[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	United Kingdom VAT & Duties Tribunals (Customs) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Customs) Decisions >> Solitaire (Liverpool) Ltd v Revenue & Customs [2006] UKVAT(Customs) C00213 (09 March 2006) URL: http://www.bailii.org/uk/cases/UKVAT/Customs/2006/C00213.html Cite as: [2006] UKVAT(Customs) C213, [2006] UKVAT(Customs) C00213

[New search] [Printable RTF version] [Help]

 


CO213

CUSTOMS DUTY - preferential treatment - subsequent entry in accounts - remission - special situation - cumulation - agreement between Community and Romania - imports of fabric from Turkey to Romania for manufacture into garments - cumulation agreement between Romania and Turkey not yet in force - cumulation agreement held not to be retrospective - exports of finished goods to Community accorded preferential treatment in error - exporter in continual touch with Romanian customs authorities at request of importer - reliance upon authorities and absence of fault on part of exporter or importer - Council Regulation 2913/92/EEC art 220(2)(b) held to be applicable - remission held to be appropriate under ditto art 239 and Commission Regulation 2454/93/EEC establishing the Community Customs Code - appeal allowed

MANCHESTER TRIBUNAL CENTRE

SOLITAIRE (LIVERPOOL) LTD

Appellant

-and-

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS

Respondents

Tribunal: Michael Johnson (Chairman)

Member: Mary Ainsworth

Sitting in public in Manchester on 21 and 22 February 2006

James Henderson, counsel instructed by Bermans, solicitors for the Appellant

James Puzey, counsel instructed by the solicitor for HMRC for the Respondents

DECISION

Nature of the appeal

1. This appeal firstly concerns an issue of interpretation and application of the Europe Agreement ("the Agreement") establishing an association between the European Communities and their member states, of the one part, and Romania, of the other part, signed in Brussels on 1 February 1993. With regard to customs duties said to be due, the appeal also gives rise to a second issue as to whether an adjustment of the accounts is precluded by virtue of article 220(2)(b) of Council Regulation 2913/92/EEC ("the Regulation"), and to a third and final issue as to whether there should be a remission of duties pursuant to article 239 of the Regulation and article 905 of Commission Regulation 2454/93/EEC, implementing the Community Customs Code ("the Code").
2. Protocol 4 of the Agreement was amended by Decision 1/97 of 31 January 1997 of the Association Council, Association between the European Communities and their Member States, of the one part, and Romania, of the other part ("the first amendment"). Protocol 4 was further amended by Decision 4/98 of 21 December 1998 of the Association Council ("the second amendment").
3. By virtue of the Agreement as so amended, it became possible for Romania to conclude agreements with certain other specified non-Community states, the result of which would be that exports from Romania to the Community of products manufactured using materials imported to Romania from the specified non-Community states would enjoy preferential status for Community customs duty purposes. The materials would need to have originated in those other states according to the rules of origin contained in the Agreement. The Agreement had correlative consequence with regard to Turkey, as regards materials exported from Turkey to Romania and incorporated into the finished products before exportation to the UK. Preferential customs duty treatment would thus be enjoyed in respect of both the materials and the finished products, pursuant to what is termed in article 4 of Protocol 4 "cumulation".
4. Of particular relevance to this appeal is that Turkey and Romania entered into an agreement ("the Cross-agreement") in order to take advantage of these preferential trading arrangements. The Cross-agreement, as was envisaged by the Agreement as amended, contained provisions as to rules of origin identical to those contained in Protocol 4 of the Agreement as substituted by the second amendment. The result was that the preferential trading arrangements were implemented, so far as concerning trade between Turkey and Romania, with effect from 1 October 1999.
5. Unfortunately, in the period following the second amendment, there was uncertainty as to the dates on which the Cross-agreement, and other similar agreements between states named in Protocol 4, might be put into place. This appeal has arisen because the Appellant relied upon the Agreement ensuring preferential tariff treatment in respect of exports to the UK from Romania prior to 1 October 1999. The exports were of clothes made in Romania from fabric said to have originated in Turkey and to have been imported to Romania under cover of the Cross-agreement. However certain of the importations of fabric were apparently completed prior to that date, ie the operative date of the Cross-agreement.
6. Her Majesty's Revenue and Customs ("Customs") have not accepted that certain of the relevant exports to the UK are entitled to preferential treatment. Customs maintain that these exports were dutiable on a non-preferential basis. The Appellant contends that the exports are covered by preference. Alternatively, the Appellant says, the situation as to the implementation of the Agreement was so confusing in 1999 that errors were made for which the Appellant was not responsible, so that the accounts should not be altered; alternatively any duty properly due should be remitted in the particular circumstances of this appeal. Such is the scope of the dispute between the parties.

