United Kingdom VAT & Duties Tribunals (Customs) Decisions

Chief Logistics Ltd v Revenue and Customs [2006] UKVAT(Customs) C00208 (16 January 2006)

CO208

CUSTOMS DUTY – refund claim for a lower rate of duty on consignments of hazelnuts from Turkey after validity of preference certificates had expired – exceptional circumstances not found – appeal dismissed. Article 236 of Council Regulation 2913/92; Council Decision 1/98 of the EC-Turkey Association Council (98/223/EC).

LONDON TRIBUNAL CENTRE

CHIEF LOGISTICS LIMITED	Appellant
and
THE COMMISSIONERS OF REVENUE AND CUSTOMS	Respondents

Tribunal: Rodney P Huggins (Chairman)

Alex McLoughlin

Sitting in public in London on 12 December 2005

No appearance by or on behalf of the Appellant

Michael Barnes of Counsel for the Respondents.

... CROWN COPYRIGHT 2005

DECISION

The appeal

1. Chief Logistics Limited (the Appellant) appeals against a decision of the Commissioners contained in a letter dated 24 March 2005 to the Appellant confirming on review an earlier referral in two letters dated 2 February 2005 not to repay a proportion of import duties paid by the Appellant on two consignments of hazelnuts from Turkey in May 2004.
2. At the hearing no one appeared for the Appellant. Notification had been given to the London VAT and Duties Tribunals Centre that no one would be attending and the tribunal could proceed.
3. The tribunal therefore decided to proceed under Rule 26(2) of the Value Added Tax Tribunals Rules 1986 as amended as the Appellant can apply within 14 days after the date of release of the decision to have it set aside if there is a proper reason. The Appellant is therefore protected because it can apply to have the appeal re-heard. The Appellant should note, however, that if their application is to be entertained by a tribunal the Appellant must arrange to be represented at the hearing of the application.

The legislation

4. The preferential agreement between the EC and Turkey is set out in Council decision 1/98 of the EC-Turkey Association Council (98/223/EC), which can be found in official Journal L86/1998.

Article 21 of Protocol 3 to this agreement reads as follows :

"Article 21

5. A proof of origin shall be valid for four months from the date of issue in the exporting country, and must be submitted within the said period to the customs authorities of the importing country.
6. Proofs or origin which are submitted to the customs authorities of the importing country after the final date for presentation specified [above] may be accepted for the purpose of applying preferential treatment, where the failure to submit these documents by the final date set is due to exceptional circumstances …"
7. If a valid certificate were presented to Customs after import duties had been paid, a refund of the duty paid would be issued under the provisions of Article 236 of European Council Regulation 2913/92.

The effect of the legislation relative to this appeal

8. Under the terms of the agreement between the European Community and Turkey establishing a trade regime for agricultural products (the "Agreement" – 98/223/EC). The importations of certain goods such as

hazelnuts into the Community from Turkey and originating therefrom, are eligible for a preferential rate of duty. Protocol 3 to the Agreement stipulates that such goods be accompanied by documentary proof of origin. Article 21(1) of the protocol provides that a proof of origin is valid for four months from the date of issue and must therefore be submitted within that time to the customs authorities of the importing country. Article 21(2) provides that proofs of origin may be accepted outside their period of validity 'where the failure to submit these documents by the final date set is due to exceptional circumstances'.

9. In pursuance of article 205 of Commission Regulation 2454/93/EEC (the "Implementing Regulation"), customs declarations fall to be made in the form of the Single Administrative Document ("SAD"), Article 212 provides that SDA is to be completed in accordance with the explanatory note at Annex 37. The latter provides that, in the case of import declarations at a preferential rate, box 47 should contain details of the relevant preferential agreement, by reference to the appropriate code. Details of all such codes appear at pages 3 – 19 (inclusive) of the UK Tariff. "AT" is the code for goods imported under the EU-Turkey agreement which "A" is the code for all other non-GSP preferences.

