ECJ renders judgement in Jumbocarry case: suspension provision Art. 103(3)b UCC applies to customs debt incurred under CCC

The ECJ just rendered a decision on the application of the suspension provisions of Article 103(3)b and 124(1)a of the UCC to customs debts incurred pursuant to the CCC before 1 May 2016 that had not yet become time-barred on that date, and rules that this application does not infringe with the principles of legal certainty and protection of legitimate expectations.   

Author: Jikke Biermasz is attorney-at-law and partner at Ploum, and part of Ploum’s Customs, Trade & Logistics practice group. 

As of 30 October 2013, the Union Customs Code (‘UCC’) entered into force and replaced the then applicable Community Customs Code (‘CCC’). However, most provisions relevant to legal practice did not enter into force until 1 May 2016. This also applies to the provisions that play the leading role in the recent judgment of the European Court of Justice (‘ECC’) of 3 June 2021 rendered in case C-39/20 (Jumbocarry Trading GmbH) as a result of a reference for a preliminary ruling by the Dutch Supreme Court. Presumably to the disappointment of interested parties who anxiously awaited the outcome of this referral case about the vicissitudes of transitional law, the ECJ has ruled that the suspension provision of Article 103(3)b UCC can be applied to customs debts that have been incurred under the CCC and that were not yet time-barred on 1 May 2016. Thus, debtors with ‘old’ CCC debts must equally take into account that the regular period within which the customs authorities of the Member States may notify customs debts, is effectively not limited to three years, but is extended by the 30 days period during which the customs authorities have notified them of their intention for recovery by virtue of Article 22(6) in conjunction with 29 UCC, and they have been given the opportunity to respond thereto.

Issues in the transition from CCC to UCC

With this ruling, the ECJ exclusively authorized to interpret EU law, has provided clarification in respect of one of the main issues of transitional law that has occupied the minds of practitioners of customs law in recent years following the entry into force of the UCC. Although not much has changed in terms of content, there are a number of striking differences between the CCC and UCC. Looking back now in June 2021, more than five years after the legislative change, the number of cases where these issues can play a role is logically decreasing. Still, there are certainly a few other unanswered questions, for example the application of interest on arrears, ex Article 114(2) UCC, on debts incurred under the CCC. Also a novelty that was introduced by the UCC, and that is enthusiastically applied by Member States customs authorities on CCC debts, although, contrary to the letter of the provision, not “from the date on which the customs debt was incurred”, but per 1 May 2016. Time will tell whether the remaining issues will be settled in favor of the litigants or the EU treasury. For the time being, the ruling in the case of Jumbocarry does not give too much hope. What was this case about?

Jumbocarry case

On 4 July 2013 Jumbocarry had lodged an import declaration for free circulation to Dutch Customs in respect of a consignment porcelain goods indicating Bangladesh as preferential country of origin. The duty rate applied was 0%. Following an audit, Dutch Customs established that the certificate of origin was false. The application of the standard rate of 12% of the value would adversely affect Jumbocarry as declarant. Therefore, Dutch Customs communicated on 1 June 2016 its intention, in accordance with Article 22(6) UCC in conjunction with Article 29 UCC, to impose a post-clearance assessment and recover the underpaid duties. In accordance with Article 8 of the UCC Delegated Act Jumbocarry was given a period of 30 days to express its view on the matter. On 18 July 2016, Dutch Customs notified Jumbocarry by means of a ‘request for payment’ of the customs debt that had been incurred under Article 201 CCC on 4 July 2013, the date of acceptance of the import declaration. By then, already more than three years had lapsed since the date on which the debt had been incurred.

In the appeal proceedings following the imposition of the debt, Jumbocarry logically argued that the customs debt had meanwhile become time-barred, and that the suspension provision of Article 103(3)b UCC could not be applied to a CCC debt. After all, in the CCC there was no provision suspending the three-years limitation period for the 30-days period of the prior communication and the response to that. The customs chambers of the district Courts of Noord-Holland and the Court of Appeal of Amsterdam ruled in favor of Jumbocarry, but the State Secretary for Finance did not accept this outcome and filed an appeal in cassation with the Dutch Supreme Court.