The JCCC papers

7. It is clear to the tribunal that a degree of uncertainty did exist for some months in 1999 as to how and when the Agreement had been implemented with regard to some of the relevant non-Community states. The uncertainty appears from Joint Customs Consultative Committee ("JCCC") information papers issued in 1998/99 (copied behind Tab 37 of the main tribunal bundle). We find that these papers had the object of providing information, in particular to importers, as to the position regarding the implementation of the Agreement.
8. JCCC paper (98)36, under the heading "Cumulation with Turkey", stated that materials which originated in Turkey could "now" be considered as originating when incorporated into finished products exported under preference. That paper was issued in November 1998 and was stated to be "effective" on 1 January 1999. We find that "originated" and "originating" as expressed in this paper connoted compliance with the rules of origin laid down in the Agreement.
9. JCCC paper (99)02, supplemental to (98)36, gave further information as to allocation of origin, mentioning Turkey and referring to (98)36 as to the procedure to be adopted for materials originating in Turkey. That paper was issued in January 1999 and was stated to be "effective" on 1 January 1999.
10. JCCC paper (99)17, supplemental to (98)36 and (99)02, stated that some countries had not yet "signed up" to the Agreement, although most had done so by 1 January 1999, when the Agreement became "effective". The paper indicated that Poland had not done so in respect of Turkey. The paper continued that the JCCC did not know when Poland would be signing, or whether this would be backdated to 1 January 1999. The paper did not mention Romania, but under the heading "Action to Take", it stated:

"We suggest that importers check with their garment manufacturer to confirm whether the customs authority of that country regard Turkish fabric as originating before any production is commenced."

11. Even though the paper does not expressly mention Romania, we therefore consider that it was indicating that importers such as the Appellant ought to check the current preference position with the customs authorities of the country of manufacture of the clothes, ie in this case, Romania. That paper was issued in June 1999 and stated to be "already in force".
12. JCCC paper (99)26, supplemental to (99)17, stated that the agreement between Turkey and Romania (ie the Cross-agreement) had been delayed and was not expected to be ratified before the end of 1999. Under the heading "Action Recommended", it stated:

"The new agreements between Turkey and the European partner countries were to have been in place by 1 January 1999. It is now known that two agreements have not yet been concluded. There may be others. Traders considering having goods manufactured in any of the partner countries from materials originating in Turkey, in order to take advantage of the system of Pan-European cumulation of origin, are strongly recommended to check first with the customs authority in the country concerned that the necessary national legislation exists to permit the use of such materials."

That paper was issued in August 1999 and stated to be "already in force".

13. JCCC paper (00)04, supplemental to (99)17 and (99)26, stated that the Cross-agreement "has now been signed and came into force on 1 October 1999". That paper was issued in January 2000 and was stated to be already in force.
14. Considering these papers in sequence, we think that they present a picture of ongoing uncertainty on the part of the JCCC as to when the Cross-agreement, and at least one other similar agreement, might be entered into and become operative. We note that it was apparently only in January 2000 that a paper was issued giving 1 October 1999 as the operative date of the Cross-agreement, yet by the paper issued in August 1999 it was suggested that the Cross-agreement was not expected to be ratified until the end of that year. Basing itself solely upon that guidance, an importer might well have lost the benefit of three months' preference.
15. Accordingly we think that, in substance, these JCCC papers were less a source of timely information as to implementation than a warning that importers must carry out their own enquiries, locally to their foreign manufacturing operations. Importers were twice invited to contact the customs authorities of exporting countries for specific information, which we think that it is clear that the JCCC itself lacked. Indeed, JCCC paper (98)36 carried a prominent boxed warning as to the responsibility of importers to check entitlement to preference and to pay the correct duty. The JCCC papers can themselves, as we see it, have amounted to no more than a general guide.