The evidence

10. Mr Barnes put in a file of documents consisting of 28 pages which included pleadings, correspondence between the parties and import documents. He called Mr John Evans (Mr Evans) a reviewing officer for HM Revenue and Customs (Customs) of the Customs & International Trade National Reviews & Appeals team stationed at Portcullis House, 27 Victoria Avenue, Southend-on-Sea, Essex.

The facts

11. On the evidence before us, we find the following facts.
12. The Appellant is an agent for importers of various commodities and operates at 3B Orwell Road, Felixstowe, Suffolk.
13. Acting on behalf of R M Curtis and Co Limited of 95 Camberwell Station Road, London, the Appellant arranged for the import of two consignments of roasted hazelnuts (commodity code 2008 19 19 10) into the United Kingdom (a member of the European Community) from Turkey on 17 May 2004 and 19 May 2004.
14. The total value of the invoice for the first consignment was £74,090 which on a customs value of £41,792.64 would normally attract a full customs duty of £4,680.77. However, subject to production of a valid Movement certificate from the Turkish exporters with a local Turkish customs endorsement, and agent for an importer such as the Appellant would because the hazelnuts being imported were agricultural products. These Movement certificates are not formally produced to Customs unless requested to do so which happens occasionally.
15. The documentary process for the general import of agricultural products such as roasted hazelnuts is undertaken through the CHIEF electronic system set up by Customs. As mentioned in paragraph 7 above the agent for the importer has to enter codes in the appropriate boxes in the SAD.
16. A Mr Simon Delves ( Mr Delves) employed by the Appellant was the person dealing with the documentation. When he came to complete the SAD form initially on the computer he used code A in box 47 of the import duty when attempting to complete the import declaration. He believed that code A was appropriate to imports claiming preference on an EUR1 certificate. This was the form of certificate which had been provided by the Turkish exporter (Poyraz & Karlibel) as the transaction involved agricultural products. It was believed by Mr Evans the Customs officer that by using code A in box 47 entry, Mr Delves was making a fundamental error and the computer programme would have shown an entry 'Check Tariff – Declaration of this Tax Line incorrect'. In a subsequent telephone conversation with Mr Evans on 20 March 2005 Mr Delves explained that these details were rejected by the CHIEF system and he therefore concluded that there was no preferential rate available for the hazelnuts. Mr Delves then submitted an import entry using code F in box 47 which declared that the full rate of duty had to be paid which occurred, If the correct entries had been made then the reduced rate of entry would have been applicable.
17. Mr Delves does not appear to have contacted the Custom's helpline to assist him.
18. Another consignment of hazelnuts arrived and was treated the same way on 19 May 2004. The figures were different in that the value of the invoice was £109,600 and the Customs' value £61,823.10 and the full duty was £6924.18. This was also paid in error because Mr Delves had entered the wrong figures again in the identical manner of the first consignment.
19. The EUR1 preferential movements certificates were endorsed by the Turkish authority on 29 April 2004 and 7 May 2004 and the appropriate period of validity is four months for both certificates. They therefore expired on 29 august and 7 September 2004 respectively.
20. The Appellant must have subsequently realized that too much duty had been paid on both the EUR1 certificates as Mr Delves wrote to the Respondents' National Duty Repayment Centre at Dover on 20 December 2004. No explanation was given. He submitted two C285 application forms. These forms were requests for repayment of duty. They were accompanied by substitute entries created by the Appellant on 3 December

2004 correcting the errors in the earlier SAD forms. The Appellant also enclosed copy invoices from the Turkish exporters and preference documents relating to both consignments.