Reference for preliminary ruling

Doubting the correct interpretation and application of the relevant provisions, the Supreme Court referred the case to Luxembourg for the final say. In a relative short judgment the ECJ has rendered a decision that is not in favor of Jumbocarry and, indirectly, many market operators who have submitted the same ground of appeal in their respective cases challenging customs claims regarding CCC debts imposed more than three years after the date of incurrence of the debt through applying the suspension provision of Article 103(3)b UCC. The main elements of the ruling of the ECJ are:

• The ECJ recalls that in accordance with settled case-law rules of procedural nature generally are taken to apply from the date of entry into force, unlike substantive rules which are “usually interpreted as applying to situations existing before their entry into force only in so far as it follows clearly from their terms, their objectives or their general scheme that such effect must be given to them” (consideration 28).
• The ECJ adds to this that a new legal rule applies from the entry into force of the act introducing it, and that, while it does not apply to legal situations that arose and became definitive prior to that entry into force, it does apply immediately to future effects of a situation that arose under the old law (29).
• According to the ECJ, the obligation of prior communication set by Article 22(6) and Article 29 UCC is a ‘procedural rule’ (30). To support this view the ECJ refers in consideration 31 to the observance of the right of defence as fundamental principle of EU law as developed in the well-known Sopropé case-law and in consideration 32 to the more recent case of CEVA Freight Holland (C-249/18). The ECJ therefore rules that as from 1 May 2016 the customs authorities of the Member States were required to comply with the obligation of prior communication.
• In consideration 35 the ECJ rules that Article 221(3) CCC which provided that a customs debt should be notified within three years after the date the debt is incurred, is a ‘substantive rule’. Reference is made to the equally well-known Molenbergnatie judgment (case C-201/04). According to the ECJ the judgment in the Molenbergnatie case-law can be applied to Article 103(1) UCC, which is the successor of Article 221(3) CCC: “in so far as the wording and scope of that latter provision are essentially identical to those of the former provision”.  Incidentally, the latter seems a highly interesting consideration for legal practice, since the ECJ states in so many words that case law rendered under the old customs legislation can be equally relevant for the interpretation of the UCC provisions.
• The ECJ notes that similarly, Article 103(3)b UCC should be regarded as enacting a substantive rule.
• In consideration 36 the ECJ concludes from the case-law that in principle Article 103(3)b UCC cannot be applied to legal situations that arose and became definitive under the CCC.
• Bad luck for Jumbocarry because the debt arising from its import declaration had not yet been extinguished on 1 May 2016 (consideration 37). Notwithstanding the fact that its debt had been incurred under the CCC, Jumbocarry had not yet acquired a definitive legal position at the time of the entry into force of the new regulations (38), and therefore it must accept the application of Article 103(3)b UCC (39).
• In the considerations 40 to 45 the ECJ pays some attention to the legal systematic and historic background of the rules newly introduced by the UCC. In view of a consistent and uniform application of EU legislation, Article 22(6) and Article 29 UCC and Article 103(3)b UCC form a “indivisible whole, the individual elements of which can not be considered in isolation” (40). With the simultaneous application of the provisions, according to the ECJ, the EU legislator “had sought to strike a balance between two objectives, namely, on the one hand, the protection of the financial interests of the European Union and, on the other hand, the protection of the debtor with regard to his or her rights of defence” (42).
• Although ECJ thus mentions the EU legislator had the observance of the right of defence in mind, Jumbocarry’s appeal to other fundamental principles, namely that of legal certainty and protection of legitimate expectations, is set aside (47). These principles, which require that rules of law be clear and precise and that the application of those rules is predictable (48), do, according to the ECJ, not entail an obligation to maintain the legal order unchanged over time (50).
• The ECJ rules that Article 103(3)b UCC applies to debts which have been incurred before 1 May 2016 under the old legislation and which have not yet become time-barred on that date.

Conclusion

The ECJ has passed its judgment and unfortunately not in favor of market operators. In this context the argument of seeking a balance between two objectives, namely on the one hand protecting the debtor’s right of defence and, on the other hand, protecting the financial interests of the EU, seems somewhat inappropriate to me. After all, under the CCC, it had long been established case-law (Sopropé) that customs should not impose a customs debt abruptly without prior communication, but already had an obligation of prior communication. Of course it is to be welcomed that this obligation of prior communication has been codified in the UCC. However, I do not immediately see why, in that context, the period for making the notification of the debt should effectively be extended by 30 days in respect of customs debts that were lodged under old legislation that provided for a strict three-years timebar, and equally respected the right of defence based on case-law, but then still within the three-years period.

This article was initially published on Ploum’s website – available here.