Misdemeanour Liability for Incorrect Tariffing of Imported Goods (Part I)

In the following articles we intend to fur­ther analyse practice of the misdemean­our courts of the Republic of Serbia and EU courts in relation to the liability of im­porters and customs representatives for actions or omissions that could result in incorrect tariffing of goods.

1. The Concept of Incorrect Tariffing of Goods

Pursuant to the Article 139 of the Customs Law (“Official Gazette of the RS”, no. br. 95/2018, 91/2019 – other law, 144/2020, 118/2021 and 138/2022; henceforth: CL) all goods intended to be placed in a customs procedure, except in the free zone procedure, must be included in a declaration for the respective customs procedure.

When importing goods into the customs territory of the Republic of Serbia with the in­tention of placing the goods into free circulation on the Serbian market, a declaration for placing the goods into free circulation must be submitted. A declarant must possess all data required for legitimate conducting of customs procedure (cases of submission of regular and simplified customs declaration). Since placing of goods into free circulation may be subject to payment of customs duties, whereby the customs debt occurs at the moment of acceptance of the declaration by the customs authorities (Article 65 Para­graph 2 of CL), the declaration to be submitted on this occasion must encompass all of elements, required for determining customs duties.

That is, above all, the tariff code of goods from the valid Customs Tariff Nomenclature, which the Government of the Republic of Serbia, on the basis of the Article 8 paragraph 3 of the Law on Customs Tariff (“Official Gazette of the RS”, no. 62/2005, 61/2007, 5/2009, 95 /2018 - other law and 91/2019), harmonizes with the Combined Nomenclature of the European Union by way of adopting an ordinance no later than in November of the current year for the following year (currently in force is the Ordinance on Harmonization of the Customs Tariff Nomenclature for the year 2023 (“Official Gazette of the RS”, no. 132/2022 and 141/2022 – corr.).

The tariff code to be entered in the cus­toms declaration must correspond to the nature of goods which are subject of the customs procedure of free circulation. If this is not the case, we are dealing with classification of goods under the incorrect tariff code – classification of the goods in tariff code with lower customs rate results in collection of lower amount of customs duties and VAT by customs authorities (incorrect tariffing of goods).

Import formalities by the import of goods, including filling and submission of the cus­toms declaration, are in business practice conducted by customs representatives on behalf of importers. As the law sets forth misdemeanor sanctions for incorrect tar­iffing of goods, the question is, who in the event of such misconduct bears misde­meanor responsibility - the importer, the customs representative or both.

2. Previous Customs Law and Court Practice

In court practice, rendered in the period of validity of the previous Customs Law (“Official Gazette of the RS”, no. 18/2010, 111/2012, 29/2015, 108/2016 and 113/2017 – other law; henceforth: Previous CL), misdemeanor courts, in cases where direct customs representation was contracted, regularly declared importers liable for incorrect tariffing, because they acted in the capacity of declarants (e.g. judgment of the Misdemeanor Appellate Court, no. Prž 908/2020 as of 27 January 2020).

However, in our practice we also came across judgments in which different standpoints on this issue were taken compared to the earlier court practice. In all of these cases the importer has contracted direct representation with the customs representative.

The previous CZ in its Article 294 Paragraph 1 Item 5 prescribed as a misdemeanor failure to insert in the declaration all the data on the goods, which are decisive for determining the tariff classification according to the nomenclature, or entering in the declaration a tariff code that is inadequate in relation to the data on nature of the respective goods, whereby such actions cause or may cause payment of import duties or other fees in a lower amount. 

In two more recent judgments that we received, the court took a stance that only the customs representative can be held responsible for the aforementioned misdemeanor, since he was the one who completed the customs declaration and entered the tariff code therein, which was subsequently determined as incorrect, respectively that the importer and the authorized person of the importer did not participate in the customs clearance procedure and consequently they could not be held responsible for such violations, since they did not even enter the data of the goods in the declaration.

In the third judgment that we received, the court indirectly took the position that in case of contracting direct representation both the customs representative and the importer are to be held liable for incorrect tariffing of goods respectively entering in­correct data in the customs declaration.

Such a stance, although taken while ap­plying the Previous CL, as a matter of fact already reflected solutions, enacted by the new/current CL.

3. The Current Customs Law

Article 12 Paragraph 2 Item 1 of the CL prescribes that the person lodging declaration, temporary storage declaration, entry summary declaration, exit summary declaration, re-export declaration, re-export notification, request for an authorization or any other decision, shall be responsible for accuracy and completeness of the information given in the declaration, notification or request.

Item 2 of the same paragraph of the same Article prescribes that obligation from paragraph 1 is also related to the authenticity, accuracy and validity of any document accompanying the declaration, notification or request.

Further, the Article 12 Paragraph 4 of the CL envisages that in the event, when the declaration, notification or request is submitted or information is provided by the customs representative in line with the Article 13 of the CL, the customs representative shall be bound by the obligations from the Article 12 Paragraph 2 of the CL. Hence, the customs representative shall also be held liable for accuracy and completeness of the data included in the declaration.

When it comes to customs representation, Article 13 of the current CL, similarly to the Previous CL, distinguishes between direct and indirect customs representation. While in the first case the customs representative acts in the name and on behalf of another person (principal/importer), in the second case the customs representative acts in his own name and on behalf of another person.

Our understanding is that the intention of the legislator is to harmonize CL with Regulation (EU) no. 952/2013 of the European Parliament and Council as of 9 October 2013 laying down the Union Customs Code (henceforth: EU Customs Code).

The current CL encompasses in the respective provisions nearly identical solutions as envisaged by the EU Customs Code.

