A landmark EU ruling that calls for interest to be paid on wrongfully collected customs fines from exporters could see member countries facing billions of euros in claims.
The ruling, which was made on behalf of German shoe manufacturing company, Wortmann, states that companies claiming refunds on wrongfully imposed antidumping duties should also be able to claim interest on the amounts paid from member states. Further, the interest is due from the day the payment was made.
The move opens the door for companies in the EU that have received money back from customs over the past three years, to now go back to claim interest on the amounts.
“The implications of the ruling are profound and could see countries needing an additional budget line,” partner at Sidley Austin, Arnoud Willems, who represented Wortmann, tells GTR.
“This is most relevant for industries with double-digit import duties, for example electronics, automotive, textiles and agriculture. Interest payments will be made by individual EU member states, so countries with a high concentration of these industries will be the hardest hit. These include Germany, France, Italy, Poland, Belgium and the UK who make up 85% of import duty collections in the EU.”
According to analysis by the law firm, potential refund claims could be in the billions of euros. In 2015, total imports levied by the EU amounted to €25bn – if only 4% are disputed, this is already a billion per year. If you go back three years and add interest of around 6%, which is the case for Germany currently, and assume most cases will take at least five years to resolve, you are in the billions, explains Willems.
The Federation of German Wholesale, Foreign Trade and Services (BGA), a business association, describes the ruling as “good news for importers”.
“We understand the interest of German customs or tax officials to collect and keep as much revenue for the treasury as possible,” says Marcus Schwenke, head of department for imports, international trade policy and customs at BGA.
“However, it should be clear that this should not comprise revenue collected on the basis of an invalid legal footing, nor the interest attached to it. Companies that had to deal with unjustified custom duties were negatively affected by a decreased solvency and should be entitled to be refunded on the interest.”
The case at hand
In the case of Wortmann, the company had paid anti-dumping duties on certain footwear imported between 2006 and 2011. In February 2012, the European Court of Justice (ECJ) ruled that the EU had illegally imposed the anti-dumping duties. Upon Wortmann’s request, German customs repaid the anti-dumping duties it had collected.
However, it refused to pay interest, based on Article 241 of the Community Customs Code, which states the repayment of duties “shall not give rise to the payment of interest”. Wortmann considered the refusal violated general principles of EU law and therefore took the matter to the German fiscal court, Finanzgericht Düsseldorf, to refer the issue to the ECJ.
Despite the ECJ ruling in favour of the manufacturer, the German customs office is refusing to pay the interest now demanded. The case is now back in German courts and a judgement is expected within two weeks.
“The EU must amend its customs legislation to bring it in line with the Wortmann case,” says Willems.
“The European Commission (EC) is saying this is not necessary, but national customs authorities are now raising their concerns on whether this should happen.”
A further twist to the debate is who should be liable to pay the interest if the initial decision was made at the European level. The regulation imposing anti-dumping duties is an EU regulation, which in the past member states had to approve, but is now delegated to the EC. EU customs law, together with the ruling on the Wortmann case, make the local customs authority liable for the repayment.
“The question is whether Germany can claim this back from the EU,” says Willems.
“It is a mistake from the EU that Germany has to pay interest over. The EU responds that this type of issue is covered by the percentage of import duties that German customs may keep, and that it won’t repay. This may end up in a new court case of Germany trying to claim the money back from the EU. This case has a number of angles and consequences.”
The bigger discussion now sits with a customs expert group who will put forward their proposals to the EC. However, countries are considering whether to make a more formal application that would see the debate taken to the ECJ.