The duty said to be due and the jurisdiction of the tribunal

16. On 17 November 2000, Customs issued the Appellant with four Post Clearance Demand Notes ("C18s") for customs duty totalling £243,214 including VAT. These C18s related to importations from Romania to the UK that Customs believed should not have received preferential tariff treatment. The Appellant required a departmental review, which was dealt with by a senior reviewing officer of Customs, Mrs Birnie. She upheld the C18s on 1 May 2001.
17. Article 32 of the first amendment provides for verification of proofs of origin for the purposes of preferential treatment. Customs accordingly made enquiries of the Romanian customs authorities by correspondence entered into between November 2001 and April 2003. Mrs Birnie then revisited the demand, and she withdrew two of the C18s and reduced the duty and VAT demanded in the other two C18s to a total of £40,672.
18. That is the alleged liability that is under appeal, our jurisdiction being to consider the result of Mrs Birnie's review pursuant to s 16 of the Finance Act 1994, in particular s 16(5).
19. Recently, by a letter written to Mr Rowley of the Appellant dated 17 January 2006, the Frontier Unit of Customs have notified a decision to remit (in round figures) the amount of £8,734 including VAT, leaving £31,938 as the duty and tax remaining in dispute. That letter states that the remission is in accordance with article 239 of the Regulation.
20. At the invitation of the parties, the tribunal is to assume that the Appellant has duly applied for remission pursuant to article 239 and can also seek to take advantage of article 220(2)(b). Thus it is common ground between the parties that this tribunal has jurisdiction to decide not only the first issue as to the application of the Agreement but also the second and third issues as to whether the whole or part of the duty still in dispute should, if otherwise payable, be negated by virtue of the operation of article 220(2)(b) or remitted pursuant to article 239. A previous tribunal has held that these latter issues are not a matter of jurisdiction but rather of the legislative context of decisions of Customs against which an appeal lies to the tribunal, so that the final decision that amounts of duty should not be entered into the accounts or that duty should be remitted is not for the tribunal: see South Lodge Imports Ltd v the Commissioners of Customs and Excise Customs Duty Decision No C00103 commencing at [122], in particular at [164-5]. It appears that this may be too restrictive: see Commissioners of Customs and Excise v E Reece Ltd (Chancery Division, 27 July 2000, unreported). That is not however a matter which we are required to decide in this case.

The witnesses for the parties

21. The single witness for the Appellant was Mr John Rowley, the company secretary of the Appellant. He proved his witness statement dated 20 January 2006 and gave oral evidence. Mr Rowley was able to give evidence not only as to the importations of the relevant finished garments from Romania to the UK from the standpoint of the Appellant importer, but also from the standpoint of the Romanian manufacturing exporter. This is because Mr Rowley's other "hat" is that he is the administrator of the Romanian business that manufactures the garments, Beta Impex 93 SRL.
22. The reviewing officer Mrs Birnie swore a witness statement for Customs dated 19 January 2006 but this was objected to on behalf of the Appellant. For personal reasons, Mrs Birnie did not attend tribunal. Counsel appearing for the Appellant would have wished to cross-examine her on the contents of her statement. Neither party was anxious that there should be an adjournment of the hearing for her to give evidence at a late date. Having regard to the tribunal rules, we directed that her statement should not be received in evidence.
23. Customs' only live witness was therefore Mrs Carole Monaghan, an assurance officer in HMRC. She proved her witness statement dated 20 December 2005 and gave oral evidence. Mrs Monaghan's principal role was to correspond with the Romanian customs authorities to ascertain the background to the pre-1 October 1999 importations for which preferential treatment had been obtained.

Background to the reduction in duty demanded

24. To obtain preferential treatment, materials or products for export under the cumulation arrangements fall to be supported by movement certificates known as "EUR 1s". Of the fabric in issue in this appeal, we find that it was probably all covered by purported EUR 1s. We say this because it appears to us that the Romanian business did genuinely obtain relevant fabric from Turkey under cover of EUR 1s generated there and emanating from the Turkish authorities. On the face of these EUR 1s, described as such, the Turkish authorities appear to have certified the origin of the fabric as being Turkey for the purposes of the rules of origin laid down in the Agreement. Otherwise, we have no contemporaneous information as to the attitude of the Turkish authorities towards the validity of the EUR 1s or the entitlement of the exports of fabric to preferential treatment.
25. Copies of examples of Turkish EUR 1s, covering fabric obtained by the Romanian factory, were exhibited to Mr Rowley's witness statement (Tab 47 of the tribunal bundle). We think that it is inherently unlikely that preferential treatment could have been claimed for fabric not covered by such EUR 1s. Of course, many of these EUR 1s covered fabric exported prior to 1 October 1999 and their validity was thus questionable. But there is nothing to suggest to us that Beta Impex 93 SRL may have thought at the time that the EUR 1s might be invalid.
26. The disputed finished garments exported from Romania to the UK purported to be covered by Romanian EUR 1s. We were provided with a set of copies of the relevant EUR 1s, many of which were dated prior to 1 October 1999. In the case of the garments, there is reason to think that the Romanian customs authorities believed that these pre-1 October 1999 exports were covered by the Agreement. One of the exhibits to Mrs Monaghan's witness statement (exhibit "CM10") is a letter dated 7 November 2002 written to Customs by the Romanian customs authorities which includes the following:

