribunal has seen various invoices, bills of lading and packing lists relating to fabric of UK origin imported by La Marquise; some documents were authenticated by the Ipswich and Suffolk Chamber of Commerce Industry and Shipping (Incorporated), and one was authenticated by the Arab-British Chamber of Commerce, however none of these documents can be directly related to any of the six importations in question.
- It was Mr Haytayan's evidence that the Appellant arranged the export of fabric from the UK to La Marquise, La Marquise would process the garments in its factory in the Lebanon and re-export them to the United Kingdom to the Appellant.
- From the documents obtained by the Appellant it appears that in respect of five of the six certificates there were two invoices, one marked A and one marked B. The invoices marked A are represented by EX3 statements, which indicates that they are made from cloth or fabric imported into the Lebanon, then re-exported. Where there is an invoice marked B alone, this indicates that the goods are made from fabric which was processed in the Lebanon. In the present case the EUR certificates numbered A34066 and A34067 referred only to invoices A, and not B.
- During part of the time the Appellant was seeking to obtain the various documents which it had been suggested by the Respondents that he should obtain, the Iraq War was taking place and travel to the Lebanon was difficult. It was also the Appellant's experience that the authorities in the Lebanon were unhelpful. It took the Appellant some one year to eighteen months to obtain the second production statement. The certificates in question had been stamped by the Ministry of Industry and the Foreign Affairs Ministry. It was also Mr Haytayan's evidence that the system in the Lebanon is that the Ministry of Industry checks that documents are authentic before the Lebanese Customs and Excise will stamp the documents. In respect of the six certificates in question the Appellant's agent had not obtained the appropriate Customs and Excise stamp.
- In Mr Brewis' letter of 4 March 2003 he had at the end of that letter suggested to the Appellant that as an alternative to appealing, the Appellant might wish to complain about the handling of his case by Customs and gave the relevant address. The reason for this was because of what he considered to be an excessive delay on the part of Customs in dealing with the matter.
- Whilst at the time of the receipt of the first production statement the Respondents queried whether the stamps on them were official Lebanese Customs stamps, by the time of the hearing they were accepted by them as such and it was accepted that if those stamps had been present on the EUR.1 documents the Commissioners would have accepted them. The first production statement was signed by Assaad Ghanem, the Director General of the Lebanese Customs, as was the second production statement.
- From the outset of the hearing it was accepted on behalf of the Respondents that the statement of case was misleading in various particulars. In particular the statement of case referred to the Respondents "policy of accepting the statements and decisions of overseas authorities", and the Respondents' decision to issue the demand note as being "fair and reasonable" when in fact the former was not a matter of policy but was a requirement of the regulations, and the decision was not a matter of the exercise of a discretion by the Respondents. Furthermore it referred to the Appellant's failure to produce any evidence to show that the goods were made of cloth imported from the EU, when what was required was the production of properly stamped EUR.1 certificates. It was contended that the appeal related to an ancillary matter under s.16(4) and Schedule 5 of the Finance Act 1994, and that the decision was both reasonable and proportionate in all circumstances, which was not the issue. The Appellant was therefore left with the erroneous impression that to succeed in the appeal he had to show that the decision was not fair and reasonable. In addition, as a consequence of the earlier correspondence and telephone conversations with the Respondents he had been led to believe that by obtaining documents from the Lebanon showing the origin of the goods, he would be able to succeed in this appeal.
- Mr Timson-Hunt on behalf of the Respondents quite properly acknowledged that not only did the statement of case not appropriately state the case, but also that the Appellant had been subject to an unconscionable amount of delay by the Commissioners in reaching their decision, and that he had been given wrong information as to the type of evidence which would be acceptable by the Commissioners, and as to the nature of the Commissioners' own jurisdiction in the matter.
- It was the Respondent's case that the only evidence which was acceptable in the circumstances of these importations was as provided for under the Agreement and Regulation (EEC) 2214/78. In respect of none of the six consignments had evidence been produced to show that they did so comply.
- It was further submitted that the goods brought in under heading 61.08 did not qualify for preferential origin status as they were not manufactured from yarn, but from fabric.
- The Respondents' principle submissions on the substantive case, aside from the issues relating to human rights were:
- Insofar as the Appellant was claiming that when the goods were imported with all the necessary documents, and the Respondents had cleared the goods on several occasions, and therefore this suggested that Customs and Excise accepted the certificates as valid, it was submitted that it was established law that initial acceptance by the Customs authorities of a trader's declaration and calculation of duty could not give rise of itself to any legitimate expectation that no further duty would become payable (see Commissioners of Customs and Excise v Invicta Poultry Ltd and Fareway Trading Co Ltd [1997] V&DR 56).
