New case law provides possibilities to reassess preferential treatment of goods imported into Sweden in a scenario of non-compliance with customs regulations

Background
According to the provisions in the European customs regulations, the Union Customs Code, it is stated that in the case of failure to comply with customs regulations at the moment of importation of goods into the EU, a customs debt is considered to have occurred towards the authorities. Liable for this customs debt is any person who knew or should have known of such non-compliance. These provision have in turn been adopted by the EU member states in their national legislation.

Sweden has held a very strict application of these provisions over the years and more specifically when it comes to the errors or mistakes occurring in the customs clearance of the goods upon import into Sweden. It is common procedure that the goods are assigned to a freight forwarder to be transported cross border into Sweden. The freight forwarder is engaged either by the seller of the goods or the purchaser but the responsibility for the obligation to submit the customs declarations, to pay the customs duties as well as the import VAT and in turn the right to reclaim import VAT charged on the goods lies with the importer of record, which is normally the owner of the goods. However, in case of an incorrect customs clearance, the freight forwarder, who is in possession of the goods when transported cross border, is commonly considered liable for the customs debt that have occurred due to the non-compliance. These charges normally result in significant amounts to be paid.

The effects of the Swedish application of the rules have been debated for a long time, specifically due to the lack of possibilities to rectify occurrences of non-compliance that have been made due to mistakes or errors made when goods were transported cross the border. The key issue is that the rules do not allow for any charges levied on goods imported, i.e. customs duties and import VAT, to be reclaimed by the actual owner of the goods once a debtor liable for the customs debts has been appointed. This applies even though it can be shown that the incorrect clearance which resulted in the non-compliance was made due to an error or mistake and that it is not a case of fraudulent behaviour. This application results in customs duties charged on goods subject to preferential treatment and import VAT to be levied on the freight forwarder in possession of the goods even though they are not the actual owner of the goods.

New case law
During the end of 2021, the Swedish Supreme Administrative court (the Court), issued a ruling in a case where goods originating from a country outside the EU, have been transported into Sweden without being properly cleared through customs at arrival.

In the case at hand, goods were assigned to a freight forwarder to be transported from Turkey to their final destination in Sweden under a transit arrangement. The goods themselves were, according to an agreement concluded between Turkey and the EU, subject to preferential treatment with no customs duties to be charged on the goods when imported to the EU assuming certain certificates stating the goods origin could be shown. Due a communication error, the freight forwarder did not report the arrival of the goods in Sweden. This prompted an inquiry from the Swedish Customs authorities issued to the owner of the goods which immediately submitted import declarations reporting the shipments. Furthermore, the owner of the goods was also able to show certain A.TR. goods certificates showing the goods origin that supported preferential treatment of the goods.

Nonetheless, the Swedish Customs authorities issued their decisions stating that a customs debt has been incurred due to non-compliance of the customs regulations by failing to report the goods at arrival. In addition, the freight forwarder was appointed as debtor for the customs debt and consequently was charged with both customs duties and import VAT related to the goods.

The questions for the Court to answer was, whether the goods that were originally subject to preferential treatment could still be subject to this preferential treatment when the proper certificates of preferential treatment has been shown and whether it is correct to charge the import VAT to the freight forwarder when a customs declaration from the importer of record has been submitted to the authorities before the decision appoint the freight forwarder as liable for the customs debt.

The ruling of the Court stated, that the preferential treatment of the goods cannot be denied when there are proper certificates shown to support the goods origin even in cases of non-compliance and where a freight forwarder has been assigned as the debtor. This assumes that the circumstances that resulted in the non-compliance is not a case of fraud. Therefore, even though a customs debt has been incurred this should be reduced to zero in the current scenario due to the goods preferential treatment since there was nothing to suggest that the non-compliance was a result of fraud.

With regard to the question on the import VAT, the Court ruled that in case there is an importer of record that is registered for VAT at the time of the decision by the Swedish Customs authorities, the import VAT should be charged to the importer of record and not to the fright forwarder. In addition, the import VAT should in turn be possible to reclaim as input VAT for the importer of record assuming the correct conditions are met.

Possibilities in light of the ruling
The ruling loosens up the former strict approach by Sweden and offers a greater nuance in non-compliance scenarios that has occurred to errors or mistakes. This also provides for the possibilities reassess former decisions from the Swedish Customs authorities where preferential treatment has been denied due to non-compliance and where it can be shown that the non-compliance is not a case of fraud.

In addition, decisions where the freight forwarder has been charged with import VAT should be re-examined in case the importer of record be registered for VAT in Sweden. There should be a possibility to reclaim the input VAT charges since this has been incorrectly charged to the freight forwarder in a non-compliance scenario assuming that certain conditions are met.