Greetings from the Editor Welcome to the sixty-seventh edition of our

Case law
Local Updates
Regular Updates
www.pwc.com
Greetings from the Editor
Welcome to the sixty-seventh edition of our
newsletter on Customs and Trade issues.
In this edition you will find updates as you are used from us and,
amongst others, an article from our German colleagues on a ECJ
case in which the ECJ stated that the right for effective judicial
protection cannot be endangered just because there is evidence
from a third party (not the customs authorities) to which the
claimant has no detailed access.
Customs &
International Trade
Communiqué
Volume 67 / January 2015
Network Leadership team
Ruud Tusveld
PwC The Netherlands
Jochen Schmidt
PwC Germany
Daniel Anghel
PwC Romania
[email protected]
[email protected]
[email protected]
Global contact details
Ruud Tusveld
EMEA
Domenick Gambardella
Americas
Frank Debets
Asia
[email protected]
(31) 88 79 23473
[email protected]
(1) 646 471 3791
[email protected]
(65) 6236 7302
Editor
Claudia Buysing Damsté
Rotterdam, The Netherlands
[email protected]
Gabor Verzandvoort
Rotterdam, The Netherlands
[email protected]
Nobody could fail to notice the increased amount of news about
where multinationals do and do not pay taxes. The Organisation for
Economic Cooperation and Development (“OECD”) has been looking
at whether the current rules allow for the allocation of taxable profits
to locations other than where the actual business activity takes
place, and what could be done to change this if they do. This project
has become known as “Base Erosion and Profit Shifting” (BEPS).
Even though the discussions evolve mostly around corporate income
taxes, BEPS could have implications on the customs valuation,
especially when importers buy from related parties.
There are also some local developments that ask for your
attention. In the Netherlands the Supreme court decided in line
with the ECJ that exceeding the time-limit for presentation of
goods to customs leads to a customs debt and Dutch import VAT
can be due. We think however that the impact will be limited
since import VAT can mostly be deducted as input VAT. Lesson
learnt from case law in the UK is not to include ‘bonus’ parts in
a pack without considering what implication the inclusion could
have on the classification of the entire pack.
We hope you enjoy reading this edition of our newsletter. In case
you have any questions after reading it, please do not hesitate to
contact your local PwC contact person, the writer of the article
or us.
Kind regards,
Claudia & Gabor
On behalf of the European Customs & International Trade team.
Case law
Local Updates
Regular Updates
www.pwc.com
In this issue
Case law
Local Updates
Regular Updates
Judgment of the European Court of Justice (ECJ)
Case C-437/13: right to effective judicial protection
derived from Article 47 of the Charter of Fundamental
Rights of the European Union (‘the Charter’)
Dutch High Court follows European Court of
Justice: non-fulfilment of customs formalities
can lead to a customs debt for which VAT is due
Recent instructions on the application of
temporary importation regime with partial relief
in Romania
What is BEPS?
ECJ Case C-666/13: customs classification of
modules or mobile phones and laptops
Reverse charge mechanism on import VAT
implemented in France starting January 1 2015
Turkey: 10th Development Plan could lead to
higher taxes on luxury products
Anti-dumping updates
Electronic Road Freight Control System: new
reporting obligation for goods transported by
road in Hungary
Egypt customs update: towards international
standards and best practice
Classification updates
Powell Gee and Company vs HMRC FTT
TC/2012/05936 including parts in imported packs
may affect the classification of the entire product
Vietnam: Ease of customs boosted by new law
Wassenaar Arrangement on Export Controls
for Conventional Arms and Dual-Use Goods
and Technologies
Ongoing increased need for compliance in the
UK’s customs and excise duty environment
Spain: amendments on import VAT and
excise duties
Case law
Local Updates
Regular Updates
www.pwc.com
Judgment of the European Court of Justice (ECJ) Case
C-437/13: right to effective judicial protection derived
from Article 47 of the Charter of Fundamental Rights of
the European Union (‘the Charter’)
Case C-437/13 is regarding the requested clarification
interpreting whether the right to effective judicial
protection of Art. 47 of the Charter is violated if someone
cannot possibly protect himself in front of court, because
access is being denied to detailed examination data from
a third party on which basis a conclusion against him has
been reached.
With regard to this first question, the Hoge Raad der Nederlanden
asked if in case certain relevant information cannot be disclosed, the
authorities must at least allow the claimant to conduct, at his own
expense, an examination by a third party he chooses.
Background
On 20 November 2007, Unitrading made a declaration to the Dutch
customs authorities to release of 86,400 kg of fresh garlic bulbs (‘the
goods’)into free circulation of the EU. Pakistan was declared as the
country of origin of the goods. A certificate of origin issued by the
Karachi Chamber of Commerce and Industry served as proof of origin.
Being suspicious about the cited origin, Dutch customs authorities
took samples of the garlic bulbs and demanded an additional
guarantee. The goods were released into free circulation after
Unitrading had provided the guarantee. The Dutch customs
authorities had a portion of each sample examined by a laboratory
of the US Department of Homeland Security, Customs and Border
Protection (‘the American laboratory’). The American laboratory
reported that the garlic bulbs imported were, with a probability
of at least 98%, of Chinese origin. Confronted with these results
Unitrading, , requested to send in a different portion of each sample to
the American laboratory for a second examination.
Sarah Schrick
Germany
[email protected]
The American laboratory confirmed its earlier findings. The following
proposal to have the goods examined in Pakistan, at the cost of
Unitrading, was rejected by the Dutch customs authorities.
Informed about the results of the examination, the Dutch customs
authorities issued a notice of assessment of customs duties. Additional
duties of EUR 1,200 per 1,000 kg (overall EUR 98,870.40) were
imposed based on the Chinese origin of the goods. Unitrading
appealed against the notice of assessment complaining about the
examination results of the American laboratory. By email, the
American laboratory stated that the examination results were
obtained by comparing sample data taken from garlic bulbs of
Pakistan and China. The American laboratory refused to disclose
further detailed information about the compared regions of China
and Pakistan from which samples were taken, explaining that access
to such sensitive data is restricted by law.
Dutch Customs confirmed their notice of assessment. Unitrading took
action before the District Court which declared the appeal against the
notice of assessment as unfounded. In reaction, Unitrading appealed
against this judgment before the Regional Court of Appeal which
validated the position of the Dutch Customs that the goods originate
in China. They also noted that a portion of the samples from 2007
are still available and usable for getting a possible second expert
opinion. Unitrading placed an appeal in cassation, reasoning that its
fundamental right for effective judicial protection of Art. 47 of the
Charter is violated. Giving Unitrading no access to the data of the
American laboratory makes it difficult for them to verify or disprove
the correctness of the conclusion.
Given the circumstances, the Hoge Raad der Nederlanden stayed the
proceedings and referred to the European Court of Justice (ECJ) for a
preliminary ruling.
Findings
The ECJ interprets Art. 47 of the Charter as a right for the person
concerned to ascertain the reasons upon which the decision taken
against him is based. Furthermore, the parties to a case must have
the right to examine all documents or observations submitted to
the court on the basis of which a decision has been reached. In this
case, Unitrading was aware of the reason why a notice of assessment
was actioned upon them. They were also aware of all documents
and observations submitted to the court in order to influence the
decision of the court or comment on them before the court. The right
for effective judicial protection cannot be endangered just because
there is evidence (examination results of the American laboratory)
from a third party to which the claimant has no detailed access. The
decision of the court is not bound, under the national procedural
law, by the assessment of the facts made and, in particular, the type
of evidence delivered by the customs authority. The fact that the
claimant was able to challenge the examination results from the
American laboratory in front of court with other evidence supporting
his point of view, shows that his right for effective judicial protection
is not infringed.
The provisions for the implementation of the appeal procedure
and the detailed procedural rules governing those actions have
to be formed by the Member States on a national level (Art. 245,
243 Customs Code). There is no violation of Art. 47 of the Charter
as long as these rules are not less favorable than those governing
similar domestic actions (principle of equivalence) and that they do
not contradict with the application of Community law (principle of
effectiveness). It is the responsibility of the national court to verify if
the principles of equivalence and effectiveness are upheld.
Continued
Case law
Local Updates
Regular Updates
www.pwc.com
Whether the customs authorities must grant the claimant the
opportunity to conduct his own examination and whether they have
to inform the claimant about available samples that could be used
for a second examination, has to be assessed on the basis of national
procedural law.
There is no breach of Art. 47 of the Charter as long as the principles of
equivalence and effectiveness are upheld
Conclusion
This case differs from the judgment ZZ (EU:C- 2013/363) where
the claimant saw his right for effective judicial protection violated,
because both the national authority and the court refused in that
case, by application of the national legislation, to tell the claimant the
reason on which a decision against him was reached. In Unitrading’s
case the reason behind the decision of the customs authorities
was communicated. Even though the American laboratory denied
access to certain sensible data, the ECJ saw no breach of Art. 47
of the Charter, because the court is not bound to the examination
results of the American laboratory and Unitrading had all the
rights to challenge the examination results before court. If in any
case the evidence from the American laboratory is valid or not
and if Unitrading should have the opportunity to conduct its own
examination at its own expense has to be decided in respect of the
national procedural law of the member states in harmony with the
principles of equivalence and effectiveness.