- With regard to points raised by the Appellant that his human rights has been breached, it was submitted that as the appeal concerned European Community law and its implementation, the only relevance in respect of the Human Rights Act was whether the Respondents had breached the Appellant's rights in not accepting the evidence of preferential origin and requiring the duty to be paid in the course of implementing community law.
- With regard to the application of human rights to the European Community, the Community had not acceded to the ECHR and therefore it was not a substantive part of community law. However by the EC Treaty, Title 1, article F, paragraph 2 it was agreed to respect the fundamental rights contained in the 1950 Treaty. Respect for human rights was a condition of the lawfulness of community acts (see the European Court of Justice in its opinion of 28 March 1996 (2/94 ECR [1996] 1-01759). The Tribunal was referred to the cases of Marguerite Johnston v Chief Constable of Royal Ulster Constabulary [1986] ECR 01651 Case 222/84 and The Queen v Ministry of Agriculture Fisheries and Food ex parte Denis Clifford Bostock [1994] ECR 1-009555 where issues of human rights were considered by the ECJ. In the case of Bostock at para 16 the ECJ stated:
- It was submitted that the Respondents had a duty as a matter of law to comply with Community legislation and to ensure strict compliance with the regulation which implements the Agreement. To avoid fraud it was obliged to ensure that only certain documents were acceptable. The words of the regulation implementing the trade agreement were strict and quite clear: only an EUR.1 movement certificate can be accepted by member States as evidence of preferential status and the certificates must be issued by the Customs authorities of the exporting State. There was no discretion or interpretation open to member States, and therefore the Respondents, by which they might apply the provisions more flexibly with a mind to human rights.
- With regard to the specific rights relevant to the appeal under the Human Rights Act the following submissions were made:
- The Appellant had been informed one month prior to the hearing of the evidence which was properly needed, namely the EUR.1 and evidence of origin, and had been given the opportunity to request an adjournment.
- With regard to the issue of proportionality, the Tribunal was referred to the joint cases C153/94 and C-204/94, The Queen v Commissioners of Customs and Excise ex parte Faroe Seafood Co Ltd, Fψroya Fisksψla L/F [1996] ECR 1-2465 where at paragraph 114 the ECJ stated:
- With regard to the issue of misdirection, because duties are levied at a community level through the EC Treaty and the system of collecting duties is set out in Regulation 2913/92 of 12 October 1992, and community regulations are binding in their entirety and are directly applicable in all Member States they must be strictly applied. Neither the Treaty nor the Customs code provide for "misdirection" and/or extra statutory concessions in respect of Customs duty, therefore the concept (which is relevant in VAT appeals) cannot be relied on in this case. Any concession with regard to Customs duties could be construed as State aid.
- The Customs code, article 220(2)(b) sets out the criteria for relying on legitimate expectation as follows:
- In the present case there was no factual basis upon which to consider that there had been an error by the Lebanese Customs, it being the Appellant's case that the EUR.1 certificates were not presented to the Lebanese Customs for stamping. There was no basis for suggesting that the Respondents had made an error by accepting the EUR.1s at the time of importation (see Commissioners of Customs and Excise v Invicta Poultry and Fareway Trading Co Ltd [1997] V&DR 56).
- It was the Appellant's case that he was not properly informed that the only acceptable document was the EUR.1. In their letter of 9 July 2001 the Commissioners had wrongly informed the Appellant inter alia that relief was dependent upon his being able to demonstrate that the claim to preference was made in good faith. It therefore had spent time and money in an effort to show that it had made the claim in good faith.
- In the review letter of 3 April 2002 the Commissioners had referred to it being the "policy" of the Commissioners to accept the statements and decisions of overseas authorities, they had not stated that they were obliged to accept those statements and decisions. If the Appellant had been informed at the outset of the strict requirement in relation to the EUR.1 it might have been possible to obtain the correct information. In the event two journeys had been made to the Lebanon and two approaches made to the Lebanese authorities, it would now be extremely difficult because of the nature of the Lebanese authorities to approach them again on the same matter.
- In the further review of 4 March 2003 there was no mention at all of the EUR.1, Mr Brewis referred only to the fact that processing imported fabric was not sufficient for the goods to qualify for preferential treatment. Again there was no reference by Mr Brewis in his letter of 10 March 2003 to the necessity for the EUR.1s to be correctly stamped. He only emphasised the matter of the originating status of the garments.
- The Tribunal was reminded of the volatility in the Lebanon at the time.
