ECJ Rules Against UK In Customs Case

by Ulrika Lomas, LawAndTax-News.com, Brussels

20 January 2010

The European Court of Justice (ECJ) has found in favor of FG Wilson/Caterpillar in a case concerning the impact of using an incorrect customs procedure code on customs declarations when goods are being exported from the European Union.

According to the facts of the case, FG Wilson/Caterpillar had been authorized by the UK's HM Revenue and Customs (HMRC) to use a special customs procedure which allowed the company to import duty-free parts used in the manufacture of machinery ultimately destined for export outside the EU.

However, FG Wilson/Caterpillar had used an incorrect customs procedure code when re-exporting the goods. As a consequence of the error, HMRC contended that the company had failed to comply with certain requirements of the customs procedure and argued that a customs debt arose on importation of the parts resulting in a duty.

The case was referred to the ECJ by the UK Tax Tribunal and the European court held that although the errors could give rise to a customs debt, those debts may be repaid or remitted by amending the declarations, assuming that HMRC is satisfied that the parts were ultimately exported from the EU.

Tax and business advisors Deloitte said that the total demands issued for duty and value-added tax against about 400 UK manufacturers amounted to in excess of GBP100m.

Giles Salmond, a director in the tax dispute resolution group at Deloitte, who advised Caterpillar in this litigation, stated: “This is a fair and just result for FG Wilson/Caterpillar and the many other UK manufacturers who found themselves unexpectedly liable to additional VAT and customs duty and are likely to be entitled to a refund.”

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