"Following the control carried out by us it has resulted that the goods manufactured and exported by SC Beta Impex 93 SRL are of Romanian origin.

"The raw materials were imported in Romania covered by the movement certificates and the invoices from annex.

" … Consequently, the above mentioned movement certificates can be taken into consideration for granting tariff preference regime."

27. That letter was written at a time before Customs had alerted the Romanian customs authority to the fact that the Cross-agreement had not entered into force until 1 October 1999. It appears to us that it may well have been the case that confusion existed in Bucharest as to the implementation date of the Agreement for present purposes.
28. However Customs continued to correspond with the Romanian authorities. The upshot was that, by a letter to Customs dated 16 April 2003, the Romanian authorities accepted that the relevant exports were only "partially" covered for preference by the relevant EUR 1s issued by them (exhibit "CM14" to Mrs Monaghan's statement).
29. That letter enclosed an annex which has complicated matters in that –

It lists garments as being entitled to preferential export treatment which were exported prior to 1 October 1999;

It lists garments as not being entitled to preferential export treatment which were exported after 1 October 1999;

It fails to mention some of the relevant exports at all.

30. Customs raised the last point with the Romanian authorities, but there was no clarification of the annex included with the letter of 16 April 2003. Customs, properly in our view, thereupon allowed matters to rest, having regard to article 32(6) of the first amendment (page 12 of 20 behind Tab 40 in the tribunal bundle). This reads:

"If in cases of reasonable doubt there is no reply [in this case from the Romanian customs authorities] within ten months of the date of the verification request or if the reply does not contain sufficient information to determine the authenticity of the document in question or the real origin of the products, the requesting customs authorities shall, except in exceptional circumstances, refuse entitlement to the preferences."

31. The result of Customs' enquiries was that the Romanian authorities had justified some, but not all, of the EUR 1s issued by them. The preferential treatment accorded to some of the exports remained unexplained, despite the request of Customs; there were some garments for which preferential treatment had been denied when it appeared that those exports might well have attracted such treatment; most fundamentally, perhaps, the question as to why EUR 1s had been issued in respect of exports prior to 1 October 1999 remained unanswered.
32. Not having heard from Mrs Birnie, this tribunal has relied upon the evidence of Mrs Monaghan as to the rationale underlying the outcome of the review of the C18s. We also have Mrs Birnie's review sheet (Tab 29 of the tribunal bundle). We find that the C18s were reduced to cover only those items stated to be non-qualifying for preferential treatment by the Romanians in the annex to their letter of 16 April 2003.
33. At first sight, this approach appears to be consonant with article 32(6) of the first amendment. It does however allow for the benefit of the doubt to be given to the Appellant in respect of the items not dealt with at all by the Romanians in the annex. Moreover it relies upon the information provided by the Romanians as to non-qualifying exports in a case where it is unclear that the Romanians had conducted a full investigation. The shortcomings of the annex are manifest. The result of the review in this appeal does therefore seem to us to countenance that the present case may be one of "exceptional circumstances", as contemplated by article 32(6), otherwise entitlement to preference would simply fall to be denied, as article 32(6) provides: see Pascoal & Filhos Ltda v Fazenda Pública Case C-97/95 at [37-42] in the European Court, cited to the tribunal by Mr Puzey, who appeared for Customs.