- The fact that the Appellant had subsequently been able to obtain the second production statement showed that the Lebanese authorities did not consider that the EUR.1 movement certificates were considered to be null and void, as they had originally said. Mr Assaad Ghanem had signed both the first production statement and his name had appeared on the second one as well. It had not been possible for the Lebanese authorities to make enquiries because the factory was shut by the time the Commissioners took action in the matter, whereas the appropriate evidence could have been obtained had the Appellant been informed earlier.
- The Appellant was never notified by the Respondents that a document such as the second production statement would not be acceptable, and the Appellant had wasted time and money in obtaining that and other documents. Furthermore the Appellant had also wasted time in producing to the Tribunal evidence of the origin of the goods.
- The documents produced by the Appellant showed that the Appellant sent the fabric to the Lebanon to be processed. The bills of lading were stamped as authentic, they showed the shipper and the consignee. The letter of 14 March 1995 from Cloverbrook Fabrics showed the link between the Appellant and La Marquise. Other documents showed that the completion of the fabric was 100% polyester and some showed that it was 100% cotton. This corresponded with the consignments in question. They showed that the factory did buy fabric from the UK but it would be impossible to show any further links.
- It was accepted by Mr Haytayan that the letter from the Respondents' solicitors of 21 November 2003 informed them of the proper process, however the language of the letter was not such as to indicate that it was essential to provide this evidence. The writer had used phrases such as "like to suggest" and at no point did he say that the Appellant must obtain such evidence to succeed or that it was only such evidence that was acceptable. In any event it would have been impossible for the Appellant to have obtained such evidence in such a short time.
- The Appellant further relied on article 41 of the European Union Charter which gave the right to good administration and the right to an effective remedy. It was submitted that there had been lack of good administration in the present case by the Respondents, and it was not reasonable or fair to say that the law prevented the Appellant from raising the argument that he had been misdirected.
- In their letter of 4 March 2003 the Respondents had apologised for the length of time the matter had taken, and had given the name of the complaints authority, but if at the first review stage the Commissioners had responded timeously and correctly the issue could have been resolved. There was not just the question of maladministration at the review stage, but also at the solicitor's office itself. The Appellant had appealed in April 2003, and the rules required that the statement of case be served in 30 days. On 29 May 2003 the Commissioners applied for an extension until 1 July 2003 saying they were awaiting for the Appellant to withdraw his appeal, which was not the case. On 2 June 2003 the Respondents said they had made a mistake and applied again for an extension until 1 July. On 24 July 2003 the Tribunal ordered that the statement of case be served. The Respondent again failed to file a statement of case and there was a further extension of time granted by the Tribunal until 7 August 2003, whereupon there was a further application by the Respondents for the matter to be stood over and time limits to be extended up to and including 7 September 2003. The grounds for the application were that the Commissioners required further time "in which to conduct their review". When the statement of case was finally served there were inconsistencies in it and it did not appropriately state the case.
- The Appellant relied on article 13 of the Human Rights Act for his right to an effective remedy in the present situation. He had spent time and money pursuing documents on the basis of the Respondents' advice. The Respondents' wrong advice had caused the Appellant damage.
- The Appellant distinguished the case of Invicta Poultry Ltd on the basis that the sum of money in that case was only £912 which was not comparable with the £26,000 in the present case. In the present case the errors could not be detected by the Appellant because he could not read Arabic. He had acted in good faith and the lapse of time in the particular circumstances in asking for the duty was unfair.
- Whilst he did not withdraw the relevant part of his grounds for appeal, Mr Haytayan on behalf of the Appellant effectively conceded that the Respondents were obliged by the terms of the agreement and the relevant case law and that the duty was properly demanded. His main argument related to breaches of human rights. However it is necessary for the Tribunal initially to deal with the other issues before considering the issues relating to human rights.
- We accept the Respondents' case as set out above in paragraph 43 with regard to the evidence which would have been necessary for the Appellant to provide in respect of these importations to establish that it was entitled to the preferential rate of duty. The Appellant did not very strenuously seek to argue otherwise, once the proper legislative framework had been set out and explained. Because those arguments are set out in full above, it is not necessary to repeat them here.
- The main issue in this case is therefore whether the Appellant has established that any of his human rights have been breached, and if so, whether there is any remedy available to him in respect of such breach(s). At the start of the hearing the Tribunal's main concerns were the misleading information which the Appellant had consistently been given since the Respondents first became aware that it might be the case that the appropriate duty had not been levied on the goods, and inconsistent and incorrect reasons for the decision to impose the higher rate of duty which had been advanced by the Respondents to the Appellant. We were not aware at that time, nor indeed it subsequently appeared was Mr Timson-Hunt, that the Agreement had not been amended in 1992 when corresponding agreements with other countries had been. This only emerged at the resumed hearing.