21. Mr Lee Pierce-Pendry of the National Duty Repayment Centre rejected both of these repayment requests by letter on 2 February 2005 on the grounds that the EUR1 Certificates were presented outside their period of validity which Mr Pierce-Pendry erroneously quoted as five months instead of four. In addition, he stated that there had been no prior claim to preference (eg deposit).
22. Mr Delves for the Appellant wrote to Customs on 20 February 2005 seeking a review of the refusal. He submitted "We were not made aware that Customs and Excise allow entries to be coded as ATR1 but except preference on EUR1 certificates, So as there was no preference available according to the CHIEF system from Turkey, goods were entered under the full rate of duty". Mr Evans undertook the review and replied to Mr Delves on 24 March 2005, upholding the decision, He rehearsed the relevant legal provisions including that limiting the validity of a proof of origin to four months from the date of issue. He explained that, contract to what Mr Delves had represented, the Commissioners did not allow entries to be 'coded ATR1' for preference (or indeed any) purposes. Goods entered under the preferential arrangements between EC and Turkey fell to be entered under the code 'AT' in box 47. 'ATR1' was the name of a form of accompanying certificate that had been defunct for over three years and had nothing to do with the matter in hand. Details of EUR1 validity period were available in the official Journal of the European Communities and Public Notice 826 (though the latter, incorrectly, gives a 5-month period) while information on the appropriate entry codes appeared in the Customs Tariff. In his view, this was a case of a simple misunderstanding of the relevant procedures and, therefore, by no means constituted exceptional circumstances.

Reasons for decision

23. This appeal revolves around the interpretation of Article 21 of Protocol 3 to the preferential agreements between the European Community and Turkey. This article details the validity period for proofs or origin and the requirement for such documents to be submitted within the validity period in al but exceptional circumstances.
24. The disputed decision of the Commissioners is the refusal to repay

part of the import duties paid by the Appellant as agent for the importer on two large consignments of roasted hazelnuts which were imported from Turkey in may 2004 and which were eligible for a lower rate of duty under the preferential trade arrangements between EU and Turkey.

25. Mr Evans told the tribunal that he had no way of confirming whether Mr Delves for the Appellant initially attempted to declare the hazelnuts in

the two SADs using code A and like Mr Evans the tribunal can only speculate on why he may have done so. Mr Evans in his evidence to the tribunal said most non agricultural goods coming from Turkey would be accompanied by an ATR document rather than an EUR1. It could be that Mr Delves was in the habit of using code AT for ATR documents and code A for EUR1 documents which are generally used for claiming preference from countries not specified under another code. Unfortunately, nether the Appellant nor Mr Delves have elucidated why he did what he did. Nor have they given any indication why they delayed in submitting the claims for repayment.

26. The is no doubt in our minds that Mr Delves made an error in the entries in the SADs. This resulted in the computer programme set up by Customs rejecting his entries and Mr Delves then substituted entries which imposed full duty on the value of both consignments. It is evident that he did not realize his error until much later.
27. The two EUR1 certificates were endorsed by the Turkish authority on 29 April and 7 May 2004 respectively. As has already been found by us, theses certificates expired on 29 August 2004 and 7 September 2004. Mr Delves did not present the certificates to Customs on 20 December 2004. Consequently, the certificates of origin were invalid at the time of presentation and cannot be accepted to repayment purposes unless there were exceptional circumstances that justified their acceptance outside the usual four month period.
28. Mr Evans told the tribunal that he was not aware of any aspect of the case that would or should be considered exceptional circumstances which he believed should remain reserved for situations that are outside of the trader's control and normal professional or commercial risk. Mr Evans is an experienced Customs officer and in the absence of any relevant comment from the Appellant, we accepted what he said.
29. Mr Delves who appears to be the representative of the Appellant has not argued any case for exceptional circumstances and failure to present the preferential certificates within their period of validity seems to result from a misunderstanding of the information published in the Customs Tariff and a lack of diligent post clearance checks. Examples of legitimate circumstances could include a number of difficulties beyond the control of the person concerned such as national postal strikes or political difficulties in the country of export that prevented the certificates from being returned by Customs after endorsement.
30. There is no doubt that the preferential certificates were valid for four months and the Appellant could have submitted them to Customs within that period for the repayment claims to have been met. Furthermore, it is possible for a preference certificate to be issued retrospectively and therefore the Appellant could seek duplicate certificates. However, this

does not alter the fact that the onus in on the Appellant to prove that the delay in submitting the original certificate was caused by exceptional circumstances. The Appellant has not discharged that onus.

31. The appeal is therefore dismissed. There is no order as to costs.

RODNEY P HUGGINS

Chairman

Released :16 January 2006

LON/2005/7033