Background to the remission of January 2006

34. The remission decided upon by Customs was because Customs were of the opinion that the Appellant might, excusably, have been under the mistaken impression that garments imported to the UK from Romania which had been made from Turkish fabric for which the Romanian authorities had issued preferential certificates on or after 1 January 1999 qualified for preferential treatment.
35. The reason why Customs were of that opinion was that JCCC information paper (98)36 indicated that the Turkey/Romania arrangements, ie the Cross-agreement, would come into force on 1 January 1999. The remission conceded by Customs covered only exports of finished products from Romania between 1 January 1999 and 31 August 1999 inclusive. The remission was only partial because Customs were of the opinion that, following JCCC information paper (99)26, issued in August 1999, the mistaken impression would have been "dispelled".
36. The remission assumes in the Appellant's favour that it will have read the relevant JCCC papers at the time they were respectively issued, and have acted in reliance upon their contents. As appears below, we have made a finding of fact that these assumptions were incorrect.

The evidence of Mr Rowley

37. We find that the business of Beta Impex 93 SRL is one of which high standards were and are demanded. That business's Bucharest factory is one of a limited number of garment manufacturers supplying the UK retail operation of Marks & Spencer plc. Whilst Mr Rowley is the administrator of the business, the person heading the business in Romania is an experienced Romanian solicitor having local responsibility for the achievement of the ethical and legal compliance expected of the factory by its UK customers.
38. We find that neither the Appellant nor the Romanian business had any inkling that the EUR 1s issued by the customs authorities might be invalid. There seems to have been a general assumption in the trade that the Agreement was effectual to accord preferential treatment to such exports from the end of 1998 onwards. It does not appear that an awareness existed generally that cumulative preference might be subject to the putting in place of the Cross-agreement or similar agreements.
39. We find that the Appellant was ignorant at the time of the JCCC papers mentioned above. It has not been shown to the tribunal that the Appellant ought to have been aware of them. However we think that this was irrelevant, because it would not have sufficed for the Appellant to have placed reliance upon them. The papers themselves made it clear that it was the responsibility of importers to satisfy themselves as to the customs duty position relative to their imports and as to the availability of preferential treatment.
40. We find that the Appellant, without knowing of the advice contained in the JCCC papers, did what those papers advised – it liaised with the customs authorities in Romania. The Appellant kept itself informed in that way about the customs position. Mr Rowley requested the solicitor who headed the Romanian business to be in regular contact with the Romanian customs authorities, to verify the position from time to time as to the applicability of the principle of cumulation between Turkey and Romania and as to the preferential tariff treatment of the manufactured garments made from the fabric imported from Turkey. Mr Rowley told the tribunal, and we accept, that the solicitor was in contact with Romanian customs on a daily basis, so that we find that she must have been continuously au fait with the tariff position that the local customs authorities treated as being correct.
41. We have, unfortunately, not heard from the Romanian solicitor. However, having regard to the picture presented by the correspondence between Customs and the Romanian authorities, the undoubted fact of the issue of Romanian EUR 1s bearing dates prior to 1 October 1999, the uncertainty as to the effective date of the Cross-agreement demonstrated by the JCCC papers, and especially the fact that the Romanian business was headed by an experienced lawyer who appears to have taken pains to keep abreast of the requirements of Romanian customs, we are of the view that it has been proved by the Appellant that there were exceptional circumstances falling to be taken into account in considering the outcome of the review under appeal.

The interpretation of Protocol 4 as amended

42. Counsel appearing for the Appellant, Mr Henderson, contended that the wording of article 4 of Protocol 4 is broad enough to encompass that preferential tariff treatment should be accorded to exports of finished garments from Romania to the Community, even where the fabric used to make the garments was imported to Romania prior to the date on which the Cross-agreement came into force. It suffices, he submits, that it can be said of the particular fabric that it would be "originating" within the meaning of the article at the time when the requirements of the article fall to be considered in relation to it, that is, he submits, at the time of exportation from Romania of the finished garment into which it has been incorporated.
43. This is a possible interpretation of the article, because the article is silent as to when its requirements are to be considered as satisfied or not satisfied, as the case may be. However the argument involves making the Cross-agreement retrospective.
44. The second amendment makes it clear that the extension of the principle of cumulation to Turkey applied as from 1 January 1999. Article 4(4) of Protocol 4 provides that the cumulation provided for in that article may only be applied to materials and products which have acquired originating status by an application of rules of origin identical to those given in that protocol. This seems to us to be a reference to article 4(1), which envisages rules of origin annexed to agreements between Romania and each of the countries mentioned in that sub-article: specifically, in the present case, the Cross-agreement.
45. Article 4(1) requires that the Cross-agreement shall have been put in place. The expectation appears to have been that this would have happened by 1 January 1999. But it is clear to us that if, in the event, such had not happened, then article 4 would have executory effect only. Accordingly if there were, for the time being, no such agreement between Romania and Turkey as required by article 4(1), there would be no rules of origin in the light of which importations of fabric from Turkey to Romania could be judged.
46. Did the Cross-agreement, when it took effect on 1 October 1999, have retrospective effect to embrace importations of fabric which might have complied with the rules of origin even though imported prior to 1 October that year? Apparently not. We have in the tribunal bundle (Tab 2) a copy of a "faxed" letter to Customs from the head of the Customs Policy Unit of the European Commission dated 15 December 1999, in which it is indicated that the Romanian authorities had confirmed to the Commission that the Cross-agreement came into force on 1 October 1999. The letter continues:

