FMX Food Merchants Import Export Co Ltd v Revenue & Customs

Factual and Procedural Background

The Appellant, Company A, appealed against a Post Clearance Demand Note issued by the Respondents, the customs authorities, seeking payment of customs duties totaling US$370,872.50 for garlic imports declared as originating from Cambodia during the period February to October 2004. The Respondents contended that the garlic was in fact of Chinese origin and subject to Anti-Dumping Duty. The Appellant imported nine consignments of garlic during the relevant period and relied on certificates of origin issued by the Cambodian Ministry of Commerce. An investigation by the European Union's Anti Fraud Office ("OLAF") revealed that fraudulent certificates of origin had been issued based on forged documents submitted by an exporter in Cambodia. The Appellant asserted good faith and sought remission of duties under relevant provisions of the Community Customs Code ("the Code"). The appeal was heard by the First-tier Tribunal (Tax Chamber) with oral evidence and documentary submissions presented by both parties.

Legal Issues Presented

1. Whether the garlic imported in the consignments was of Chinese or Cambodian origin.
2. Whether the customs debt could be waived under Article 220(2)(b) of the Community Customs Code, specifically considering (i) error by the customs authorities and (ii) good faith of the Appellant.
3. Whether duties could be remitted under Article 239 of the Code in the absence of deception or obvious negligence, including consideration of remission in a "special situation" under Article 905 of the Implementing Regulations.

Arguments of the Parties

Appellant's Arguments

• The Appellant acted in good faith throughout, relying on longstanding relationships and certificates issued by the Cambodian customs administration, which had full knowledge of the facts.
• The Anti-Dumping Duty should be waived under Article 220(2)(b) of the Code as the conditions were met, including the absence of error by customs authorities and the Appellant’s good faith.
• The Appellant sought remission of duties under Article 239 of the Code, asserting no deception or obvious negligence.
• The Appellant criticized the OLAF investigation for not fully examining the knowledge of Cambodian authorities at the time of export and argued that the Cambodian authorities should have detected irregularities.
• The Appellant highlighted cooperation with UK customs regarding smuggling and noted that trade statistics supported the legitimacy of Cambodian garlic imports prior to the Commission’s 2005 warning.

Respondents' Arguments

• The certificates of origin were obtained through fraudulent means involving forged documents submitted by an exporter, and the garlic was of Chinese origin.
• The Cambodian Ministry of Commerce was not in error as it was deceived by false documents and had no reason to suspect the fraud at the time of issuing certificates.
• The Appellant did not act in good faith as it failed to exercise due care and diligence, including not following HMRC guidance to obtain assurances or Binding Origin Information from suppliers.
• The Appellant’s directors had knowledge imputed to the company regarding difficulties with Italian customs and the fraudulent nature of the garlic’s origin.
• The Appellant failed to comply fully with customs declaration requirements, including incorrect tariff codes.
• No compliant application for remission was made under Article 239 within the prescribed time limit and in the required form, depriving the Tribunal of jurisdiction to consider remission.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal found that the garlic imported by the Appellant was of Chinese origin, not Cambodian, based on the unchallenged OLAF investigation and documentary evidence demonstrating a fraudulent scheme involving dual customs declarations and forged certificates of origin issued by the Cambodian Ministry of Commerce. The Ministry was deceived by false information provided by the exporter and was not aware, nor should it have been aware, that the garlic was not Cambodian. Thus, there was no error on the part of the customs authorities within the meaning of Article 220(2)(b) of the Code.

Regarding the Appellant’s good faith, the Tribunal applied the restrictive definition under the Code, requiring absence of deception and exercise of due care. The Appellant was aware of risks of false certificates of origin in the garlic trade but failed to take recommended precautions such as obtaining written assurances from suppliers or requesting Binding Origin Information. The close relationship between the Appellant’s director and the majority shareholder, who was also involved with an Italian company facing similar customs issues, indicated knowledge inconsistent with good faith. The Tribunal found the Appellant’s explanations not credible and concluded that the Appellant did not exercise all due care.

The Tribunal also found that the Appellant had not complied fully with customs declaration requirements, including incorrect tariff codes, further negating good faith.

On remission under Article 239, the Tribunal noted the Appellant had failed to submit a compliant application within the statutory 12-month period and had not used the prescribed form or provided required details. Consequently, the Tribunal lacked jurisdiction to consider remission. Nevertheless, the Tribunal opined that any such application would fail because remission is not permitted where documents are forged or falsified, even if presented in good faith, and the Appellant failed to demonstrate absence of deception or obvious negligence.

The Tribunal rejected the Appellant’s contention that it was prejudiced by allegations of fraud not pleaded explicitly, holding that the appeal could be dismissed on the basis of incorrect information and lack of due care as pleaded.

Holding and Implications

The appeal is dismissed.

The Tribunal upheld the customs authorities’ Post Clearance Demand Note for the full amount of duties claimed, confirming that the garlic was of Chinese origin and that the Appellant did not meet the stringent requirements for waiver or remission of duties under the Community Customs Code. The decision imposes a financial liability on the Appellant to pay the duties and associated costs. No new legal precedent was established; the ruling applies established principles regarding fraud, good faith, and customs declarations in the context of anti-dumping duties and preferential tariff treatment.

The Tribunal directed that costs be awarded to the Respondents, with a partial exception for costs caused by late amendment of the Statement of Case. The parties were informed of their right to seek permission to appeal within 56 days.