This case clarifies again that Art. 47 of the Charter does not easily
interfere with national procedural law and is meant to protect the
most fundamental rights for effective judicial protection. Each
Member State with its respective customs authorities follows its own
procedural laws, effecting that especially multinational companies
are still bound to adapt to a variety of differently operating courts
when it comes down to delivering or challenging evidences.
Case law
Local Updates
Regular Updates
www.pwc.com
ECJ Case C-666/13: customs classification of modules
for mobile phones and laptops
ECJ Case C-666/13 concerns the interpretation of the
headings 8541 and 8543 and of the subheadings 8543
89 95 and 8543 90 80 of the Combined Nomenclature
(hereinafter as ‘Taric’).
The case originates from an assessment issued by the German
Customs Authorities towards a German company for the recovery of
higher customs duties at importation.
In the view of the German company, the modules for short-range data
transmission and reception in interaction with other electronic tools
using infrared light (hereinafter as ‘LEDs’), have to be classified in a
certain heading (i.e. 8541), while for the German Customs Authorities
this customs classification is not correct.
In the main, the ECJ has been asked to provide its judgment about the
following questions:
1.
Does the fact that goods have an individual function within the
meaning of heading 8543 of the Taric mean that they may not be
classified in heading 8541, despite their composition?
2.
If the answer to Question 1 is in the affirmative, in what
circumstances must transmitter/receiver modules of the type at
hands, which have an individual function within the meaning of
heading 8543, be regarded as parts of machines or apparatus in
heading 8543?
Lorenzo Ontano
Italy
[email protected]
With reference to the first question, disregarding the mere technical
analysis on the LEDs, “the fact that modules such as those at hands
are composed of elements which, considered in isolation, could each
be classified under heading 8541, is not such as to call into question
their classification under another heading, since, as a result of the
assembly of those elements, they constitute products that are distinct
from those elements”.
In the light of the above, the modules, each consisting of the
interconnection of a LED, a photo-diode and a number of other
semiconductor devices, and which may be used as infrared
transmitters/receivers where their electricity supply derives from the
devices in which they are incorporated, come under heading 8543
(i.e. not under heading 8541).
The second question deals with the issue related to the definition of
‘parts’. The definition of ‘parts’ is not mentioned in Section XVI of the
Taric (the section that includes Chapter 85).
Therefore, in order to get a unique interpretation within the Taric it
is necessary to take into consideration the previous jurisprudence of
the ECJ itself. In this respect, the latter stated that the notion of ‘parts’
implies a whole for the functioning of which the part is essential.
Moreover, in order to qualify “a product as a ‘part’, it is not sufficient
to show that, without that product, the machine is not able to function
properly. It remains necessary to establish that the mechanical or
electrical functioning of the machine in question is dependent upon
that product”.
That said, it is confirmed that the modules at hands are not necessary
for the use of the devices in which they are included. Moreover, such
modules “do not play any role in the process of telephony, data-transfer,
printing or creation and reproduction of photographs and the fact that
they are not incorporated in mobile phones, laptops, printers or digital
cameras does not impede their functioning”.
All above stated, according to the EU Judges, the modules cannot
be considered as ‘parts’ but have to be considered as other electrical
machines and apparatus having individual functions, not specified or
included elsewhere in Chapter 85 of the Taric.
Case law
Local Updates
Regular Updates
www.pwc.com
Dutch High Court follows European Court of Justice:
non-fulfilment of customs formalities can lead to a
customs debt for which VAT is due
There are several events described in the EU Community
Customs Code (hereafter: CCC) which can lead to a
customs debt.
The most common is the one mentioned in article 201 of the CCC:
the release for free circulation of goods liable to import duties. In
principle, when the goods are imported in the Netherlands in such
case, this also leads to (import) VAT being due in the Netherlands.
Two other events leading to a customs debt are the unlawful removal
from customs supervision of goods liable to import duties (article 203
CCC) and non fulfilment of customs formalities unless it is established
that those failures have no significant effect on the correct operation
on the temporary storage or customs procedure in question (article
204 CCC).
In the latter two cases, it is first of all not always clear which of
the two is applicable (i.e. it is not always clear whether goods
are (unlawfully) removed from customs supervision). This is of
importance since although in both cases a customs debt arises, article
204 CCC has an “escape” option (i.e. due to the phrase “unless it
is established that those failures have no significant effect on the
correct operation of the temporary storage or customs procedure
in question”), whereas article 203 CCC has not. Moreover, and in
this case more importantly, it was not clear whether both situations
trigger the taxable fact “import” as mentioned in the EU VAT directive
and as such lead to (import) VAT being due.
Following the above, there has been and still is a lot of discussion in
literature and case law regarding these articles. In the case at hand,
some uncertainties have been taken away.
Gabor Verzandvoort
The Netherlands
[email protected]
The case was -in short- as follows. The beneficiary in this case
filed a declaration at Dutch Customs to place a diesel engine under
the external transit procedure. More than two weeks after the
deadline, the consignee presented the engine at the customs office of
destination and subsequently placed it under the inward processing
procedure. The matter in dispute was the assessment by Dutch
Customs of customs duties and VAT, c.q. the refund requests of the
beneficiary to retrieve these. Following this case, the Dutch High
Court issued prejudicial questions to the European Court of Justice
(hereafter: ECJ), since it was not clear whether merely exceeding the
time-limit for presentation leads to a customs debt based on article
203 CCC or article 204 CCC. Moreover, in case the customs debt
occurs based on article 204 CCC, the Dutch High Court requested
clarification whether in such case import VAT becomes due.
Import VAT can be due based on article 204 CCC
In May of last year, the ECJ passed its judgment on the questions
asked by the Dutch High Court (case C-480/12) and concluded that
1.
articles 203 and 204 of the CCC must be interpreted as meaning
that merely exceeding the time-limit for presentation, does not
lead to a customs debt being incurred for removal from customs
supervision of the goods in question within the meaning of
article 203 CCC, but to a customs debt being incurred on the
basis of Article 204 CCC; and
2.
import VAT is due (i.e. even where a customs debt is incurred
exclusively on the basis of Article 204 CCC). The preceding
because article 7, sub 3 of the 6th Directive (current article
61 of the VAT Directive) must be interpreted as meaning that
VAT is due where the goods in question are not covered by the
arrangements provided for in that article (e.g. the internal
transit procedure).
In December 2014, the Dutch High Court adopted the above judgment
of the ECJ in the case at hand. This is especially notable from a VAT
point of view, since until then the Dutch High Court had always ruled
that not fulfilling the customs formalities for the internal transit
procedure (i.e. a customs debt following article 204 CCC), does not
lead to VAT liability.
However, the Dutch High Court referred the case back to the Dutch
Customs Court, since they need to address the question whether
the “escape” possibility of article 204 CCC can be applied here (i.e.
this was not sufficiently addressed and/or motivated during the
prior appeal phases). If this is the case and the Dutch Customs Court
determines that exceeding the time-limit for presentation at the
customs office has no significant effect on the correct operation of the
internal transit procedure, no customs debt occurs and as such also no
import VAT can be levied.
Moreover, the Dutch High Court states that their change of view
following the ECJ case, cannot be applied retrospectively in case of an
assessment by the Authorities, because this would be a violation of the
legal certainty principle. In case of a refund request however (as is the
case), this may differ.
Continued
Case law
Local Updates
Regular Updates
www.pwc.com
Summary
Summarizing the above, it is clear that the Dutch High Court follows
the judgment of the ECJ. This means that merely exceeding the timelimit for presentation, leads to a customs debt based on article 204
CCC and that Dutch import VAT can be due. This is a new stance from
the Dutch High Court.
Implications
In our view, the above can be of impact for business, since the same
reasoning can be applied on situations of non fulfilment of customs
formalities in other customs procedures as well (i.e. not only in case of
internal transit). Although it will depend on the situation, in general
the way is now open for the Dutch Tax Authorities to levy VAT in case
a customs debt occurs based on article 204 CCC. That being said, the
impact will (in most cases) be limited to a cash flow disadvantage
however, since in our view the VAT is due for import and as such can
mostly be deducted as input VAT on the VAT return.
Please note that at the moment, there are more prejudicial questions
pending at the ECJ regarding the question when article 203 CCC and/
or when article 204 CCC is applicable. The outcome of these decisions
will also be published in this newsletter.
Case law
Local Updates
Regular Updates
www.pwc.com
Reverse charge mechanism on import VAT implemented
in France starting January 1 2015
Starting 1 January 2015, the French amended financial
tax law, introduced the reverse charge mechanism on
import VAT in France.
Until January 2015, import VAT was payable at the time of
importation of goods into the EU. As a consequence, companies
importing goods in France were obliged to pay import VAT at the
time of the importation and were not able to obtain a refund of
such a VAT until the filing of a VAT return of the month following
the importation. This system resulted in a VAT payment which was
compensated at best after one month delay.
With the new reverse charge mechanism on import VAT, it will be
possible for certain operators to self-assess import VAT on the CA3
(VAT return) rather than pay it to the Customs authorities at the time
of clearance and then deduct it on the VAT declarations filed between
the 19th and the 24th of the following month. As a consequence, the
operators will avoid import VAT carrying cost. Up until recently, there
were some uncertainties regarding the operators allowed to apply
this mechanism. Both Tax and Customs authorities agreed to consider
that this reverse charge might lead to fraud and that a control over the
transaction was necessary.
