Import businesses should take heed of the outcome of a recent tribunal where an importer won the case but still ended up paying over 99% of the £600,000 duty charge because they failed to retain records to prove the imported goods were as they had described.

Laurence Supply Co won a complex trial against HMRC over the classification of handbags and purses made of a combination of leather and plastics but failed to satisfy the burden of proof demonstrating that every item on the duty demand fitted the agreed commodity code.

They were only able to supply detailed records (such as photography, samples and product descriptions) to a very small percentage of the goods in question – reducing the duty charge by just £2064. Potentially, the lower duty rate could have been applied to the entirety of goods listed in the C18, negating the whole £600,000 sum.

The case raises several important points for businesses importing goods. Primarily, the necessity to retain detailed descriptions of goods imported for four years post import and audit trails, but also the complex intricacies of commodity codes and the extent of significant, unplanned liabilities resulting from errors.

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Adam Wood, Commercial Director of Barbourne Brook said:

“When it comes to accurately and reliably classifying goods, there is no substitute for expert customs knowledge and experience – whether this is resourced in house or through a customs consultancy.”

“In this case the importer had previously obtained a clear HMRC audit with no issues raised over classification codes which appeared to set a safe precedent.  However, the court ruled that no legitimate expectation can arise from a previous audit and re-iterated that the onus was on the business to conduct its own internal audit and seek to improve customs knowledge within the business to make informed decisions.”

Ultimately it was the lack of record keeping that proved to be the importer’s downfall as the Court concluded that, in the absence of proof that all the styles were made from the same material as the samples examined, the assessment could not be further reduced.

 

Wood added:

“As a consultancy we are seeing issues like this on a more regular basis. We have noticed that HMRC are going into much more detail at audit.  This makes sense given that post-Brexit customs duty is now a UK revenue stream, and we see this trend set to continue as a more proactive approach from HMRC beds in.”

If you are concerned about your customs compliance obligations or simply want a second pair of eyes, please get in touch with our team.

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