- Dealing first of all with the issue of delay, there are two areas in which this is relevant. First of all there is the matter of the lapse of time between the original importation of the goods and the demand being made by the Respondents for the higher level of duty to be paid. This is a matter which is governed by Council Regulation (EEC) No.2913/92, Article 221, which requires the Customs authorities within three years to take action to recover the additional duty. In the present case the demand for the additional duty was made within that three-year time limit and the Appellant can have no redress in respect of that.
- It was acknowledged by the Commissioners that there was excessive delay in proceedings following the initial demand. We do not consider that any of the problems which the Appellant encountered subsequently are specifically related to the Respondents' delay. It was the case that the Appellant suffered as a consequence of the factory in the Lebanon having closed down by the time the enquiries were made of the Lebanese Customs, but that had occurred within the three-year time span allowed by the legislation. The expense and problems encountered by the Appellant arose not so much from the matter of delay but from the misunderstanding by the Respondents of the relevant factors to be taken into consideration in this case and their misunderstanding of the limited rights of appeal available to the Appellant. The Appellant was misinformed by the Respondents and as a consequence of being given that misinformation he incurred expense of time and money unnecessarily.
- There appear to be no methods by which the Appellant could satisfy the requirements of the legislation. Even if he had produced completely compelling evidence as to the fact that the material used in the manufacture of the goods originated in the European Union, and that he had complied in every respect with the other articles of the Agreement, he would still not have been able to succeed because he could never have obtained the relevant documents. His agent in the Lebanon had failed to ensure that the EUR.1 movement certificates were properly stamped, and once that requirement had not been satisfied there was no method by which it was open to the Appellant to procure preferential rates of duty. The Agreement allowed for the United Kingdom Customs authorities to make enquiries of the Lebanese Customs authorities, there was no provision for someone in the Appellant's situation to do so, and, as Mr Timson-Hunt submitted, there was no provision for recognition of any documents which might be provided by the Appellant. It was therefore unhelpful of the Respondents in their letter of November 2003 to suggest that the Appellant approach the Lebanese Customs asking them to approve new EUR.1 certificates, since it was not open to the Appellant to do so.
- It was submitted by Mr Timson-Hunt that it is a taxpayer's duty to make himself familiar with the relevant legal provisions. It seems to us that it is entirely proper for an Appellant to rely on advice given to him by the Respondents as to the legal requirements to be satisfied, since they are the proper authority in such a case as this. It does not lie in the Respondents' mouth to put the responsibility on the Appellant in circumstances in which they gave the Appellant completely wrong advice up until November 2003. Even then, it was not made clear by the solicitor's letter that the only way for the Appellant to succeed was by producing stamped EUR.1 movement certificates. The Respondents themselves were not aware that the Agreement had not been amended and had relied on what they wrongly thought was the nature of the Agreement up until the second appearance before the Tribunal. In such circumstances it is scarcely open to them to say that the taxpayer should have been aware of this matter.
- Mr Timson-Hunt submitted that the Respondents were entitled to change the basis for any decision which they make, but we do not consider that that is relevant in this case. What was changed by the Respondents was not the basis for the decision, but the advice that they were giving to the Appellant as to the documentation he needed to provide to satisfy them that their decision should not be upheld. Furthermore the statement of case wrongly set out the law, was completely misleading and was not in terms corrected by the November letter sent by the Respondents' solicitor. The issue is not that the Respondents changed their case, but that the Respondents were in ignorance of the status of the Agreement and in addition were applying wrong principles of law and wrongly advising the Appellant
- In response to the Appellant's arguments on the Charter of Fundamental Human Rights to the European Union article 41(3) this is a European Parliamentary- based document and could not be relied on in the present circumstances. Article 13 of the Human Rights Act only enforces substantive remedies within the Act itself. The Charter of Fundamental Human Rights was issued by Parliament for Parliament.
- We do not find that by giving the Appellant misleading advice and directions the Respondents breached any of his justiciable human rights. Whilst the Appellant did expend money in pursuing matters which could be of no assistance to him in this case, his remedy in this instance lies with the Adjudicator and/or his M.P., not being matters which this Tribunal is able to deal with by way of costs.
- This appeal is dismissed with no order for costs.