It is now clear that the reverse charge mechanism will be limited
to operators holding the regime of the Single Customs Clearance
Procedure (i.e., operators that centralize their clearance through
a single office). In other words, to benefit from the reverse charge
mechanism, operators will have to obtain an authorization from
the Customs Authorities, through an audit procedure which is
very similar to the one which takes place in the framework of the
“AEO” customs only agreement. For non-established companies, the
authorization needs to be obtained through their customs broker.
Julien Leclerc
France
[email protected]
Other options to manage import VAT
An additional constraint for obtaining single customs clearance
procedure is its limitation to operators who clear goods in at least two
different customs offices on the French territory.
Besides the reverse charge mechanism, there are others options for
‘managing’ import VAT in France:
•
the VAT payment deferment: VAT payment is delayed to the 30th
of the month, the same time as for the customs duties. This is
limited to businesses that have a specific authorization issued
by the Customs Administration. This mechanism is used by
firms regularly carrying out customs transactions. This includes
providing a guarantee.
•
the single deadline procedure allowing a deferral of payment
of the import VAT at the 20th of the month following the
importation. This mechanism is implemented solely by operators
who provide guarantee.
•
the “AI2 procedure” which is used for importation of the quota of
tax-paid goods provided under the French tax code (CGI). This
mechanism poses the practical problem of monitoring the quota
by different departments in the firm.
The “Regime 42”, an exemption from import VAT for imports
immediately followed by an intra-community delivery.
Case law
Local Updates
Regular Updates
www.pwc.com
Electronic Road Freight Control System: new reporting
obligation for goods transported by road in Hungary
Introduction
Per 1 January 2015, tax law amendments introduced a new
administrative obligation for taxpayers engaged in the carriage
of goods by road. Taxpayers engaged in the carriage of goods by
road have to be registered and report specific transactions to the
Hungarian Tax Authority through the new Electronic Road Freight
Control System (“EKAER”) database that is set up and maintained by
the Hungarian Tax Authority. Once the road transport of a specific
unit of goods is reported, it will be automatically assigned an EKAER
number. Only registered taxpayers having an EKAER number are
allowed to carry goods by road.
Which transactions are effected?
General rules
The following activities performed by vehicles subject to toll payment
qualify as the carriage of goods by road:
Special rules
Special rules apply to the road transport of hazardous food and
hazardous goods (foodstuffs and other goods that are deemed by
law to pose certain risks). In addition to the requirements set out in
the general rules above to receive an EKAER number, taxpayers have
to report:
•
in case of hazardous foods:
•
•
whether the food products are being transported with a
vehicle that is not subject to toll payment; and
•
whether the weight of goods transported to the same
consignee exceeds 200 kg; and
•
whether the consideration due (excluding VAT) exceeds
HUF 250,000;
in case of other hazardous goods:
•
acquiring goods or importing goods for other purposes than
from another EU Member States to Hungary;
•
whether the goods are being transported with a vehicle that
is not subject to toll payment; and
•
supplying goods or exporting goods for other purposes than
from Hungary to another EU Member States; or
•
whether the weight of goods transported to the same
consignee exceeds 500 kg, and
•
performing a first taxable supply of goods to parties other than
end users (natural person who purchases the goods for personal
use and not in excessive quantities) in Hungary.
•
whether the consideration due (excluding VAT) exceeds
HUF 1 million.
Vehicles subject to toll payment are vehicles required by law to pay
a toll for the use of motorways, freeways and other major roadways,
depending on the distance travelled. In general, the reporting
obligation applies to road transport carried out using vehicles
weighing more than 3.5 tons. The new rules do not apply to noncommercial shipments for disaster relief or military vehicles.
Lajos Ludmany
Hungary
[email protected]
Data that need to be reported
The following data has to be reported by the consignee or
the consignor:
•
consignor and consignee details (name, identifier);
•
place of loading and unloading;
•
information on the goods to be transported (e.g. general
description, customs tariff number, weight);
•
reasons for transporting the goods by road;
•
the value (net of VAT) of each item if the goods are transported
by road for the purpose of acquiring or supplying them. If the
goods are transported for other purposes, the net purchase price
or production cost for each product;
•
the registration number of the transport vehicle;
•
in case goods are transported from another EU Member State to
Hungary and domestic supplies, the expected date of delivery to
the place of unloading;
•
for goods transported from Hungary to another EU Member
State, the date of loading.
Taxpayers are required to provide a risk deposit for carriage by road of
hazardous goods.
Continued
Case law
Local Updates
Regular Updates
www.pwc.com
Who is required to file the report?
A) In case from EU MSs to Hungary
As a general rule, the consignee is required to file the report via the
EKAER interface by the time transport of the goods begins, except for
the date of arrival of the goods to the place of unloading.
If the person receiving the goods is not the consignee, the recipient of
the goods has to report via the EKAER interface the date on which the
vehicle transporting the goods arrives at the place of delivery.
The recipient of the goods has to report the data if the goods are
shipped to Hungary by road from another EU Member State for
purposes other than the intra-Community acquisition of goods.
B) In case from Hungary to EU MSs
As a general rule, the consignor is required to report the data to
the Tax Authority no later than when loading of the goods on a
vehicle commences.
If the goods are loaded by a person other than the consignor, the
freight handler of the goods has to report via the EKAER interface the
date when loading of the goods on a vehicle commences.
The freight handler has to report the above data if the goods
are transported by road for purposes other than intraCommunity supplies.
C) In case of carriage by road from a domestic dispatch
address to a domestic delivery address
The consignor and the consignee share the reporting obligation.
Based on the decision of the taxpayers, upon arrival the consignee
or the consignor reports the date when the vehicle transporting the
goods arrives at the place of delivery. All other data must be reported
by the consignor no later than when loading of the goods on a
vehicle commences.
Exemptions
There are some exemptions where the obligations above do not apply,
for instance for goods transported by armed forces, goods transported
for disaster management purposes or for humanitarian purposes and
excise goods.
Consequences
Goods transported without a valid EKAER number or if reported data
is invalid, insufficient or incorrect, will be regarded as having no
certificate. In connection with such transactions, the Tax Authority
will be entitled to levy a default fine up to 40% of the value of the
goods, and to seize the goods as security. The default fine can be
levied as from 28 February 2015.
Case law
Local Updates
Regular Updates
www.pwc.com
Powell Gee and Company vs HMRC FTT TC/2012/05936:
including parts in imported packs may affect the
classification of the entire product
Summary
This relates to Powell Gee and Company’s (‘Powell Gee’) appeal to the
review letter following Her Majesty’s Revenue and Customs (‘HMRC’)
decision of 6 December 2011. The company imports from China
packs of parts that could be classified under two different commodity
tariff codes. Rule 3 of the General Rules for the Interpretation of the
Harmonised System was used to determine which of the two disputed
commodity codes the goods should be classified under. There was
no dispute about which law is applicable in this case, merely about
its application to the facts and interpretation of rules. The question
reviewed by the First-tier Tribunal (‘FTT’) was whether it is possible
to determine the “essential character” of the sets of parts imported by
Powell Gee and classify them accordingly.
Background
Powell Gee imports sets of parts for use in the construction of
buildings. These parts are used for securing corrugated roofing
materials in a waterproof way. The goods are imported from China
in sealed polythene packets containing 10 or 25 sets of component
parts. Each package comprises of waterproof plastic strapwasher,
steel woodscrew and (in some cases) plastic spacer used to fix roofing
panels. They are intended for retail sale.
As a result of an HMRC audit it was established that on a number of
occasions between 2007-2009 Powell Gee declared the imported
packs as ‘nails’ at a nil rate of duty. On 6 December 2011 HMRC
sent a “right to be heard” letter classifying the packs under heading
7318 (‘screws, bolts, nuts, coach screws, screw hooks, rivets, cotters,
cotterpins, washers and similar articles, of iron or steel’) and
commodity code 7318 12 90 99 (of the 2011 Tariff).
Anna Jerzewska
United Kingdom
[email protected]
As such, they would be subject to customs duty at a rate of 3.7% and
anti-dumping duty at 85%. After a further exchange of letters, Powell
Gee requested a review by letter dated 29 February 2012.
The rules of how to classify goods at import are laid down in the
General Rules for the Interpretation of the Harmonised System (GIR).
Rule 3 of the GIR provides guidance on the classification of goods
where more than one commodity code may be applicable. According
to GIR rule 3(b) goods put up in sets for retail sale “shall be classified
as if they consisted of the material or component which gives their
essential character in so far as this criterion is applicable.”
Powell Gee argued that customers were buying the packs for the
strapwashers and spacers. However, by themselves, the strapwasher
and spacer could perform no function; some fastener or other would
always be needed by the customer. Woodscrews were the most
commonly used fastener and it was much more cost effective to have
the packets made up in China to include woodscrews than it would be
to package them up separately in the UK with different fasteners to
customer requirements. According to Powell Gee this demonstrated
that the woodscrew was not a core part of the packet as a whole, its
inclusion was simply a matter of convenience for many of the ultimate
users. Therefore, the principal components in the packs (which
provided the product’s “essential character”) were the strapwashers
and spacers, manufactured from PVC. As such, the packs were proper
to the heading 3925 (‘builders’ ware of plastics’) and, in particular, to
code 3925 90 80 00 with a customs duty rate of 6.5%.
A response to Powell Gee’s letter confirmed the earlier HMRC
decision. The amount of the disputed duty had subsequently been
agreed between the parties. The only outstanding issue was whether
HMRC’s classification of the goods is correct.
