EU classification regulations retroactive effect

11 marzo 2008

Jasper Helder

Previously, classification regulations did not have retroactive effect. The European Court confirmed this as early as 1979 in the "Biegi"-case, and reiterated this in the more recent "CBA"-case. In a letter to national customs administrations from 29 May 1996, the EU Commission confirmed this view.

Of course, this coin has 2 sides: customs cannot claim additional duties retroactively, and importers cannot reclaim duties paid retroactively.

New EU Policy

The EU Commission is now trying to change this. In a policy document adopted in July 2007, but published only recently, the Commission states (summarised) the following:

There are 2 types of classification regulations:

1. On a 6 digit HS level ("HS-regulation")
2. On a 8 digit EU CN level ("CN-regulation")

Types of classification regulations & retroactive effect

HS-regulations are considered as "interpretative": they give guidance on how the existing HS must be interpreted. CN-regulations can be intepretative, but also "normative": when they lay down additional classification requirements on EU CN level and thus create a new rule.

"Normative" regulations (being some CN-regulations) have no retroactive effect as they introduce a new rule. "Interpretative"regulations (all HS-regulations and some CN-regulations) can be applied retroactively, however.

The EU Commission then divided the "interpretative"-regulations into 2 subcategories: "new" regulations (where no previous classification regulation existed) and "amending" regulations (which only amend or repeal an existing classification regulation).

"Amending" regulations

If the duties as per an "amending"-regulation are higher than under the previous regulation, importers are protected against retroactive claims for the higher duties by the older regulation. For possible repayment requests for imports under the older regulation (with the lower duty rate) importers can still rely on the older regulation up to the date the new regulation came into effect.

If the duties as per an "amending"-regulation are lower than under the previous regulation, importers can apply for repayment retroactively (3 years). There is an exception when the reduction of duties follows from a WTO DSB report, which do not have retroactive effect (which the new regulation will clearly state).

"New"regulations

If the duties under the "new"regulation are lower than previously paid by an importer for these products, the importer can apply for repayment retroactively (3 years).

However, if the duties as per the "new" regulation are higher than those previously paid by an importer for these products, customs can in principle claim additional duties retroactively. The retroactive claims by customs are limited to 3 years. This period can be extended though, when the previous imports can be considered as declared wrong and thus are a criminal offence. If that is the case is at customs' discretion (under their national law). Depending on the EU country, claims could go back for 5 or 10 years. This could occur where customs and the importer were in litigation about classification before the new regulation (confirming customs views and a higher duty rate) came into effect.

If an importer has a Binding Tariff Information ("BTI", confirming a lower duty rate) , the BTI will lapse due to the conflicting new regulation. Nonetheless, the BTI will protect the importer against retroactive claims by customs.

Conclusion

When a product is first classified in an EU regulation, this regulation can in principle allow customs to claim additional duties retroactively, if the duty rate as per the regulation is higher than previously paid by the importer, unless the importer is protected by a BTI.

Similarly, if the duty rate as per the regulation is lower than previously paid by the importer, the importer can claim repayment of duties retroactively for 3 years.