Lama Ltd v Customs and Excise [2004] UKVAT(Customs) C00189 (08 June 2004)
C00189
CUSTOMS DUTIES Preferential tariff relief EUR.1s not stamped by Lebanese Customs Authorities Post-clearance demand issued Agreement with the Lebanon not amended in 1992
HUMAN RIGHTS Whether breached Whether Commissioners' misunderstanding of the law give rise to remedy in Tribunal
LONDON TRIBUNAL CENTRE
LAMA LTD Appellant
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: MISS J C GORT (Chairman)
MR K MANTERFIELD FCA
Sitting in public in London on 13 January and 19 February 2004
Mr R Haytayan company manager, for the Appellant
Mr D Timson-Hunt of counsel, for the Respondents
© CROWN COPYRIGHT 2004
DECISION
The legislative background
Powers of the Tribunal
Reference agreements and community law
Article 41
(1) The contracting parties shall take any general or specific measures required to fulfil their obligations under the agreement
Article 54
Protocols 1 and 2 and annexes A, B and C shall form an integral part of the agreement
Protocol 2
Article 1
(1) Products originating in Lebanon
(a) products wholly obtained in Lebanon,
(b) products obtained in Lebanon, in the manufacture of which products other than those wholly obtained in Lebanon are used, provided that the said products have undergone sufficient working or processing within the meaning of article 3. This condition shall not apply, however, to products which, within the meaning of this Protocol, originate in the Community;
Article 3
(1) For the purpose of implementing the provisions of Article 1(1)(b) the following shall be considered as sufficient working or processing:
(a) working or processing as a result of which the goods obtained receive classification under a heading other than that covering each of the products worked or processed, except, however, working or processing specified in list (a) in annex (ii), where the special provisions of that list apply;
(b) working or processing specified in list (b) in annex (iii).
Article 6
Evidence of the originating status, or products, within the meaning of this Protocol, is given by a movement certificate EUR.1
Article 7
A movement certificate EUR.1 shall be issued by the Customs authorities of the exporting State when the goods to which it relates are exported
Article 8
(1) A movement EUR.1 shall be issued by the Customs authorities of the exporting State, if the goods can be considered 'originating products' within the meaning of this Protocol.
(2) the Customs authorities shall have the right to call for any documentary evidence to carry out any check which they consider appropriate.
(3) It shall be the responsibility of the Customs authorities of the exporting State to ensure that the forms referred to in article 9 [EUR.1 certificates] are duly completed
Article 11
A movement certificate must be submitted within five months of the date of issue by the Customs authorities of the exporting State to the Customs authorities of the importing State
Article 22
In order to ensure the proper application of this Title, the Lebanon and the community shall assist each other, through their respective Customs administrations, in checking the authenticity of movement certificates EUR.1 and the accuracy of the information concerning the actual origin of the products concerned
Article 24
(1) Subsequent verification of movement certificates EUR.1 shall be carried out at random or whenever Customs authorities of the importing State have reasonable doubt as to the authenticity of the document with accuracy of the information regarding the true origin of the goods
(3) The Customs authorities of the importing State shall be informed of the result of the verification as quickly as possible. These results must be such as to make it possible to determine whether the disputed movement certificate EUR.1 applies to the goods actually exported, and whether these goods can, in fact, qualify for the application of the preferential arrangements
In all cases the settlement of disputes between the importer and the Customs authorities of the importing State shall be under the legislation of the importing State.
| New Declared Heading | Old Heading + Goods Obtained + Criteria |
| 6108 1100 00 Knitted slips and petticoats of man-made fibres | 60.04 Under garments, knitted CRITERIA A (sic) |
| 6108 2100 00 Knitted briefs and panties of cotton | 60.04 Under garments, knitted CRITERIA A |
| 6108 3211 00 Knitted nightdresses knitted or crocheted of man-made fibre | 60.05 Outer garments CRITERIA A |
| 6108 9200 00 Knitted, other of man-made fibres (Dressing Gown) | 60.05 Outer garments CRITERIA A |
| 6208 2200 00 Unknitted nightdresses and pyjamas of man- made fibres | ex 61.02 Women's, girls' and infants outer garments, embroidered CRITERIA B (sic) |
| 6208 9119 90 Unknitted, other (Polyester Dressing Gown) | ex 61.02 Women's, girls' and infants outer garments, embroidered CRITERIA B |
| 6208 9200 00 Unknitted other of man-made fibres (Kaftans) | ex 6102 Women's, girls' and infants outer garments, embroidered CRITERIA B |
CRITERIA A = Manufactured from yarn.
Fn (1): Trimmings and accessories used (excluding linings and interlining) which change tariff heading do not remove the originating status of the product obtained if their weight does not exceed 10% of the total weight of all the textile materials incorporated.
CRITERIA B = Manufacture from fabrics not embroidered, the value of which does not exceed 40% of the value of the finished product.
Fn (1): Trimmings and accessories used (excluding linings and interlining) which change tariff heading do not remove the originating status of the product obtained if their weight does not exceed 10% of the total weight of all the textile materials incorporated.