Details of the Judgment
The First Tier Tribunal (FTT) dismissed Powell Gee’s appeal and
held that the General Interpretation Rule 3(b) of the Combined
Nomenclature cannot be applied. The FTT decided that the “essential
character” of the sets is inherent in the combination of contents and
no one component or set of components gives them that character.
According to GIR Rule 3, if classification is not possible under Rule
3(b), then Rule 3(c) will apply. Rule 3(c) stipulates that the packs
should be allocated to “the heading which occurs last in numerical
order among those which equally merit consideration”. The pack
should be classified under Chapter 73, commodity code 7318 12 90 99
subject to customs duty at 3.7% and anti-dumping duty at 85%.
Implications
In our view, this case goes further than being limited to packs of items
imported for use in the construction of buildings. It has potential
application for all businesses that import sets of goods or parts, in
particular where one of the parts is subject to a high rate of customs
duty or additional tariff barriers to trade such as anti-dumping duties.
Economic operators should be aware that including such parts in
imported packs may affect the classification of the entire product.
The fact that a part is added as a bonus part does not prevent it from
changing the “essential character” of the product. In this instance, the
importer wanted to classify the packs based on the fact that a number
of users discard the woodscrews and use the strapwashers. As this
could not be proven the Tribunal considered the purpose of all the
parts in the pack equally.
Case law
Local Updates
Regular Updates
www.pwc.com
Ongoing increased need for compliance in the UK’s
customs and excise duty environment
The First Tier Tribunal in the UK has upheld HMRC’s
decision to refuse to register a successor to a liquidated
company as a ‘Registered Dealer in Controlled Oils’
(RDCO) due to the circumstances surrounding the
liquidation and subsequent detection of rebated fuel in the
Appellant’s road vehicles.
Background
The Appellant company supplies aviation turbine kerosene (‘Avtur’)
to helicopters and was set up to continue the trade of a company with
which it shared a common director and which had been liquidated
owing Her Majesty’s Revenue and Customs (HMRC) £47,750 in
unpaid VAT. The goodwill and other assets of the liquidated company
(‘Hovercam’) were subsequently sold to the Appellant company
(trading under the name ‘Hovercam’).
Avtur is an ‘unmarked’ controlled oil, meaning that it contains no
‘Euromarker’ or other fiscal markers, such as are normally added
to rebated oils to demonstrate that they have borne a lower rate of
duty, therefore suppliers of Avtur have to register with HMRC. The
liquidated company, Hovercam, had been approved as a Registered
Dealer in Controlled Oils (RDCO). However HMRC refused to register
the Appellant as an RDCO on the basis that the common director had
waited two years before notifying HMRC that Hovercam had gone
into liquidation, despite it being a condition of the RDCO scheme
that HMRC be notified of any changes within 30 days, and that the
Appellant had subsequently been detected using rebated fuel in
road vehicles.
Matthew Clark
United Kingdom
[email protected]
Following a statutory review of HMRC’s decision to refuse RDCO
registration, the Appellant was notified that it was not “fit and proper
to hold an RDCO registration” and it appealed this decision to the
First Tier Tribunal (FTT).
Details of the Opinion or Judgment
The FTT noted that it could only allow the appeal if HMRC’s
decision was one which HMRC “could not reasonably have arrived
at”, and that it was not enough that a Tribunal might have made a
different decision.
In dismissing the appeal, the Tribunal agreed with HMRC that the
RDCO regime depends heavily on the “probity and integrity” of
those approved, and the fact that the common director had failed to
inform HMRC that Hovercam was about to go into liquidation, and
the Appellant company had then continued to sell Avtur for over
two years without authorisation, allied to the misuse of controlled
oils, meant that it was “entirely reasonable” for HMRC to decide that
the Appellant was not a “fit and proper person” to be approved as
an RDCO.
Implications
In our view this case has wider applications and illustrates the
ongoing increased need for compliance in the UK’s customs and
excise duty environment. It demonstrates the increasing scrutiny
from HMRC with regards to controls and procedures as well
as the need for businesses to improve their customs and excise
compliance frameworks.
Case law
Local Updates
Regular Updates
www.pwc.com
Recent instructions on the application of temporary
importation regime with partial relief in Romania
Turkey: 10th Development
Plan could lead to higher
taxes on luxury products
The Romanian Customs authorities issued a national
instruction regarding the application of temporary
importation with partial relief customs arrangement on
Romanian territory.
On 18 December 2014, Turkey’s Prime Minister Mr.
Davutoğlu has made statements on “Action Plans
for Priority Transformation Programs of 10th
Development Plan”.
Generally, this regime is used by companies that bring into Romania
goods under a lease /rental agreement.
We underline that prior to the issuance of this national instruction,
both customs duties and VAT were due on completion of the
temporary importation arrangement with partial relief.
Under the new national instruction, for the temporary admission
procedure with partial relief, both customs duties and VAT are due at
the time of the placement of the goods under the regime.
Given the above, the companies that had/ have placed goods under
the procedure of temporary importation arrangement with partial
relief in Romania before the national instruction was issued, or
intend to use the temporary importation with partial relief customs
arrangement, should appropriately analyze the tax implications that
may arise.
As part of his statements, Mr. Davutoğlu said: “We will revise
the taxation in luxury and import of dependent products. While
supporting the industrial development, we will put deterrent taxation
for luxury products imported.”.
With this wording chosen by the highest executive authority of the
Republic of Turkey, we may assume that Special Consumption Tax or
importation duties on luxury and technology intensive products, may
be re-arranged or rise in the near future.
Moreover, for goods placed under this procedure before the issuance
of this instruction, the Romanian Customs authorities shall take
measures to rectify the situation, namely they will collect customs
duties and VAT as well as late payment penalties and interest.
Additionally from the above, we also wish to emphasize that due to
the fact that the goods that are placed under this regime are usually
leased or rented goods and that the import VAT is in general paid by
the user, a risk of input VAT non-deductibility might arise.
As such, as the Romanian VAT legislation provides that the owner of
the goods has the right to deduct the import VAT paid at Customs,
there is a possibility that the Romanian Tax authorities may deny
the VAT deduction for the user. Subsequently, in order to avoid such
situation, the user should recharge the cost incurred with the VAT
paid at import to the owner of the goods.
Lorina Darmanescu
Romania
[email protected]
Cenk Ulu
Turkey
[email protected]
Case law
Local Updates
Regular Updates
www.pwc.com
Egypt customs update: towards international
standards and best practice
Recent developments in the Egyptian Customs legislation
The Egyptian Customs Authority is in the process of aligning
the local customs legislation with the principles, standards and
recommendations set by international organisations such as the World
Customs Organisation (WCO) and the World Trade Organisation
(WTO). For this purpose Egypt has embarked in an ambitious
customs reform that includes substantial amendments to the existing
legislative framework with notably the issuance of a new Customs
Law. The new Customs Law currently being drafted is expected to
come into force by the end of the first semester of 2015.
One of the main anticipated changes is the enhancement of the
penalty and delay fine to tackle the revenue loss derived from the
non-compliance of the customs procedures and payment of the
customs duty due, which is presently a major concern for the Egyptian
Customs Authority. Likewise, the rights of the customs auditors
will clearly be defined and expanded, creating the legal framework
needed for the new post-import audit policy initiated by the Customs
Authority. In addition, in response to the global concern on securing
the international supply chain while facilitating the international
trade of goods, the Egyptian Customs Authority has also adopted a
new risk control and assessment system.
The main developments cover the post-import audits and the
Authorized Economic Operator (AEO) programme.
Carlos Garcia Pinilla
PwC Middle East Customs Team (Dubai office)
[email protected]
Enforcement of customs law: significant increase of postimport audits
During the last months, we have seen an intensification of the postimport audit activity in Egypt, mainly targeted to multinational
industrial and trading companies engaged in international trade,
with special focus on imports. The number of assessments issued
by the Customs Authority is expected to continue increasing in the
coming months.
Based on our experience, customs auditors are scrutinizing the
main elements impacting the amount of customs duty due, such as
customs valuation (license and royalties payments, related parties
transactions and foreign transfers), tariff classification, preferential
tariff treatment and proof of origin, duty rates, etc. The audits
normally focus on the last three years of activity, whereas the
statutory period of limitation is five years.
Although penalties are not currently imposed as part of the postimport audit process (except for cases of evasion), the new Customs
Law will set a comprehensive list of penalties and delay fines
applicable to importers imposed by the Customs Authority.
Businesses engaged in import/ export activities in Egypt, particularly
multinational companies, are encouraged to review and update
their customs policies in anticipation of a potential post-import audit
conducted by the Customs Authority. It is to note that customs duty
rates in Egypt can reach 30% (higher rates are set for specific products
such as tobacco, alcohol and cars), with penalties generally ranging
from 15% to 25% of the amount of custom duties due (up to 100% of
the customs duties due depending on the case). An additional Sales
Tax assessment may be issued following the customs assessment.
The AEO programme: trusted importers and exporters
will benefit from important customs advantages and
preferential access to customs services
In line with the Egyptian Authorities commitment to the WCO
Framework of Standards to Secure and Facilitate Global Trade (SAFE
Framework), and following other major trade partners such as the EU,
Egypt introduced at the end of 2013 the AEO programme to enhance
the security of the international supply chain. Both the Egyptian
Authorities and the businesses will benefit from the programme,
which is expected to promote Egypt and businesses operating in the
country as reliable and trusted partners in the global supply chain.
