By Deandra Frederick

 For businesses who rely on importing goods or raw materials it is undisputed that certainty of supply, fixed classifications for tariff purposes, and the application of appropriate rates of duty are key to fixing prices of goods and stability in local market supply chain. Transparency in the trade facilitation process and the access to recourse when disputes arise are therefore pivotal in the effective facilitation of trade.

In Trinidad and Tobago, Customs activities including the fixing of classifications and tariffs are governed by the Customs Act Chap: 78:01. The classification of goods is determined in accordance with the Universal General Rules for the Interpretation of the Harmonized System which is found in the First Schedule to the Customs Act which also sets out the general classifications of goods and the rates of duty payable.

In the recent case of Westco Foods Unlimited v the Comptroller of Customs, the High Court of Trinidad and Tobago held among other things that there was no legal justification for a post clearance audit conducted by Customs which resulted in a demand from Customs that the Claimant, an importer of food products, make payment of short-levied duties. The Court also held that the Claimant had a right to be heard on the audits conducted by Customs particularly where the Claimant had complied with all of Customs’ requirements and had already taken delivery of the goods.

Evidence in the case showed that for a certain period the Claimant in its self-assessment declaration form had been using the code which related to  the preferential rate of import duty of 5% for the importation of the same product under the general heading “French Fried Potatoes” to include wedges and there had been no dispute by the Division to the Claimant’s use of this tariff code to clear the goods.

At the time of delivery the Claimant would have paid the duty that was due in accordance with its obligations under the Act and the Court held that it was obviously impermissible for the Comptroller to retrospectively impose back tariffs for almost nine preceding years on the basis of an order made.

One of the questions in the Westco case was– whether an importer, who had taken delivery of goods was entitled to be heard on the audits conducted.

Post clearance audits or audit-based controls are defined by the Revised Kyoto Convention as measures by which Customs satisfy themselves as to the accuracy and authenticity of declarations through examination of the relevant books, records, business systems and commercial data held by persons concerned.

The circumstances of the Westco case presented unique facts such that there ought to have been  adherence to the fundamental rules of natural justice. This could have been effected by  the Claimant being afforded an opportunity to participate in the process; being given prior notice of Customs’ intention to perform the audits with reasons for such audits and also by the Claimant being provided with the opportunity to be heard on the legal authority for it, as well as on the methodology to be engaged in the audit. However it was found that these steps were not undertaken.

Evidence was put forward that Customs neither consulted with nor sought the representation of the Claimant/importer prior to the performance of the Post-Clearance Desk review on the imported items.

It was therefore found that the policy of Customs to conduct the post-clearance audits without first affording the Claimant an opportunity to be heard was improper, unfair and illegal and that it betrayed the basic requirements of fairness.

This case highlights some key issues and measures in trade facilitation which, if conducted effectively, contribute to pro-trade and a competitive national economy while maintaining appropriate revenue collection and border controls. These include but are not limited to transparency and access to recourse which are briefly touched on below.

Scope of the Customs Act and role of the Customs Division

The Customs and Excise Division of Trinidad and Tobago (the ‘Customs Division’) assists the Government in achieving its national and international policy aims. The Division undertakes the roles of revenue collection and protection, application of trade policy, protection of the physical borders, society and the environment and the collection and dissemination of accurate trade related information and statistics.

The Division is therefore responsible for enforcing, not only the Customs Act, but the Value added tax, the Excise General Provisions and the Free Zones Act just to name a few. One pivotal objective of the Customs Division is that of encouraging voluntary compliance with these laws and regulations under which the Division is empowered to act.

This is maintained through an awareness of rights and expectations of fair and efficient treatment and the implementation of clear, simple legislation and ‘user friendly’ administrative systems and procedures.

Transparency in Trade facilitation

The traditional public image of the Customs official is often portrayed as the uniformed man or woman at a frontier post or airport and we often believe that the term ‘trade facilitation’ solely involves State entities such as the Ministry of Trade in its role as the facilitator of business. However, the truth is that other actors are involved in this process such as the private sector (producer/exporter or importer) as well as other non-customs entities who play just as important a role.

It is no doubt understood that business requires predictability in costs, processes, and government requirements. However, at both ends of the coin transparency is crucial. It supports businesses by making the “rules of the game” available and enables the state to adequately effect its objectives. This compliance is also facilitated when there is participation of trade stakeholders in both the public and private sector by consultation and interaction in the legislative process, providing their views and perspectives on proposed laws before enactment to facilitate compliance.

Access to Recourse

Providing importers with access to recourse is crucial as there can often be an imbalance of power between a trader and customs particularly where a majority of the disputes in Trinidad and Tobago concern classification issues as was illustrated in the Westco “wedges vs French fries debate.” Access to recourse ensures that customs administrations work in a transparent way and that they are held accountable for their decisions. One way this is done is through an appeal or review mechanism.

This access is provided for under the Customs Act. Where documentary submissions do not support physical examinations with regard to the quantity and description of the declared goods, Customs often requires payment of additional duties. Based on the level of discrepancies found by Customs, fines may also be payable. At the point of the physical examination of cargo, if an importer disagrees with Customs’ decisions they may ask for an on-site administrative review. In the case of a continued disagreement however, the importer has 90 days to appeal to the Classification Committee under the Comptroller of Customs and Excise; the time-frame for resolution of disputes at this level is 90 days with the final avenue for appeal being the Tax Appeal Board.

The governing principles relative to these appeals are set out in the Revised Kyoto Convention. The appeal system should consist of four levels: (1) the right to request the reason for the decision, (2) the right of an initial appeal to customs, (3) the right of further appeal to an authority independent of customs, and (4) the right of appeal to a judicial authority.

As seen from the Westco case customs had recalculated the duty payable by the importer with the possibility of the imposition of excess duty/ short levy duty which was found to interfere with his right to property. The Claimant since taking delivery of the goods would have long operated on the basis of what he considered to be the appropriate commercial costs. The Claimant was only asked to submit literature relative to the classification dispute after the Customs Order determining the issue had been made. In the circumstances of the Westco case this opportunity to submit literature did not discharge Customs duty to provide the Claimant with the opportunity to be heard.

In all cases, customs ought to be required to provide the reasons for the review decision in writing to ensure transparency. The right of appeal in customs matters will contribute to a predictable trading environment, especially in conjunction with the publication of customs law and regulations. Often the experience of importers will indicate that delays and bureaucratic hindrances when trading can operate as barriers that are sometimes much more restrictive than the tariff itself.

Disclaimer: This Document Provides General Guidance Only And Nothing In This Document Constitutes Legal Advice. Should You Require Specific Assistance, Please Contact Your Attorney-At-Law.


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