- is based on grounds corresponding to one of the circumstances referred to in articles 900-903, and that these do not result from deception or obvious negligence on the part of the person concerned, it shall repay or remit the amount of import or export duties concerned,
- is based on grounds corresponding to one of the circumstances referred to in article 904, it shall not repay or remit the amount of import or export duties concerned.
Where article 905(2), second indent, is applicable, the customs authorities may not decide to authorise repayment or remission of the duties in question until the end of a procedure initiated in accordance with articles 906-909.
Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by general principles of law.
The preceding provision shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
In determination of a civil right and obligation , everyone is entitled to a fair and public hearing in a reasonable time by an independent and impartial tribunal established by law "
Everyone whose rights and freedoms as set forth in this Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.
1. The union shall respect the national identities of its member States, whose system of government are founded on the principles of democracy.
2. The union shall respect fundamental rights as guaranteed by the European Convention for the protection of human rights and fundamental freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to member States as general principles of Community law.
3. The union shall provide itself with the means necessary for it to attain its objectives and carry through its policies.
Council Regulation 2913/92 provides at Article 219:
1. The time limits for entry in the accounts laid down in article 218 may be extended
(a) for reasons relating to the administrative organisation of the member States, and in particular where accounts are centralised, or
(b) where special circumstances prevent the customs authorities from complying with the said time limit.
Such extended time limit shall not exceed 14 days.
2. The time limits laid down in paragraph 1 shall not apply in unforeseeable circumstances or in cases of force majeure.
Council Regulation 2913/92/EEC provides at article 220:
1. Where the amount of duty resulting from customs debt has not been entered in the account in accordance with articles 218 and 219 was to have been entered in the accounts at a lower level than the amount legally owed, the amount of duty to be recovered or which remains to be recovered shall be entered into the account within two days of the date on which the customs authorities become aware of the situation and are in a position to calculate the amount legally owed and to determine the debtor (subsequent to entry in the accounts). That time limit may be extended in accordance with article 219.
Article 221
1. As soon as it has been entered in the accounts, the amount of duty shall be communicated to the debtor in accordance with appropriate procedures.
2.
3. Communication to the debtor shall not take place after the expiry of a period of three years from the date on which the Customs debt was incurred. .
The facts
"In reply to your above letter requesting retrospective verification of EUR.1 movement certificates numbers A34063, A34065, A34066, A34067, A34068, A30081, A41784 and A43464 we would inform you that the said certificates are not endorsed by Lebanese Customs moreover, the factory whose name appears in box 1 has shut up shop and moved away
In view of the above, please regard these certificates as null and void "
"Article 220.2(b) of the Community Customs Code (Council Regulation 2913/92) provides for the remission (non-recovery) of the Customs duty payable on products which are found to be ineligible for the preferential rate of duty claimed at the time of importation. The relief is dependent upon you being able to demonstrate that the claim to preference was made in good faith. You must therefore be able to provide documentary evidence which clearly shows that either before or during the period in which you imported the products from La Marquise you acquainted yourself with the origin rules and that you had received written, dated, confirmation from your supplier that the rules had been met
"If you are able to produce such evidence you must submit it to this office together with an application for remission on form C285 "
" Customs clearing agent Mr Joseph Abu Khalil temporarily imported a quantity of fabric on behalf of La Marquise Clothing Company in accordance with IMF temporary importation declaration
The fabric was processed at the La Marquise Clothing factory and a variety of types were produced
The goods were re-exported in accordance with EX3 declarations
This statement is therefore issued based on the records we hold without acceptance on the part of the Customs department of any responsibility for the misuse thereof."
The facsimile was stamped by Lebanese Customs, having been sent at the request of the Appellant This document is referred to as the first production statement.
"I would like to suggest that you contact Lebanese Customs and ask it to approve new EUR.1 movement certificates for the consignments in question. EUR.1s can be issued, in exceptional circumstances, after the export of the goods. However, you may need to ask La Marquise's authorised agent to correspond with the Customs authority.
"You should also have evidence of Lebanese originating status (i.e., that the garments met the terms of the Origin Rules) and may need to provide details or the original exports, for instance, copies of the export invoices. I would be interested to see any documentary evidence you have of the preferential origin of this fabric or of the finished garment. Therefore you will need to provide me with:
"At the risk of stating the obvious you need to provide such acceptable evidence of EC or Lebanese originating status, to demonstrate that you are entitled to claim preferential duty rates for the imports of the garments covered by the six EUR.1 movement certificates referred to in the second paragraph of this letter. Evidence that does not establish EC or Lebanese originating status for those garments as opposed to other garments imported by you will not suffice. In my opinion, the information you have provided so far does not demonstrate Lebanese originating status for the goods which are the subject matter of this appeal."