Although at this stage the number of AEO certified companies is still
low, it is anticipated that businesses with a relevant volume of import/
export transactions initiate the certification process in the following
months in view of the benefits and advantages that the Egyptian
Customs Authorities have set for the AEO service.
Case law
Local Updates
Regular Updates
www.pwc.com
Vietnam: Ease of customs boosted by new law
In Vietnam, a new Law on Customs is effective as of
1 January 2015 and the Ministry of Finance and the
General Department of Customs are drafting circulars to
guide its implementation.
Businesses can expect to see improvements, including uniform and
simplified customs procedures, e-customs procedures, customs audits
and inspections, and a mechanism for obtaining advance rulings on
classification. Simplifications are also being made with respect to
requirements for supporting customs documentation. For example,
commercial contracts will no longer be required to support a customs
declaration. Importers and exporters will be allowed to declare up
to 50 lines of items of goods in a single customs declaration, and a
combined customs declaration will be allowed for goods of the same
HS codes, origin and duty rate.
Of particular note is one draft circular specifically dealing with
practical issues faced by businesses during the assessment of
preferential duty rates in relation to certificates of origin. The
draft circular allows customs to accept a certificate of origin with
“minor errors” ranging from typos to discrepancies in descriptions,
measurements, HS codes, incorrect markings, and other items
specified in the certificate of origin. In the past, such discrepancies
often led to rejections by customs.
Nam Nguyen
Vietnam
[email protected]
Another draft circular combines and streamlines the existing
customs procedures for import, for re-export and import for export
manufacturing and toll-manufacturing procedures. Expected
changes include stricter customs requirements such as the physical
inspection of material inventories and finished goods at factory
sites, and registration and liquidation requirements for in-country
export of imported materials or finished goods under tollmanufacturing arrangements.
Customs classifications and valuations are the most common areas
of dispute. A draft circular simplifies the classification procedures,
including allowing the group classification of a set of machinery and
equipment into a single HS code subject to the importer’s registration
with customs prior to importation, and publishing the classification
rulings on the General Department of Customs’ website.
Finally, a new circular is drafted to deal specifically with the
procedures for post-customs-clearance audits. This new draft
circular defines a clearer scope and the rights and accountability of
both customs officials and the businesses concerned. For example,
customs auditors are prohibited from requiring businesses to provide
documents, data or information which the relevant customs office
already has, a business may elect the custom audit to be conducted
either at the customs office or at its office, depending on whether
a physical inventory inspection is required. The new circular also
proposes to increase the length of an audit to five working days from
its current two. Furthermore, a new and separate procedure for a
customs valuation audit is included.
Customs issues are a topic of discussion in forums and dialogues
between the government and the business community and the
reforms are expected to further improve efficiency in customs
procedures as part of the wider government’s continuing
administrative reform efforts in 2015. Businesses are advised to stay
abreast of these changes to ensure full compliance with the new
customs procedures and requirements and thereby avoid potential
delays and issues in the customs clearance process.
Case law
Local Updates
Regular Updates
www.pwc.com
Spain: amendments on import VAT and excise duties
On November 28th, 2014, the Spanish Law 28/2014, of
November 27th, was published.
Among other tax measures, this Law introduced the following
amendments regarding import VAT and Excise Duties matters:
1. New VAT deferral import regime
Spain introduced a new deferral import regime which will come into
effect in 2015.
This new regime will allow tax payers who import goods into Spain
to defer their VAT payments until they file their VAT return, rather
than paying the VAT due at the same time as the customs duties.
Additionally, the VAT credit will be accounted for at the same time.
This change represents an important cash flow benefit to the taxpayer
because he will no longer have to pay the VAT and subsequently
claim a credit. This change will result in a nil cash flow impact for the
taxpayer at the time of import.
This regime applies to VAT taxpayers filing monthly returns with the
central tax authority and may include large companies (with annual
sales revenues exceeding € 6.0M), companies which have opted for
the special monthly refund regime, and companies which are within a
special VAT Group.
In order to qualify, the taxpayer must apply for this regime in
November of the prior calendar year. However, for 2015, the deadline
to apply for the deferral import regime has been extended to January
31st, 2015 and will take effect in February 2015.
After January 31st, 2015, taxpayers who have not applied for this
regime will only be able to apply in November 2015 for the calendar
year 2016.
Pilar Salinas
Madrid, Spain
[email protected]
Therefore it is important not to miss the January 31st, 2015 deadline
if the taxpayer still wishes to quality for 2015.
For taxpayers paying to the central tax authorities and the Basque and
Navarra tax authorities, special rules apply.
2. Excise Duties
Electricity Excise Duty:
In order to adapt the Spanish legislation of the Electricity Excise
Duties to the Directive 2003/96/EC of 27 October 2003, the new
Electricity Excise Duty is no longer levied upon the production of
electricity, becoming a tax levied on electricity consumption.
New taxable events have been included in connection to the
importation or intra-EU acquisition of products which entails
inherently atmospheric emissions, as well as new exemptions related
to transactions not previously foreseen have been introduced.
Tax on Hydrocarbons:
Tax on Hydrocarbons has been modified in those cases where the
supply of natural gas is performed out of the pipelines (Spanish
network gas system). In those cases the tax point will take place
following general rules instead of invoicing date.
Electricity Excise Duty formal requirements have been reduced,
limiting the obligation of registration within the relevant territorial
register, to operators supplying electricity to final consumers,
and beneficiaries covered by certain exemptions and taxable
base reductions.
Furthermore, a taxable base reduction of 85% has been introduced to
the following activities:
•
chemical reduction and electrolytic processes,
•
mineralogical and metallurgical processes,
•
industrial activities where the amount of electricity consumed
represents more than 50% of the total costs of the product
•
industrial activity in which the amount of electricity acquired or
consumed represents more than 5% of the production value and,
•
agricultural irrigation.
Fluorinated greenhouse gases Tax:
Concerning Fluorinated greenhouse gases Tax, the definition of the
concepts of “final consumer” and “reseller” have been introduced.
Enrique Tejedor
Madrid, Spain
[email protected]
Gonzalo Lorenzo
Madrid, Spain
[email protected]
Case law
Local Updates
Regular Updates
www.pwc.com
What is BEPS?
Implications of recent OECD developments on
customs valuation
It would be hard to have missed all the media coverage about where
multinationals do and do not pay corporate taxes, and how that
relates to their operational footprint. The Organisation for Economic
Cooperation and Development (“OECD”) has been looking whether
the current rules allow the allocation of taxable profits to locations
other than where the actual business activity takes place, and what
could be done to change this if they do.
This project has become known as “Base Erosion and Profit Shifting”,
or “BEPS” in short. Following the Declaration on BEPS adopted at
the 2013 Ministerial Council Meeting and at the request of G20
Finance Ministers, the OECD launched an Action Plan on BEPS.
For the first time ever in tax matters, non-OECD/G20 countries are
involved in this on an equal footing. The results of the action plan is
likely to have impact on developing economies as much as they do on
developed ones.
The BEPS Action Plan provides for 15 actions scheduled to be
finalised in three phases: September 2014, September 2015 and
December 2015.
This article will focus on the following three areas of key interest
for customs:
1.
The fact that the BEPS Action Plan is unfolding in the first place;
2.
Discussions on the Transfer Pricing rules on intangibles;
3.
Evolving documentation requirements.
Frank Debets
Singapore
[email protected]
1. I told you so!
Despite the constant evolution of global trade and the regulatory
landscape governing it, in many customs officials’ minds, import
valuation treatment should not be significantly different to what it
was 20 years ago: cross-border trade involves a seller and buyer that
are not related, and the buyer pays the seller an amount of money
upon delivery of a product, and that’s the end of the transaction.
The thinking extends to a conclusion that related party pricing is
by definition influenced by that relationship, despite the majority of
global trade being between related parties. Customs authorities are
increasingly looking to find reasons to reject import values based on
a mind-set and principles from the old Brussels Definition of Value,
which sought to take the value of a product when sold in a market,
rather than at the time of import into that market, as the basis for
customs valuation.
Many of our readers would have experienced the difficulties involved
in trying to support a customs value on the basis of transfer pricing
policies and documentation, particularly where transfer prices
are subject to retrospective adjustments. In many cases, customs
authorities will argue that comparable companies in TP studies are
not comparable for customs purposes because they compare functions
rather than goods, or because there are insufficient local comparable
companies included in such studies. It is an age-old problem: the
more strongly material supports the customs value, the less interested
Customs often is in trying to understand it.
Although the World Customs Organisation (“WCO”) has issued an
opinion stating that a TP study can be used to support a declared
customs value, it is not necessarily sufficient or necessary evidence,
and should be assessed on a case-by-case basis. In terms of risk
management, that seriously undermines their value.
There are ongoing discussions between the WCO and the OECD about
common areas, but knowledgeable insiders recognise that harmony
is impossible.
So it should come as no surprise that the concerns raised by national
tax authorities, and addressed by the OECD in its action plans, has
reinforced the view of many customs authorities that transfer pricing
arrangements were flawed to start with. The thinking is that at best
they are irrelevant for customs valuation purposes, at worst they are
a sign of deliberate attempts to avoid duty liabilities. The chances
are that many customs authorities will feel justified and emboldened
to proactively challenge customs values based on transfer prices
more often and more aggressively. As a result, customs valuation
audits around the region may reflect such views and become more
challenging to deal with.