"The reason for that is that the national legislation of Romania does not allow for the retro-active application of legal measures."

47. It therefore seems to us that Mr Henderson is wrong in his submission that preferential tariff treatment can properly be accorded to finished products incorporating materials originating in Turkey, even though those materials were imported to Romania prior to 1 October 1999. In our view it is not possible so to construe Protocol 4, in the absence of a Turkey/ Romania agreement covering the period 1 January – 1 October 1999.

Article 220(2) of the Regulation

48. An error of the customs authorities occurred in not entering duty in the accounts. The Turkish customs authorities had made an error, as we see it, that cumulation applied when it did not. The error was then apparently compounded by the reliance of the Romanian customs authorities on the EUR 1s provided in respect of the imported fabric. (We say "apparently" because it is a feature of this appeal that we have no explanations from those authorities.) Finally, it was assumed that the Romanian EUR 1s were sound.
49. There was however no error to the extent that the Romanian EUR 1s were sound. We have found that a thorough investigation as to this on the part of the Romanian authorities was lacking for the purpose of article 32(6) of the first amendment. However the Romanian authorities in the end adopted the position that some exports were qualifying and some non-qualifying. With regard to the qualifying exports, the result was that, in the view of those authorities, preferential tariff treatment was after all attracted.
50. With regard to the first paragraph of article 220(2)(b), it appears to us that neither the Appellant nor the Romanian factory ought reasonably to have done more to detect the difference between those exports attracting preferential treatment and those not attracting such treatment, in the particular circumstances of this case. They acted in good faith by keeping in touch with the Romanian customs authorities from time to time with regard to the export position. They appear to have complied at every stage with the requirements of those authorities.
51. As to the second paragraph of the article, we think that the truth was probably that the Romanian customs authorities were themselves confused as to the availability of preferential tariff treatment.
52. We do not find that the exporter provided the Romanian customs authorities with an incorrect account of facts, as mentioned in the third paragraph of the sub-article, nor was there any lack of care as mentioned in the fourth paragraph of that sub-article. The final paragraph of the sub-article does not apply.
53. Mr Puzey has drawn our attention to R v Commissioners of Customs and Excise, ex parte Faroe Seafood Co Ltd, Foroya Fiskasola L/F Case C-153/94 in the European Court, at [98-106]. When we consider the circumstances of the present appeal against the three criteria referred to at [99], we find that we cannot fault the Appellant or the Romanian factory under any of them.
54. The rules for attracting preferential tariff treatment are, in our view, properly described as complex – indeed, it is that very complexity which led to the confusion that we have identified. The complexity of the rules lay not in their wording, but in the scope of their application. One aspect of this was the confusion as to their status between 1 January and 1 October 1999, which is an issue that we have had to decide.
55. We find it impossible to point to any factor that might have led to detection of errors, notwithstanding the professional experience of the Romanian solicitor, when one takes account of the degree of care that she exercised in the matter. Mr Rowley and those at the Appellant properly referred to her to check the position. It is to the credit of the solicitor that she did not rely upon her own knowledge, but checked the position with the authorities, who would be best placed to confirm or correct her understanding of the tariff position.

