When goods are imported into the European Union (EU), different levies apply. VAT for instance is payable in almost every case. Furthermore, customs duties are imposed based upon the classification of the goods according to the combined nomenclature (CN) and the corresponding tariff. The origin of the goods is also important for establishing the customs tariff. For certain products that are imported into the EU a considerably reduced or increased customs tariff may apply, depending on the origin of these goods. As a striking example we mention the additional customs tariffs for certain products coming from the USA, which were recently introduced by the EU in response to the tariff increase for steel products and aluminium products from the EU that had been instituted earlier by the USA.
A reduced or increased customs tariff also leads to a lower or higher amount of turnover tax respectively when goods are imported, because customs duties are part of the taxable amount for VAT.
The origin of goods may also lead to a higher levy because of an anti-dumping duty. These duties are often significant and take the form of a (high) percentage of the customs value on specific goods from certain countries, for example the import of solar panels from China. The importer may be confronted with often considerable anti-dumping duties and therefore it is of great importance – when lodging a notice of objection to an additional tax assessment – to investigate whether the goods are really subject to these anti-dumping duties, considering the tariff rate and origin of the goods as used by the Customs authority.
In customs law, lawsuits about the origin of goods are common. Regardless of the actual origin, the key question is often whether an importer may rely on a certificate of origin which has been issued by the customs authorities of the exporting country.
A definition of origin
Setting aside all customs terms and considerations, the origin of goods means ‘the location where the good were produced or made’. That means the country from which the goods were transported to the EU is not relevant when determining the origin. In fact, it is often not that easy to determine where a certain product has been produced because in many cases there are multiple countries involved in the production of goods. Frequently, customs regulations include more detailed rules about the way in which the origin should then be determined.
Preferential origin versus non-preferential origin
Legislation distinguishes between what is known as the preferential origin and a non-preferential origin. Preferential origin is important because a reduced (preferential) tariff applies on imports. The EU has concluded agreements with a large number of countries that state that goods originating from those countries can be imported into the EU with a reduced tariff. A preferential tariff may also be applied without such an agreement. In that case, the EU has unilaterally determined that a favourable reduced tariff on imports applies for goods which originate from certain countries.
Non-preferential origin is important when applying trade policy measures, for example in the event of additional customs duties (as presently applies to certain products from the USA), anti-dumping duties, trade embargoes, tariff quotas, etcetera. Non-preferential rules on origin are based on the Union Customs Code (UCC). In practice, there is particularly likely to be a discussion/argument about the origin if several countries were involved in producing the products.
Proof of preferential origin
The importer will have to proof that the preferential customs tariff applies on imports; this is traditionally done by submitting the certificates of origin that the exporting country supplies to the exporter. Several rules and agreements are now acknowledging that authorities no longer supply certificates on exports, rather they issue so-called statements of ‘registered exporters’ (the Registered Exporter system) dealing with the origin (’statements on origin’).
Invoking the principle of legitimate expectations
In practice, the importer is often confronted with an additional tax assessment for substantial customs duties; this assessment may have been prompted by their own investigation or an investigation by OLAF showing that a statement on origin was wrongly given or turned out to be false. Yet, practice shows that there are good arguments for lodging a notice of objection to the additional tax assessment of the bona fide importer. That is why it is essential to inspect all documents on which the conclusions of the Customs authority have been based.
Legislation in the field of customs law is complex, especially the rules relating to the origin of goods, and the customs tariffs may vary substantially. That is why lawsuits about the origin of goods are common. An expert with profound knowledge of the substantive customs law and procedural customs law will certainly be able to make a difference.