2. For every intangible there must be a tangible….
The OECD has spent significant time and effort on trying to clarify the
valuation and treatment of intangibles. This work continues and will
be further elaborated in the 2015 BEPS deliverables. In the meantime,
the deliverables that have already been published are a mixed bag
for importers looking for more clarity on the customs treatment of
intangibles, and specifically royalties and license fees.
The OECD BEPS deliverable provides more clarity on what various
intangibles are, and how they should be appropriately compensated
for. As a result, any historic argumentation in relation to both the
appropriate amount and dutiability of such payments may be affected.
As an example, a clearer distinction is considered between the value
of a brand and the value of a trademark.
Continued
Case law
Local Updates
Regular Updates
www.pwc.com
From a customs valuation point of view, paying for the rights to use a
brand name may well be not dutiable, whereas payment for the use of
a trademark may well be dutiable, even though both of them could be
mentioned on an imported product.
The renewed focus of the OECD on what constitutes the value of an
intangible is likely to reinforce the focus of the customs authorities
on such value. It would be easy to imagine certain customs officers
picking the elements from the OECD deliverable that are likely to
increase their revenue take, and ignoring others. It is possible for
example that these discussions will lead to arguments that brand
owners should get a higher reward, and consequently some dutiable
royalties should increase in value. Importers paying fees for any
intangibles to overseas related parties would therefore be well
advised to analyse the OECD deliverable in detail, determine how it
may impact their argumentation or support for the dutiability of such
payments, and be ready to rebut any new challenges from Customs.
3. Documentation, documentation, documentation.
Documentation is one of the most impactful elements the OECD
action plans.
It is envisaged that in future a three-tiered documentation structure
will be in place, including:
1.
A ‘master file’ intended to provide a high level but complete
picture of a multinational’s global organisation;
2.
A ‘local file’ intended to provide more detailed information
specific to a multinational’s entity in a particular country,
including details of related party transactions and
intercompany payments.
3.
A ‘country-by-country report’ showing aggregated data by
territory of such things as revenue form related and unrelated
parties, profit (before and after tax), main business activities,
etc.
Information regarding overseas sellers may become accessible to
Customs in the country of import, and allow them to challenge the
use of a transaction value under a ‘circumstances of sales’ test, or
a computed value test more easily. A classic customs test compares
a related party supplier’s profit in sales to one party to its average
profit on all sales. This information may give Customs the ability to
challenge every transaction where the profit is below the average.
Also, any real or perceived differences between information in the
new documents and documentation used previously to support
declared customs values may trigger audits or even investigations by
customs authorities in the country of import.
It is by no means a given that the direct tax authorities will, or are
even allowed to, share the above documents with their counterparts
in Customs. However, there is definitely a trend of increased
cooperation between the two authorities. It would therefore be
wise for an importer to assume that the authorities will share such
information, and companies should prepare accordingly, for example
by at least matching their internal level of communication to that of
the authorities.
This preparation may well include the creation of additional
documentation purely with a view to supporting customs values.
A legal requirement to create and maintain contemporaneous
documentation for customs declaration purposes may be an
importer’s worst nightmare. However, the step from the new transfer
pricing documentation requirements to more comprehensive customs
valuation documentation may be becoming small and easily bridged.
And as the transfer pricing documentation creates customs risk, it
would be prudent to address and mitigate that risk proactively in
adequate customs valuation documentation. The ability to show why a
price should not be challenged is always more impactful than starting
the support process after a challenge has been made.
Conclusion
The deliverables that are emerging from the OECD’s BEPC Action
Plan will impact the world of customs compliance. Customs’ concerns
on related party pricing were already increasing. The fallout from
BEPS is expected to make customs authorities more probing and less
accepting of transfer pricing based customs values. The discussions
on intangibles will reverberate and probably manifest themselves
in ever-increasing challenges on the dutiability of payments
for intangibles. And the increased documentary requirements,
particularly country-by-country reporting, will make it easier for
Customs to obtain information about the profitability and cost buildup of overseas sellers. At the same time, such requirements may
make the step for companies to create some sort of contemporaneous
customs value documentation.
Hence this story is only just beginning. A recent meeting of the
Technical Committee on Customs Valuation of the WCO already
discussed a number of transfer pricing related topics. Officials from
the OECD were invited to address the customs officials attending this
meeting. Even though it is still rare in many territories for the customs
and direct tax authorities to talk to one another, let alone undertake
joint audits or investigations, cooperation between the two will likely
increase as time goes by.
Over the coming months, the discussion will probably help push the
customs authorities to start probing affected transactions.
This article has only scraped the surface of how BEPS may impact
customs valuation planning and compliance. Affected importers
would be well advised to prepare for more challenging conversations
about their companies’ related party pricing arrangements.
The first and third of the above documents are to be shared with all
tax authorities in countries where a multinational does business,
whereas the second is only to be shared in the territory of the entity
in question.
It is easy to see how the above information may present a challenge to
importers that buy from related party suppliers.
Continued
Case law
Local Updates
Regular Updates
www.pwc.com
Anti-dumping updates
•
Notice of initiation of a partial interim review of the antidumping measures applicable to imports of steel ropes and
cables originating in Ukraine
•
Notice concerning the anti-dumping measures in force in respect
of imports into the Union of melamine originating in the People’s
Republic of China: change of the name of one company subject to
the minimum import price
•
•
•
Notice concerning the anti-dumping measures in force in respect
of imports into the Union of ceramic tableware and kitchenware
originating in the People’s Republic of China: change of the
name of companies subject to the anti-dumping duty rate for
cooperating non-sampled companies
Notice concerning the anti-dumping measures in force in respect
of imports into the Union of ceramic tiles originating in the
People’s Republic of China: change of the name of a company
subject to the anti-dumping duty rate for cooperating nonsampled companies
Corrigendum to Commission Implementing Regulation (EU)
No 938/2014 initiating an investigation concerning the possible
circumvention of anti-dumping measures imposed by Council
Regulation (EU) No 502/2013 on imports of bicycles originating
in the People’s Republic of China by imports of bicycles
consigned from Cambodia, Pakistan and the Philippines,
whether declared as originating in Cambodia, Pakistan and
the Philippines or not, and making such imports subject
to registration
Francis Agnew
Ireland
[email protected]
•
Commission Implementing Regulation imposing a definitive
anti-dumping duty on imports of certain tube and pipe fittings,
of iron or steel, originating in the Republic of Korea and Malaysia
following an expiry review.
•
Notice of initiation of an absorption investigation concerning
imports of certain stainless steel wires originating in India
•
Notice of initiation of an anti-dumping proceeding concerning
imports of tartaric acid originating in the People’s Republic of
China, limited to one Chinese exporting producer, Hangzhou
Bioking Biochemical Engineering Co. Ltd
•
Commission Implementing Regulation imposing a definitive
anti-dumping duty on imports of certain prepared or preserved
citrus fruits (namely mandarins, etc.) originating in the People’s
Republic of China following an expiry review
•
Notice of initiation of an anti-dumping proceeding concerning
imports of certain aluminium foil originating in the People’s
Republic of China
•
Commission Implementing Regulation making imports of
stainless steel cold-rolled flat products originating in the People’s
Republic of China and Taiwan subject to registration
•
•
Commission Implementing Decision terminating the antisubsidy proceeding concerning the imports of polyester staple
fibres originating in the People’s Republic of China, India
and Vietnam
Commission Implementing Regulation imposing a definitive
anti-dumping duty on imports of sulphanilic acid originating in
the People’s Republic of China and repealing the definitive antidumping duty on imports of sulphanilic acid originating in India
following an expiry review
•
Commission Implementing Regulation repealing the definitive
countervailing duty on imports of sulphanilic acid originating in
India following an expiry review
•
Notice of reopening the anti-dumping investigation concerning
the imports of certain solar glass originating in the People’s
Republic of China
•
Notice of initiation of an anti-dumping proceeding concerning
imports of silico-manganese originating in India
•
Notice of initiation of an anti-dumping proceeding concerning
imports of tubes and pipes of ductile cast iron (also known as
spheroidal graphite cast iron), originating in India
•
Commission Implementing Regulation imposing a definitive
countervailing duty on imports of certain filament glass
fibre products originating in the People’s Republic of China
and amending Council Implementing Regulation imposing a
definitive anti-dumping duty on imports of certain continuous
filament glass fibre products originating in the People’s Republic
of China
•
Notice of the impending expiry of certain countervailing
measures concerning certain polyethylene terephthalate from
Iran, Pakistan and United Arab Emirates
•
Commission Implementing Regulation (EU) 2015/49 amending
Council Implementing Regulation (EU) No 1106/2013 imposing
a definitive anti-dumping duty and collecting definitively the
provisional duty imposed on imports of certain stainless steel
wires originating in India and amending Council Implementing
Regulation (EU) No 861/2013 imposing a definitive
countervailing duty and collecting definitively the provisional
duty imposed on imports of certain stainless steel wires
originating in India
Case law
Local Updates
Regular Updates
www.pwc.com
Classification updates
Since our last update there have been a number
of classification Regulations published by the
EU Commission.
