The Plenum of the Supreme Court of the Russian Federation (Supreme Court) passed Resolution No. 49 of 26 November 2019 entitled On Certain Issues Arising in the Judicial Practice in connection with the Entry into Force of the Customs Code of the Eurasian Economic Union (Resolution 49). The aim of the explanations is to summarise and ensure consistency of the judicial practice in connection with the entry into force of the Customs Code of the Eurasian Economic Union (EAEU Customs Code).
Among the most significant provisions of the new Resolution 49 one could point out the following ones:
- As a general rule, the Decisions of the Eurasia Economic Commission (EEC) on the classification of distinct goods in accordance with the Harmonized System do not have retroactive force. In the first place, we are referring to the EEC Decisions that lead to the necessity of paying extra customs fees by a party to foreign trade and contradict the classification practices that evolved earlier and were expressed in the following acts:
- advance rulings on the classification of goods; and
- decisions and explanations of the EEC and the Federal Customs Service on the classification of certain goods.
- Courts should bear in mind the provisions stipulated by the General Annex to the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention) concerning, for example, the non-imposition of substantial penalties for errors made in the course of declaring goods. This recommendation may be especially relevant for determination of cases relating to administrative offences under Articles 16.1 and 16.2 of the Administrative Offences Code of the Russian Federation.
Disputes over customs valuation
- The main principle the Supreme Court's explanations are based on is the separation of administrative proceedings from litigation. All documents and data must be submitted by the party to foreign trade at the stage of customs control. Litigation must not substitute administrative proceedings; therefore, new evidence may be produced in court only if it has been confirmed that such evidence could not have been provided to customs at the stage of customs control (for example, because of the customs authority's refusal to accept the documents and explanations or because of the party being reasonably unable to produce such evidence by the set deadline).
- The Supreme Court explains that a party to foreign trade may submit explanations – which must be taken into account when the court arrives at the final decision – on economic and other sensible reasons for a considerable difference between the value of the transaction in imported goods and pricing information available to the customs authority.
- The customs authority must give the declarant a real opportunity to remove doubts in the reliability of the customs valuation, inter alia, by way of written explanations which must be taken into account when the customs authority makes its decision.
Disputes over classification of goods
- The Supreme Court reconfirms that one may refer to international goods classification practices in disputes concerning the assignment of goods to a particular code under the Harmonized System. Thus, parties to foreign trade and customs authorities may refer to the classification practices in place in respect of imported goods in the countries using the Harmonized System and in confirmation of such practices they may produce to the court the classification decisions made by the customs authorities of other countries and international organisations (eg the World Customs Organization) containing the reasoning for a particular classification.
- The Supreme Court further clarifies that the parties to foreign trade are to expect that the classification of goods will be reasonable, predictable and transparent. For this reason, when resolving disputes caused by the ambiguity in the classification of goods, courts may take into account the recommendations and explanations on the classification given by the World Customs Organization.
Customs control and recovery of customs payments
- The Supreme Court points out that customs authorities must pursue a consistent approach to assessing the correctness of the calculation of customs payments. Thus, if the earlier made customs authority's decision to amend a goods declaration (for example, in what concerns the customs value) was found invalid in court, the customs authority may not issue a new decision to amend data on the customs value of goods on the basis of the same arguments that were already considered by the court and served as grounds for holding such a similar decision invalid.
- The Supreme Court clarifies that acceptance of the customs value at the time the goods are imported or revision of the customs value as a result of customs controls started prior to the release of goods does not exclude the right of the customs authorities to have post-release customs control in place.
- The Supreme Court points out that penalties cannot be charged if the party to foreign trade conscientiously followed the written explanations of a competent federal executive authority on the application of customs laws as may have been given to it individually or the public at large and the written consultations.
- The Supreme Court further clarifies that when assessing penalties, courts should consider that the presence of advance payments, customs overpayments or overcharges in the federal budget where such payments exceed the value of the fees additionally charged to the party to foreign trade may testify that there are no losses for the budget that would need to be recovered by way of imposing penalties. Therefore, in such situations penalties must not be imposed.
- As regards the joint and several liability for the payment of customs fees by persons other than the declarants of goods, the Supreme Court explained that the customs authority must adduce sufficient evidence of the fact that the involvement of such a person in the illegal movement (import) of goods was deliberate or evidence of the fact that the person involved had known or should have known of the illegal movement (import) of goods by exercising such degree of care that was required from it due to the nature of the obligation discharged or the terms of trade. All these pieces of evidence must be assessed by the court.
- In the opinion of the Supreme Court, the court must assess whether there were grounds for exercising customs control in respect of the data stated in the amendment to the goods declaration. The court must also assess whether the evidence of overpayment adduced by the declarant is sufficient and likewise the court must assess the evidence of customs confirming the legality of the refusal to introduce amendments to the declaration or that of not taking action in connection with the introduction of such amendments, inter alia, after the expiry of the timeframe for consideration of the declarant's application. This is quite an important explanation, as in practice customs authorities often without cause refuse to accept the declarant's application for amending the goods declaration. Now the court must examine the legality of such a refusal.
- As regards the refund of customs overpayments, an important point here is that the refund of customs overcharges must be accompanied by the payment of interest, by the customs authorities, for the use of someone else's funds in order to reimburse the party to foreign trade for losses.
Most of the issues addressed in Resolution 49 of the Supreme Court's Plenum are extremely relevant to the resolution of customs disputes. These explanations will simplify the interpretation of the EAEU law and may be used in favour of the party to foreign trade.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.