October 20
Anjum Shabbir
Anjum Shabbir
9th October 2020
External Relations & Trade Internal Market Tax

Analysis: “The extinguishment of a customs debt incurred through non-compliance: mitigating the impact of formalism in customs” by Philippe Heeren

The Court of Justice clarified in its Combinova judgment of 8 October 2020 (C-476/19) when goods are ‘used’. This is relevant to assess whether a customs debt, incurred as the result of non-compliant behaviour, could be extinguished on the ground that the goods ‘have not been used or consumed and have been taken out of the customs territory of the Union’ (Article 124(1)(k) Union Customs Code). The Court concludes that this use refers to operations other than those that are authorised by the customs authorities under a special procedure.

Combinova imported goods under the inward processing procedure. With this procedure, Swedish customs authorised the company to process goods in the customs territory of the Union without having to release those goods into free circulation – and having to pay the corresponding import duties. Some weeks after the import, Combinova re-exported the processed goods. Several months later, the company had not submitted the bill of discharge on time, which is a condition governing the placing of non-Union goods under the special procedure of processing. As the result of not meeting that formal requirement, Combinova incurred a customs debt.

The incurring of a customs debt as the result of not observing a formal customs requirement is part of the very nature of customs law. Under such circumstances, the obligation to pay the duties is a consequence of the finding that the conditions to benefit from the advantage (namely duty suspension) deriving from the application of the special procedure have not been satisfied, which has rendered that special procedure inapplicable.

The approach is different for consumption taxes. In Eurogate Distribution (C-28/11) goods were re-exported from a customs warehouse. The warehouse keeper recorded the removal from the customs warehouse late. The Court examined the incurring of a customs debt through non-compliance, notwithstanding the fact that the goods had been re-exported. Under these very same circumstances, the Court concluded that the VAT debt was not incurred, as there was no risk that the goods had entered in the economic network of the Union and were consumed (C-226/14). Similarly, the Court concluded in Polihim SS (C-355/14) that the mere formal irregularity could not lead to the incurring of an excise debt.

The Union Customs Code (UCC), which has applied since 1 May 2016, brought significant changes. The legislator streamlined the approach toward the extinguishment of the customs debt. First, cases that led to the deemed non-incurrence of a customs debt under the Community Customs Code were drawn together under the grounds for extinguishment in Article 124 UCC. Second, the legislator broadened the grounds for extinguishment. The new Article 124(1)(k) UCC states that the customs debt incurred through non-compliance will be extinguished where evidence is provided that they ‘have not been used or consumed and have been taken out of the customs territory of the Union’.

With the Court now confirming that this use refers to operations other than those that are authorised by the customs authorities under the special procedure, Article 124(1)(k) UCC can mitigate the impact of formalism in customs – and brings some alignment with VAT and excise rules. Not meeting one of the formal conditions of a special procedure such as the late submission of a bill of discharge will still result in the incurring of a customs debt; but that customs debt would be extinguished if the goods have been re-exported. The principles as set out in Eurogate Distribution remain valid, but economic operators no longer have to revert to the grounds for repayment or remission as a mostly fruitless resort.


Philippe Heeren is a Brussels-qualified lawyer dealing with customs, excise and trade matters at an international law firm. He is a lecturer on customs and international trade at Tilburg University (the Netherlands), and a visiting lecturer on customs law at the University of Antwerp (Belgium).


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