Could HMRC collect customs duty on Chinese garlic more than three years after importation? The papers wrongly stated that the garlic came from Cambodia. FMX itself was not implicated in the fraud. Under the Customs Code then in force, the decisive question was whether the debt resulted from an act capable of giving rise to criminal proceedings.
Between August 2003 and January 2004, FMX imported ten consignments of garlic and declared them to be of Cambodian origin. That declaration was said to attract exemption under the EU’s “Everything But Arms” preference. The garlic had in fact come from China. It therefore fell outside the relevant quota and attracted both ad valorem duty of 9.6% and anti-dumping duty of €120 per 100kg. The duty which should have been paid was £503,577.63.
Law Teacher writing support
Writing a law essay?
We choose a writer who is an expert in your area of law and qualified to at least the academic level you select. Most of our writers hold a master’s degree or PhD, have teaching experience, or both.
Send us your question and, if you wish, any marking criteria. We’ll write an essay to your instructions.
The false origin came to light while HMRC was investigating later imports. In February 2007 HMRC issued timely post-clearance demands for £370,872.50 on those later imports. In December 2010 the First-tier Tribunal dismissed FMX’s appeal, finding that the goods had originated in China. In March 2011, just over three months later, HMRC demanded the duty on the 2003–04 consignments. If the ordinary three-year limit applied, that communication was far too late.
When duty becomes payable
Under the then Customs Code, a customs debt is the obligation to pay the import duty due on particular goods. On importation it is incurred when the customs declaration is accepted, and the person making the declaration is the debtor. Even so, the time for payment runs only from communication of the amount by the customs authority. Article 221 normally requires that communication within three years of the debt being incurred, with time suspended while a relevant appeal is pending.
Article 221(4) created an exception:
Where the customs debt is the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the amount may, under the conditions set out in the provisions in force, be communicated to the debtor after the expiry of the three-year period referred to in paragraph 3.
The First-tier Tribunal found, and it was common ground, that the certificates were known by their makers to be false, that FMX presented them to HMRC, and that FMX was not implicated in the underlying fraud. Presenting them was nevertheless an act liable to give rise to criminal proceedings under the strict-liability offence in section 167(3) of the Customs and Excise Management Act 1979. It was also common ground that HMRC did not have to show that a prosecution actually followed, or that FMX itself was the person who committed the relevant criminal act. The criminal-proceedings condition was therefore met.
The dispute about article 221(4)
The United Kingdom had not prescribed a substitute fixed deadline for this situation. Section 37(2)(a) of the Limitation Act 1980 also excludes Crown proceedings for tax or duty from that Act. FMX argued that article 221(4) merely gave each member state an option to set, in advance, a replacement fixed time limit. If the state did not do so, the three-year limit remained, because an open-ended power to communicate the debt would breach the EU principle of legal certainty. The First-tier Tribunal and the Court of Appeal broadly accepted that argument. The Upper Tribunal found for HMRC.
HMRC said that the three-year limit was automatically displaced once the criminal condition was satisfied. Certainty could then be supplied by a national fixed limit, by domestic controls such as abuse of process, laches or the Limitation Act, or, failing those, by an EU requirement to act within a reasonable time.
The majority reasoning
Lord Briggs, with whom Lord Reed, Lord Hodge and Lord Kitchin agreed, treated the three-year period as unsuitable where criminal proceedings were in prospect, not as a suitable EU rule from which states could optionally depart. Member states deal differently with the overlap between criminal proceedings and recovery of duty: the amount might be determined in the criminal case, or civil proceedings might be stayed so as not to prejudice the prosecution. Article 221(4) therefore permits communication after three years, subject to whatever Community or national provisions are actually in force.
That reading distinguished cases on a different regulation, including Fleischhandel, where member states were expressly given the possibility of adopting a longer period. There, failure to adopt a foreseeable and proportionate national period left the EU period in place. There was no gap. Here, satisfaction of the criminal condition itself displaced the three-year limit. The resulting absence of a fixed national deadline was a genuine gap.
Lord Briggs held that no English rule filled it. Abuse of process and laches control delayed or unfair proceedings, not the earlier communication which makes the duty payable. Laches is also concerned with equitable relief, whereas recovery of this duty is not an equitable claim. Nor was it necessary to disapply section 37(2)(a) and revive the Limitation Act. EU law already supplies the missing control: where no sufficient time limit exists, legal certainty requires the step to be taken within a reasonable time. That principle is not confined to claims between EU institutions; it can also protect a private customs debtor.
No reference to the Court of Justice was required. The reasonable-time question also did not need to return to the tribunals. No further facts were outstanding, and neither party asked for a remission if that analysis prevailed. HMRC had communicated the debt within four months of the First-tier Tribunal’s decision on the closely related later imports. It was reasonable to wait while that litigation was unresolved, and FMX had not suggested that the communication was outside a reasonable time. Lord Briggs held that it clearly was not.
Lady Arden’s different route
Lady Arden agreed that the appeal should be allowed, but relied more heavily on domestic law. She agreed that article 221(4) does not require a member state to legislate for an extended period, and that its conditions may be found in national or EU provisions. In her view, EU law defers to national law on whether time has extinguished the debt. The Court of Appeal was therefore wrong to treat EU law as always requiring a limitation period fixed in advance.
She would not have used the EU reasonable-time principle to decide whether HMRC was time-barred. On her analysis, the absence of an English limitation period was not itself a breach of EU law defeating the communication. She noted that domestic law might separately control unreasonable delay, including through judicial review, but said it was unnecessary to decide that point.
Verdict: The Court unanimously allowed HMRC’s appeal. The usual three-year deadline had been displaced. The majority held that the March 2011 demand was made within a reasonable time. Lady Arden agreed in the result for different reasons.