These are summarised as follows:
Article of Steel
A ‘T’ shaped article of steel. The external diameter of the shoulders
is 23 mm and the largest diameter of the central part of the article
is 40 mm. Its lateral endings are bevelled, suitable for butt welding,
and its third ending is threaded on the inside. The lateral endings are
to be welded in between the panels of the radiator. The third ending
is used for installing either a vent valve or a regulating valve, or for
connecting the radiator with a pipe that connects it to, for example,
a boiler.
The article has the objective characteristics of tube and pipe fittings
classified under heading 7307. Articles of heading 7307 are parts of
general use. As references to parts, inter alia, in Chapter 73 do not
include references to parts of general use as defined in that note,
classification of the article under heading 7322 as a part of radiators
for central heating is excluded.
The article is therefore to be classified under CN code 7307 93 19
as other butt welding tube or pipe fittings of steel with the greatest
external diameter not exceeding 609,6 mm.
Lorraine Lavelle
Ireland
[email protected]
Screws for setting fractures
1) A solid, cylindrical, threaded product made of extra hard,
colour finished titanium alloy, of a length of approximately 12 mm.
The product has a shank with a constant outer diameter of 3 mm
and a head. The shank is wholly threaded with an asymmetrical
thread. The head is threaded (allowing it to lock into a compression
plate in fixation systems) with a recessed socket drive. The product
corresponds to the ISO/TC 150 standards for implant screws and is
presented for use in the field of trauma surgery for setting fractures.
It is to be installed in the body using specific tools. At importation,
it is presented in a sterilised packing. The product is marked
with a number and therefore traceable throughout production
and distribution.
The product entirely corresponds to a screw of base metal, even
though it is intended for use in trauma surgery. Regardless of
their actual use, screws of base metal are parts of general use.
Classification under heading 9021 as splints and other fracture
appliances is therefore excluded.
The product is therefore to be classified under CN code 8108 90 90 as
other articles of titanium.
2) A cannulated, cylindrical, threaded product made of extra hard
titanium alloy, of a length of between 20 to 56 mm. The product has a
cannulated shank with an outer diameter of 4 mm and a head with a
hexagonal drive. The shank is wholly threaded in 2 mm increments.
The product corresponds to the ISO/TC 150 standards for implant
screws and is presented for use in the field of trauma surgery for
setting fractures. It is to be installed in the body using specific
tools and by means of a guide wire, which is to be inserted in the
cannulated shaft and which allows precise placement through a small
incision in the body. At importation, it is presented in a sterilised
packing. The product is marked with a number and therefore
traceable throughout production and distribution.
Due to its objective characteristics, namely the presence of the
cannulated shaft, the product does not entirely correspond to a
screw of base metal. Consequently, it cannot be considered a part of
general use (screw) as referred to in note 2 to Section XV. Therefore,
classification under heading 8108 is excluded.
The product is therefore to be classified under CN code 9021 10 90 as
splints and other fracture appliances.
Pangea dual core screw
A solid, cylindrical, threaded product made of extra hard titanium
alloy, of a length of between 20 and 45 mm. The shank is wholly
threaded with a dual core thread containing a transition zone for the
core diameter change. It is of a constant outer diameter of 4,0 mm,
with a self-tapping profile and a blunt, threaded tip. The product has
a polyaxial (movable) U-shaped, internally threaded head that offers
25° of angulation around its axis allowing its adjustment. The product
has a specialised saddle in locking cap for fixing a rod (presented
separately) in its head.
Continued
Case law
Local Updates
Regular Updates
www.pwc.com
The product corresponds to the ISO/TC 150 standards for implant
screws and is presented for use in trauma surgery as a part of a system
for posterior stabilisation of the spine. It is installed using specific
tools. At importation, it is not presented in a sterilised packing. The
product is marked with a number and therefore traceable throughout
production and distribution.
Due to its objective characteristics, namely the presence of the
polyaxial U-shaped head with the locking cap, the product does not
entirely correspond to a screw of base metal. Consequently, it cannot
be considered a part of general use (screw) as referred to in note 2 to
Section XV. Therefore, classification under heading 8108 is excluded.
The product is therefore to be classified under CN code 9021 10 90 as
splints and other fracture appliances.
Solar panel
A solar panel with dimensions of approximately 2 × 2 m, consisting
of 25 glass vacuum tubes mounted in parallel and interconnected via
a collector pipe. Each vacuum tube is constituted by two concentric
pipes, containing heat transfer fluid. The inner pipe of each tube is
coated with an absorption layer. The solar energy is absorbed by the
layer on the inner pipe of the tubes and converted into heat energy.
The heat is then transferred to the heat transfer fluid, which turns
into gas, rises and transfers the heat to the collector pipe (a copper
manifold). The heat is subsequently transferred from the collector
pipe to a water storage tank by way of a tubing system containing heat
transfer fluid circulating by means of a pump managed by a controller.
The pump, controller, tubing system and water storage tank are not
included upon presentation. The solar panel is used in solar water
heating systems and is intended to be mounted on the roof.
Classification is determined by general rules 1, 2 (a) and 6 for the
interpretation of the Combined Nomenclature and by the wording of
CN codes 8419 and 8419 19 00. The solar panel is considered to have
the essential character of a complete or finished article (water heater)
as it contains all the necessary components for generating heat. The
missing components are used for transferring the heat and storing the
water. Consequently, classification under subheading 8419 90 85 as
parts of water heaters is excluded. As the solar panel converts solar
energy into heat, it cannot be considered a mere heat exchange unit of
subheading 8419 50.
The solar panel is therefore to be classified under CN code 8419 19 00
as other instantaneous or storage water heaters, non-electric.
Media Server
An electronic apparatus comprising a built-in flash memory of 2 TB,
a hard disk with a storage capacity of 4 TB and a MPEG processor for
various video, picture and audio formats.
The apparatus is equipped with, amongst others, the
following interfaces:
•
two 1Gbe (GigaBit ethernet) copper ingest ports, used
for reception
•
two 10Gbe SFP type, (Small Form-factor Pluggable) streaming
ports, used for transmission
•
two 1Gbe copper management ports for the management of
the apparatus
•
two USB ports
It is not possible to determine the apparatus’ principal function within
the meaning of note 3 to Section XVI as each function is equally
important for the use of the apparatus. Consequently, classification
is to be done under the heading which occurs last in numerical order
among those which equally merit consideration. Classification under
headings 8517 or 8521 is therefore excluded. As the apparatus is
not only able to transmit, but also to receive, within the providers’
network, video content (television signals) from other media servers,
classification under subheading 8525 50 00 is excluded.
The apparatus is therefore to be classified under CN code 8525 60 00
as transmission apparatus incorporating reception apparatus.
Multimedia apparatus
An electronic apparatus with dimensions of approximately 10 × 4 × 1
cm, comprising, amongst others, the following components:
•
a processor
•
a system memory of 1 GB
The apparatus uses the following media formats:
•
an internal memory of 4 GB
•
MPEG-2 TS and MPEG-4 (H.264)
•
a built-in module for wireless connection to the internet
•
Variable Bitrate (VBR) and Constant Bitrate (CBR)
•
High-Definition (HD) and Standard-Definition (SD)
The apparatus is able to provide up to 2 500 streams with a speed
of 3,75 Mbps. The apparatus is used by cable or internet television
providers for distributing on demand multimedia products to
consumers. Multimedia products, such as video sequences, pictures,
data and sound are exchanged (received and transmitted) among
media servers, installed within the providers’ network. The apparatus
records the received content and transmits it on demand via OTT
(Over the Top Technology) streaming to the clients’ terminal
equipment, for example, television sets, automatic data-processing
machines, game consoles or mobile phones.
It is equipped with the following interfaces:
•
HDMI
•
USB
•
micro USB
•
micro SDHC
The apparatus does not incorporate a video tuner. When connected to
a television set or a monitor, the apparatus enables the user to access
the internet, for example, for exchanging e-mails, watching videos,
playing games or downloading software applications. It also is able
to reproduce multimedia files such as video, photo and music from
memory cards or USB memories.
Classification is determined by general rules 1, 3(c) and 6 for the
interpretation of the Combined Nomenclature and by the wording
of CN codes 8525 and 8525 60 00. The apparatus is designed for
performing two or more alternative functions (telecommunication of
heading 8517, video recording or reproduction of heading 8521 and
transmission of heading 8525).
Continued
Case law
Local Updates
Regular Updates
www.pwc.com
Classification is determined by general rules 1, 3(c) and 6 for the
interpretation of the Combined Nomenclature, additional note 3 to
Chapter 85, and by the wording of CN codes 8528, 8528 71 and 8528
71 91. Within the meaning of note 3 to Section XVI, the apparatus is
designed to perform two or more alternative functions (automatic
data- processing of heading 8471, telecommunication of heading
8517, video reproduction of heading 8521 and reception of television
of heading 8528). It is not possible to determine the apparatus’
principal function, as each function is equally important for the use
of the apparatus. Consequently, the apparatus is to be classified under
the heading which occurs last in numerical order among those which
equally merit consideration. Classification under headings 8471, 8517
or 8521 is therefore excluded.
As the apparatus does not contain a video tuner and allows interactive
exchange of information, it is therefore to be classified under CN
code 8528 71 91 as apparatus with a microprocessor-based device
incorporating a modem for gaining access to the internet, and
having a function of interactive information exchange, capable of
receiving television signals (so-called ‘set-top boxes which have a
communication function’, including those incorporating a device
performing a recording or reproducing function, provided that
they retain the essential character of a set top box which has a
communication function).