"Approval of the Lebanese Customs Directorate General number 21666 dated 09/12/2003
Clarifying Appendix
To Whom it may concern
"In clarification of the attestation issued to the account "La Marquise Company for Clothing Industry" on September 12, 2001 mentioned herein above in the object and reference, we do hereby certify that the products were manufactured in the factory of "La Marquise Company for Clothing Industry" and re-exported to the benefit of:
Lama Ltd (and then follows the Appellant's address).
Noting that EURO1 (sic) certificates related to the following re-exportation EX 3 statements: (there then followed the relevant certificate numbers) were issued and approved by the Ministry of Industry and the Ministry of Foreign Affairs as per the rules in effect, certifying that the exported products are embroidered clothing as provided by "EMB" expression mentioned in each of these certificates, noting that EURO1 certificate is issued after making sure and verifying that manufacturing conditions related to this certificate are satisfied.
"In testimony whereof the present clarifying appendix of the attestation dated 12 September 2001 was issued without any responsibility assumed by the Customs Directorate for any misuse."
The statement was dated 19 December 2003 and bore the signature and seal of the Customs Director General Assaad Ghanem.
The Respondents' case
(a) The Respondents were bound by the terms of the Agreement which was binding in its entirety and directly applicable. Further the Tribunal was also bound by its terms. For this proposition the Tribunal was referred to the case of Vtech Electronics (UK) Plc v Commissioners of Customs and Excise [2003] EWHC 59.
(b) The terms of such preference Agreements must be strictly applied and the Respondents have no discretion on the application of the provisions unless provided for by the Agreement or the Regulations themselves (see Indus Food Ltd v Commissioners of Customs and Excise (2003) CW 178).
(c) Protocol 2 to the Agreement formed an integral part of the Agreement.
(d) The Agreement, Protocol 2, article 6 required that evidence of originating status was given by movement certificate EUR.1 or, a postal consignment, an EUR.2. No other evidence was provided for in the Agreement.
(e) Protocol 2, article 7, required that " a movement certificate EUR.1 shall be issued by the Customs authorities of the exporting State ". The use of the word `shall' indicated that the requirement that the Customs authority issued the certificate was mandatory. It was not in dispute that certificates were not issued by the Lebanese Customs.
(f) No alternative provision was made in the Agreement for the EUR.1 movement certificates to be issued or certified by the Ministry of Industry or the Ministry of Foreign Affairs.
(g) Following the request for verification of the certificates by the Respondents on 31 January 2001, the Lebanese Customs advised that the certificates were not endorsed by Lebanese Customs and asked that the certificates be regarded as null and void.
(h) Given that Protocol 2, article 6, provided only for EUR.1s as evidence of preferential origin status, and the EUR.1s accompanying the Appellant's consignments had been voided, the subsequent documents sent by the Appellant to the Respondents were not sufficient under the Agreement to establish preferential origin status. The Tribunal was referred to the cases of Fiat Auto (UK) Ltd v Commissioners of Customs and Excise (2201) COO141, citing Case C-334/93 Bonapharma Arzneimittel GmbH v Hauptzolamt Krefeld [1995] ECR 1-0319 in which the ECJ stated that:
"Under the actual terms of the EEC- Austria Agreement only goods originating in the community or Austria may benefit from the preferential arrangements and the EUR.1 movement certificate constitutes the documentary evidence of that origin to allow other means of proof in addition to those proofs of origin would affect the unity and security of the application of the Agreement."
(i) Even if the documents were acceptable under the Agreement, which it was submitted that they were not, they did not contain any information that confirmed the preferential origin status of the goods:
(i) The first production statement dated 12 September 2001 only indicated that the goods were temporarily imported by the Customs clearing agent on behalf of La Marquise, that the fabric was processed by that company and then re-exported. Whilst it was accepted that the letter contained an official stamp of the Lebanese Customs, it did not confirm that the fabric was the same as that used to manufacture the actual goods the subject of this appeal, it did not indicate where the fabric was imported from, or the country(ies) of origin and it did not indicate the level or nature of the processing or manufacture carried out in the Lebanon;
(ii) The second production statement merely confirmed that the goods were manufactured by La Marquise and re-exported to the Appellant under the relevant EUR.1 movement certificates. That document concedes that these were issued and approved by the Ministry of Industry and the Ministry of Foreign Affairs, not the Customs authorities. Whilst it has a Lebanese Customs stamp, it adds nothing to the earlier document, indeed it confirmed that the EUR.1 were not issued by Customs (as required by article 7 of the Agreement) and it appeared that the only basis for certification by the Ministry of Industry and the Ministry of Foreign Affairs was that the goods had been embroidered. This was irrelevant in respect of the Appellant's goods declared under heading 61.08, but it was conceded that it might apply under heading 62.08.
