In a ruling on 19 November 2019, the Hamburg Financial Court, in accordance with the case law of the European Court of Justice, expressed its opinion on unfair contract terms in the import of canned mushrooms.
The contractual arrangements concern a practice often practised by companies, so-called triangular transactions. The aim of this type of trade is often to import goods at a reduced rate of duty in order to avoid higher customs tariffs.
Although such triangular operations are not infrequent in practice and have long been known to the customs administration, this practice is in certain circumstances a clear violation of the legal system, according to the Finance Court.
Circumvention of the tariff quota discovered
The case concerned a major group of companies which markets canned mushrooms from China on the European market.
One company of the group, a limited partnership (GmbH & Co. KG), purchased canned mushrooms from a Chinese supplier and then sold them duty unpaid to another company in the group, the applicant in the present proceedings.
The plaintiff had import licences at a reduced rate of quota duty. They imported the canned products into free circulation under the representation of the GmbH und Co KG and exhausted the tariff quota allocated to it. In doing so, it charged the original purchase price of the GmbH & Co. KG as the customs value.
At the same time, however, a contract was concluded between the two companies for the repurchase of the canned food by the GmbH & Co. KG, which eventually sold them to other external companies. The purchase price was set at the purchase price plus customs duties.
Finance Court joins ECJ
In its decision, the Finance Court follows the case law of the ECJ. In a similar decision in 2014, the ECJ had already taken a position on the problem and affirmed an infringement of rights in such contractual arrangements.
Commercial activities which are preferably undertaken with the aim of obtaining a better customs tariff are an abuse of rights. Indicators such as the absence of commercial risk, a small profit margin and sales below market price would indicate an abusive contractual arrangement.
Infringement of tariff quotas prevents fair competition
The ECJ stated that fair competition between importers must be ensured in the management of tariff quotas.
Buying back goods, on the other hand, would lead to a shift of power in the internal market. The company whose quota has already been exhausted could expand its market position to the detriment of other companies by importing at a preferential rate of duty.
These considerations are transferable in the present case, the Senate said.
By buying back the tinned food, the company would acquire a larger market share than it was entitled to. This would impede competition between importers.
The Finance Court also emphasised the unequal distribution of business risks: The close chronological order in which the contracts were concluded and the guaranteed buy-back of the canned food meant that the applicant did not run any sales risk.
Moreover, the applicant’s low profit margin on the course of the canned food business would argue in favour of an abusive contractual arrangement.
A further indication of abuse of rights is the representation of the applicant by the GmbH & Co. KG in the entire procedure of applying for the import licence.
No subsequent payment of customs duties in the event of error by the customs authorities
However, irrespective of the abusive practice, in the present case the company concerned did not have to make any subsequent customs payments.
This is due to an error by the customs authorities: If, as a result of an error, the authorities did not enter the amount of duty due in the accounts and the company was unable to identify the error, the obligation to make subsequent payment is not applicable. That is the aim of the protection of legitimate expectations.
However, a condition for exemption from the obligation to make subsequent payments is if the company concerned was acting in good faith and otherwise observed and complied with all the rules when making the customs declaration. In this situation, this was the case.