Duty Matters: Interest on Delayed Duty Payments- Potential Knock on Effect for Financial Penalties?

While companies do their best to ensure that they declare their goods correctly on import, HMRC does not have the time to validate clearances and rather relies on post import verification.

Where errors or omissions are subsequently found, are companies required to pay interest on underpaid customs duty?

The following extract from the EU’s Advocate General’s opinion seems to suggest that the answer to the above question is no…

Opinion of Advocate General Campos Sánchez-Bordona

Case C-365/15 Wortmann KG

49.  … … …  The procedure for initially establishing the amount of the customs debt is conducted on such a fragile basis that this explains why, where the amount of that debt has to be corrected post clearance, either because it is excessive or insufficient, neither the customs authority nor the person liable for the customs debt is required, as a general rule, to pay interest during the (brief) intervening period.

50.  The Commission agrees that, in some cases, the customs authority does not inspect goods before releasing them and only later carries out checks on whether imports were properly carried out. If, at that later date, a new assessment is required, it may lead either to the importer having to pay what he had hitherto not paid (initial under-assessment) or to the customs authority having to reimburse the amount overpaid; in both cases, there is no interest.

Having settled the principle that the original import declaration provides a “fragile basis” for the duty calculation, in the same way that interest should not be charged by the authorities on underpayments, the potential for penalties becomes questionable.  HMRC has generally refrained from imposing penalties in the past, but this policy seems to be changing.

Clearly, fraudulent activity is one thing, but should importers that make mistakes expect to simply settle underpaid duty without penalty?

This can of course make a significant difference for companies that are hit with a financial penalty, as this can represent 100% of the duty involved.

Steve Cock – Director of Consultancy – KGH Customs Services

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