(j) The proper test as to whether the goods acquired preferential status was set out in the Agreement, Protocol 2, articles 1 and 3. Products must either be:
(i) Wholly produced in the Lebanon, which these were not as the fabric had been imported or;
(ii) Obtained in the Lebanon and during manufacture other products used are not from the Lebanon, provided the final products have undergone sufficient working or processing (see article 1(b)). Under article 3 sufficient working or processing is that sufficient to receive a classification under a heading (at 4-digit level) other than that covering each of the products worked or processed, except goods listed in list A or B to the Protocol. In the present case the only indication of the processing being carried out in the Lebanon was in the Appellant's letter of 10 March 2003 and the second production statement, both of which indicated that the work carried out was embroidery. Under the relevant criteria in the Agreement list A for goods under heading 61.08 this was irrelevant. For goods under heading 62.08, it was considered that this may provide sufficient working, where the criteria was complied with. Proof of this was to be provided by a valid EUR.1 movement certificate;
(iii) The rule in article 1(b) in respect of processing does not apply to goods originating in the community (e.g. which had been shipped out from the community to the Lebanon for processing and then re-exported back into the community (see article 1(b)). No evidence had been presented to the Respondents to show that the Appellant's goods originated in the community.
Given that the Appellant's goods met none of the criteria and/or alternatively there was no or insufficient evidence that the goods met the criteria to demonstrate preferential origin under the Agreement, such status must be refused.
(k) The Respondents applied for the certificates to be verified by Lebanese Customs in compliance with the Agreement, Protocol 2, article 22 but the subsequent verification provided under article 24 indicated that the certificates should be voided.
(l) There was no provision in the Agreement for the exporter, importer or any other party to approach the Customs authorities in the exporting State for verification of the documents and the Agreement made no provision for the recognition of any documents provided. Consequently production statements 1 and 2 did not assist the Appellant or the Tribunal.
(m) Under the code, article 78(3) the Respondents were entitled to regularise the situation. In this instance that included recovering duty legally due (of the full rate), provided the debt was communicated to the debtor within three years from when it was incurred (code, article 221(3)). In this appeal the Customs debts on the first consignment was incurred on 10 November 1998 and the debt was notified on 2 July 2001.
" the Court pointed out earlier in its judgment in Wachauf (paragraph 19) that the requirement flowing from the protection of fundamental rights in the Community legal order are also binding on member States when they implement Community rules and that member States must therefore as far as possible apply those rules in accordance with those requirements."
(i) ECHR, article 6 the matter being a civil matter, the Appellant's right to a fair trial was fulfilled by the Tribunal system and access to the Courts.
(ii) For the Appellant to found a claim under Protocol 1 article 1 of the ECHR, he must show that the property belonged to him in order for him to have a right to it. In this appeal the property concerned was an amount of duty which, if it were legally due, then the Appellant could have no proprietary right to it and there was no breach. Furthermore, the State was empowered to enforce such laws as it deemed necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties where they are provided for by law. The European Court of Human Rights has held that the legislature must be allowed a wide margin of appreciation see the case of Georgiou and Another (t/a Marios Chippery) v The United Kingdom [2001] STC 80 at para 90j). It was accepted by Mr Timson-Hunt that the article could possibly apply if the Tribunal were to find that the Appellant had been put to unnecessary expenditure in order to obtain evidence which could not be of any assistance to him in the case. However, the High Court had said that it was open to the Commissioners to change the case presented in their original decision when setting out their statement of case. The Tribunal was referred to the case of Commissioners of Customs and Excise v Alzitrans SL [2003] EWHC 75.
(iii) ECHR article 13 this only applied if a breach of a substantive convention right was established and if there was no recourse in the case of such a breach, which it was submitted was not the case here.
"However where the conditions for applying article 5(2) of Regulation 1697/79 [now article 220(2)(b)] are not fulfilled, the fact that action for post-clearance recovery is taken does not constitute an infringement of the principle of proportionality, even if the duties claimed are no longer recoverable from the buyer of the imported products. It is the responsibility of international traders to make the necessary arrangements in the contractual relations in order to guard against such risks "
(a) The amount duty legally due failed to be entered in the accounts as a result of an error on the part of the Customs authorities;
(b) The error could not reasonably have been detected by the person liable for the payment;
(c) The latter for his part having acted in good faith and complied with all the provisions laid down by the legislation in force as regards the cost of declaration.
The Appellant's case
Reasons for decision
MISS J C GORT
CHAIRMAN
RELEASED:08/06/2004
LON/03/7032