EU Customs Code, in Article 15, prescribes that obligation of providing accurate and truthful information in the aim of correct application of the customs regulations have all persons, who are either directly or indirectly involved in performing customs formalities, hence importers as well as the customs representatives. It is explicitly stated that the customs representatives, when lodging customs declaration, are also bound by obligations related to accuracy and completeness of information in customs declarations as well as authenticity, accuracy and validity of documents accompanying the declaration.

This provision is rooted in the nature of relationship between the importers and customs representatives which fill out and submit customs declarations to the customs authority, respectively in the obligation between to the two to cooperate and deliver to each other complete and accurate data and information for the purpose of correct application of customs regulations.

To emphasise this correlation, EU Customs Code uses formulation “shall be also bound by obligations…”, whereby this formulation indicates that responsibility of both importers and customs representatives for fulfillment of the said obligations may exist.

In other words, in case of lodging a customs declaration responsibility for accuracy and completeness of the data contained therein and for authenticity, accuracy and validity of documents, responsibility may in principle be borne by both the importer and the customs representative, respectively neither of them will a priori be exempted from such responsibility merely on account of the fact that the parties have contracted customs representation, regardless of whether representation is direct or indirect or the fact that customs representative physically submits customs declaration to customs authority. 

Depending on the circumstances of individual case, either only the importer or only the customs representative or both will be held liable for incorrect tariffing of the imported goods.

Prior to the amendments enacted in December 2022 CL prescribed liability of a legal entity and responsible person in a legal entity in cases of:

1. accomplishing or attempting to accomplish payment of duties in a lower amount, preferential tariff treatment, exemption from payment of import duties, relief in payment of import duties and other fees, payment of reduced amount, refund or remission of duties or any other relief by way of presenting incorrect or untruthful data or in any other manner persuading the customs authority to a wrong conclusion (Article 266 Paragraph 1 Item 1 in connection with the Article 12 Paragraph 3 of CL before its amendments);
2. accomplishing payment of duties in a lower amount, preferential tariff treatment, exemption from payment of import duties, relief in payment of import duties and other fees, payment of reduced amount, refund or remission of duties or any other relief by way of presenting incorrect or untruthful data or in any other manner (Article 267 Paragraph 1 Item 2 in connection with the Article 12 Paragraph 3 of CL before its amendments).

As a result of supplements and amendments to the CL enacted in December 2022:

1. Article 266 Paragraph 1 item 1 became Article 265 Paragraph 1 Item 3;
2. Article 267 Paragraph 1 item 2 was deleted and CZ, after the amendments, prescribes in regard to conducting customs formalities the following actions as violations that could result in reducing the customs duties or accomplishing other reliefs (Article 266 Paragraph 1 Items 2 and 3).
   1. lodging a declaration or a temporary storage declaration, re-export declara­tion or a request for an authorization or any other decision, with incorrect or incomplete data stated in the declara­tion or with incorrect data stated in the request, except in case when such data have no influence on the procedure, initiated upon the declaration or re­quest, respectively in case of changes or supplements to the data in the dec­laration or changes to the data in the request, before undertaking any action by the customs authority in connection with the action or omission, i.e. before starting customs control;
   2. enclosing unauthentic, incorrect or invalid document to the declaration, temporary storage declaration, re-ex­port declaration or to the request for authorization or other decision.

According to the judgment of the Misdemeanour Appellate Court, Department in Novi Sad, III-306 Prž no. 18618/21, dated September 7, 2021, the wording in the Article 267 Paragraph 1 Item 2 (CL prior to the amendments enacted in December 2022) “presenting incorrect or untruthful data” implies potential liability of both the customs agent and the importer. The term “presenting” indicates an action or omission of the customs agent and the importer resulting in payment of customs duties in a lower amount.

In this specific case, the court took the stance that the importer is not responsible since he provided the indirect customs representative with all the information and documents of relevance for correct tariffing of the goods. Such stance indicates that the importer would be liable, had he not delivered all the necessary information and documents to the customs representative.

CZ, after the 2022 amendments, in its Ar­ticle 266 Paragraph 1 Item 2 instead of the wording “presentation of incorrect or untruthful data” encompasses the word­ing “lodging of a declaration or temporary storage declaration, re-export declaration or request for authorization or other de­cision, with incorrect or incomplete data provided in the declaration”. This wording indicates that either the customs repre­sentative who submits the customs dec­laration on behalf of the importer or the importer himself in the event of submitting the customs declaration by himself, could be held responsible for the act of lodging the customs declaration.

The importer could be held liable in cases of failure to provide the customs represen­tative with the required documents or in­formation of relevance for correct tariffing of goods (Article 266 Paragraph 1 Item 3 of CL) and failure to perform other obliga­tions related to fulfilment of the tariffing of goods-related customs formalities.

When it comes to the misdemeanour from the Article 265 Paragraph 1 Item 3 of CL both the customs representative and the importer could be held liable in case of intent of persons engaged by the customs representative and the importer to accomplish payment of duties in a lower amount through an action or omission that leads to lodging of a declaration with incorrect or untruthful data (complicity - Article 23 of the Law on Misdemeanours (“Official Gazette of the RS”, no. 65/2013, 13/2016, 98/2016 - CC decision, 91/2019, 91/2019 - other law and 112/2022 – CC decision; henceforth: LM) , incitement - Article 24 of LM or aiding - Article 25 of LM).

Correct application of regulations will largely depend on how the customs authorities will formulate requests for instigating misdemeanour proceedings, the evidences submitted along with the request as well as on how the courts will determine the relevant facts and the level of responsibility of importers and customs representatives.

By Ivan Milosevic, Partner, and Janez Voncina, Senior Associate, JPM & Partners