Game Cartridge
An electronic component contained in a rectangular plastic housing
with dimensions of 35 × 33 × 4 mm. The game cartridge consists of
a printed circuit board with integrated circuits (read-only memory
(ROM) and flash memory), passive elements (capacitors, resistors)
and several contact pins. The ROM comprises an application program
(a video game) and cannot be changed or upgraded by the user.
The flash memory is used for storing data created when the game is
played, such as preferences or reached levels and scores. Due to its
special shape and specifically configured contact pins, the cartridge
can only be used in a specific brand and type of video game consoles
of heading 9504.
The cartridge contains not only a flash memory, but also a ROM
comprising the game. The flash memory only stores information
needed for playing the game, such as the players’ preferences, reached
levels and scores.
The cartridge can only be used for playing video games in conjunction
with a game console. Consequently, classification as media for the
recording of sound or other phenomena of heading 8523 is excluded.
As the cartridge is a part or accessory suitable for use solely or
principally with a game console of subheading 9504 50, it is to be
classified under CN code 9504 50 00 (see also the HSEN to heading
9504 (2), third paragraph).
Electrical filters
1) An article constituted by a multilayer ceramic capacitor of the
surface mount feedthrough type, with dimensions of approximately
8 × 3 × 3 mm. It is presented as a low pass filter for use as an
electromagnetic interference (EMI) filter in, for example, power
amplifiers, power supplies, temperature and motor controls and
driver circuits. The article is used as a component in a range
of machines.
As it is only constituted by a capacitor, it is to be classified under CN
code 8532 24 00 as ceramic dielectric, multilayer fixed capacitors.
2) An article constituted by a capacitor and two ferrite beads,
with dimensions of approximately 7 × 2 × 2 mm. The equivalent
electrical circuit comprises two inductors, one for each ferrite bead,
placed in series to the DC current pathway and attached to the
conductor at the left and right side of a surface mount feedthrough
capacitor. The two ferrite beads act as inductors and their function
is minimising resonance with surrounding circuits for suppressing
high frequency electrical currents. It is presented for use as an
electromagnetic interference (EMI) filter in, for example, automotive
and industrial applications.
Given the article’s objective characteristics, namely that it is not only
constituted by a capacitor but also by two ferrite beads, it does not
entirely correspond to the wording in heading 8532 (capacitors).
Moreover, as both the ferrite beads and the capacitor are equally
important for the overall functioning of the electrical filter, the
function of the article goes beyond the scope of heading 8532.
Classification under this heading by application of GIR 1 and note 2(a)
to Section XVI is therefore excluded.
The article is used as a component in a range of machines. As it is not
suitable for use solely or principally with a particular machine or class
of machine, it is to be classified under CN code 8548 90 90 as other
electrical parts of machinery or apparatus, not specified or included
elsewhere in Chapter 85.
Sports Utility Motor Vehicle
A used, four-wheel drive compact sport utility motor vehicle (SUV)
with a diesel engine of a cylinder capacity of 2 000 cm3, a fivespeed manual gearbox and one reverse gear. Its total gross weight is
approximately 2,330 kg and its total load capacity is approximately
700 kg. It has a single integrated space for the transport of both
persons and goods. The cabin has one row of two seats (including
the driver’s seat) and five doors with window panels (the back door
being of a swing-out type). The floor of the cargo area is equipped
with carpeting; the entire interior of the vehicle has side and roof
upholstery. It is equipped with a mechanism for raising and lowering
both the front and rear side windows. The vehicle is adapted to the
transport of goods by having the second row of seats removed, the
anchor points for fixing the rear seats and the security belts covered
and the cabin separated by a net barrier. The anchor points for fixing
the rear seats and the safety belts were not removed or rendered
permanently unusable.
Classification under heading 8704 as vehicles for the transport of
goods is excluded, as the objective characteristics and the general
appearance of the vehicle are those of a vehicle principally designed
for the transport of persons (presence of five windows, side and
roof upholstery, carpet) The changes made for the purposes of
transporting goods (removing of the rear seats installation of the net
barrier) are easily reversible.
The vehicle is therefore to be classified under CN code 8703 32 90 as
used motor vehicles principally designed for the transport of persons.
Case law
Local Updates
Regular Updates
www.pwc.com
Wassenaar Arrangement on Export Controls for
Conventional Arms and Dual-Use Goods and Technologies
The latest Plenary meeting of the Wassenaar Arrangement
was held in Vienna on 2 and 3 December 2014.
According to the recently published statement, the Participating
States agreed to continue their efforts to contribute to international
and regional security and stability by promoting transparency and
greater responsibility in the transfer of conventional arms and dualuse goods and technologies. It was agreed that further challenges
in the areas of emerging technologies of concern, research and
innovation would be addressed. Guidelines for applicant countries on
how to become a Participating State were also published.
Exporters should be aware of changes in a number of different
areas, including spacecraft equipment (Category 9) and technology
for fly-by-wire / flight-by-light systems (Category 7), while texts
for the control of machine tools (Category 2), optical equipment
for military utility and fibre laser components (Category 6) were
substantially reviewed.
Definitions of various terms across all categories were revised,
expanded or introduced including those of civil aircraft,
cryptographic activation and technology. Changes were also made to
the munitions list in various categories.
The aforementioned changes will not come into effect until adopted
into the legal systems of the Participating States. Nevertheless,
exporters should be aware of these forthcoming amendments. The
next plenary meeting will take place in December 2015 under the
chair of Spain.
If you have any questions on this, then please contact one of
our team members listed below where we can provide you with
further information.
There were further reviews of several categories which resulted
in the deletion of obsolete controls relating to vessels (Category 8)
and in refined controls of Unmanned Aerial Vehicles (Category 9).
Furthermore, there was some easing of the measures in the significant
area of telecommunications equipment having specific security
functionality for the administration, operation and maintenance of
networks (Category 5 Part 2) and further relaxation introduced in the
area of electronics (Category 3).
A number of further technical changes and revisions across
information security (Category 5 Part 2) also occurred, with a new
technical note for the local definition of “cryptanalytic functions”
being inserted.
John O’Loughlin
Ireland
[email protected]
Michael Tervooren
Germany
[email protected]
Mark Brennan
Ireland
[email protected]
Case law
Local Updates
Regular Updates
www.pwc.com
Customs & International Trade Group
Region
Contact person
Telephone
Albania
Paul Tobin
Austria
Christine Weinzierl
Belgium
Dirk Aerts
32
32 59 32 14
Belorussia
Sergei Odintsov
375
17 335 40 00
Bulgaria
Paul Tobin
359
29 35 51 16
Country code
Local
359
29 35 51 16
43
15 01 88 36 30
Region
Contact person
Telephone
Country code
Local
Lithuania
Kristina Kriščiūnaitė
370
52 39 23 65
Luxembourg
Barbara Berckmoes
352
49 48 48 30 83
Macedonia
Paul Tobin
359
29 35 51 16
Malta
David Ferry
356
25 64 67 12
Moldavia
Tatiana Stavinschi
373
22 25 17 50
Bosnia-Hercegovina
Mubera Brkovic
387
33 29 52 34
Montenegro
Branka Rajicic
381
1 13 30 21 17
Croatia
Ivo Bijelic
385
16 32 88 02
Netherlands, The
Ruud Tusveld
31
88 792 34 73
Cyprus
Chrysilios Pelekanos
357
22 55 52 80
Norway
Yngvar Engelstad Solheim
47
95 26 06 57
Czech Republic
Hana Krausová
420
7 24 36 93 55
Poland
Tomasz Kassel
48
2 27 46 48 46
Denmark
Joan Faurskov Rasmussen
45
39 45 94 63
Portugal
Susana Claro
351
2 13 59 96 01
Estonia
Ain Veide
372
6 14 19 78
Romania
Daniel Anghel
40
2 12 25 36 88
Finland
Ilona Paakkala
358
2 07 87 77 53
Russia
Marina Volkova
7
49 59 67 62 23
France
Stéphanie Thomas
33
1 56 57 53 21
Serbia
Branka Rajicic
381
1 13 30 21 17
Germany
Jochen Schmidt
49
40 63 78 13 90
Slovakia
Zuzana Šátková
421
2 59 35 06 75
Greece
Panagiotis Tsouramanis
30
21 06 87 45 47
Slovenia
Marijana Ristevski
386
15 83 60 19
Spain
Pilar Salinas
34
9 15 68 45 35
Sweden
Magnus Almgren
46
7 09 29 16 10
Switzerland
Simeon L. Probst
41
5 87 92 53 51
Turkey
Cenk Ulu
90
21 23 26 69 67
380
44 490 67 77
44
0 20 72 12 41 43
Hungary
László Deák
36
14 61 95 90
Iceland
Fridgeir Sigurðsson
354
5 50 53 66
Ireland
Tom Corbett
353
17 92 54 62
Italy
Luca Lavazza
39
02 91 60 57 01
Kosovo
Paul Tobin
359
29 35 51 16
Ukraine
Ronald Barden
Latvia
Ludmila Trošina
371
67 09 44 00
United Kingdom
Matthew P. Clark
www.pwc.com
PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 195,000 people who are committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to
you by visiting us at www.pwc.com.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or
warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone
else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Design Services 28978 (02/15).