Article 239 of the Regulation

56. The present is not a case in which, as we find, remission of duty is precluded by deception or obvious negligence on the part of those concerned, as mentioned in the second indent of article 239 and in article 905(1) of the Code. There was nothing of that kind in this case.
57. Article 904(c) of the Code provides that the presentation, for the purpose of obtaining preferential tariff treatment of goods declared for free circulation, of documents subsequently found not to be valid for that purpose, does not ground the remission of import duties, even when the documents were presented in good faith. However this applies where that ground is the only ground relied upon. That is not the case here. The true ground for remission is not the presentation of documents, but rather the shared confusion over the application of the rules for preferential tariff treatment prior to 1 October 1999.
58. Mr Henderson has relied upon Eyckeler & Malt AG v Commission of the European Communities Case T-42/96 in the European Court, at [129-34]. The court was there considering article 13 of Regulation 1430/79/EEC, the predecessor of article 239. The court stated, at [132-3], that the article is intended to apply, inter alia:

" … where the circumstances characterising the relationship between a trader and the administration are such that it would be inequitable to require the trader to bear a loss which it normally would not have incurred."

59. The exercise is one, the court said, whereby:

" … the Community interest in ensuring that the customs provisions are respected [is to be balanced against] the interest of the importer acting in good faith not to suffer harm beyond normal commercial risk."

60. Article 239 was provided in order to cater for special situations other than those which had arisen most often in practice and for which specific provision had therefore not otherwise been made by the Regulation. In Reiner Woltmann v Hauptzollamt Potsdam Case C-86/97 at [22], the European Court said that such a special situation would exist where there were:

" … factors liable to place the applicant in an exceptional situation as compared with other operators engaged in the same business."

61. Mr Puzey has submitted that the case of Eyckeler was wholly different to the present, as in that case a serious breach of duty was accepted. We do not, however, understand that the principles relied upon in that case by the Appellant are other than of general application in this sphere of Community law. They were treated as such by the tribunal in the South Lodge case supra, at [100-4], and we conceive that we should do likewise.
62. As we see it, the uncertainties in the circumstances of this particular case as to the scope of the preferential tariff treatment in 1999 with regard to fabric originating in Turkey and imported to Romania went beyond normal commercial risk. The Appellant and Beta Impex 93 SRL were placed at a disadvantage compared with those manufacturers and exporters having the benefit of cumulation arrangements with the other countries identified in article 4(1) of Protocol 4 that were in place from 1 January 1999 onwards. It appears to us that that was neither intended nor fair.
63. It was in our judgment inequitable for the Appellant and Beta Impex 93 SRL to have placed reliance – justifiably in our view – upon the state of affairs condoned by the Romanian customs authorities to the effect that preferential tariff treatment was available from 1 January 1999 onwards, and then, having acted reasonably in exporting the finished garments with the supposed benefit of preferential tariff treatment, to find this advantage denied. In our view, Customs were quite correct to regard the situation that had arisen as a special one within the intendment of article 239, as was stated in their letter to the Appellant dated 17 January 2006.
64. We think, however, that the special situation extended beyond 31 August 1999. That is an artificial date, arrived at in reliance upon assumed knowledge of the JCCC papers that was irrelevant. We find that the special situation extended until the time at which the Romanian customs authorities accepted that preferential treatment was dependent upon originality of the imported fabric being demonstrated in compliance with the Cross-agreement, at which time the Appellant and the Romanian factory could themselves reasonably be expected to have toed the line. We are satisfied that that was after any of the pre-1 October 1999 imports and exports with which we are concerned.

Decision of the tribunal with reasons

65. We reject Mr Henderson's submissions as to the first issue, for the reasons we express in paragraphs 42 to 47 above.
66. We agree with Mr Henderson that article 220(2)(b) should apply, for the reasons we express in paragraphs 48 to 55 above.
67. We agree with Mr Henderson that a special situation arose entitling the Appellant to remission as provided in article 239, for the reasons we express in paragraphs 56 to 64 above.
68. To the extent that article 220(2)(b) does not apply to prevent subsequent entry in the accounts, we decide that the duty in issue should be remitted so far as attributable to the period during which the special situation endured, as mentioned in paragraph 64 above.
69. We therefore allow the appeal and quash the decision arrived at on review by Customs.

Liberty to apply

70. The appeal may be restored before us if necessary for the purposes of working out the consequences of this decision.
71. The Appellant has not succeeded on the first issue before the tribunal, but has otherwise won the day. Without having heard argument, we are presently minded to award the Appellant all its reasonable costs, without making a deduction by reason of the Appellant having lost in respect of the first issue. We are prepared to hear argument as to costs in default of agreement; therefore we also grant liberty for the appeal to be restored if need be for that purpose. The Chairman is prepared to assess costs summarily if required.

MICHAEL JOHNSON

CHAIRMAN

Release Date: 9 March 2006

MAN/2004/7011