FMX Food Merchants Import Export Co Ltd v Revenue and Customs [2020] UKSC 1

FMX imported garlic falsely declared as Cambodian origin, avoiding customs duty. HMRC communicated a post-clearance customs debt demand after the normal three-year limit but within reasonable time, as the imports involved acts liable to give rise to criminal proceedings. The Supreme Court held that where article 221(4) applies, the three-year limit is disapplied and communication must be made within reasonable time.

Facts

Between August 2003 and January 2004, FMX Food Merchants Import Export Co Ltd imported ten consignments of garlic declared to be of Cambodian origin, purportedly entitling them to exemption from import duties. In fact, the consignments originated in China and were subject to both ad valorem duty of 9.6% and anti-dumping duty of €120 per 100kg. The false declarations came to light during HMRC’s investigation of later imports, leading to demands in February 2007 for duty on post-January 2004 imports. Following the First-tier Tribunal’s December 2010 decision concerning those later imports, HMRC issued a post-clearance demand for the 2003-04 imports in March 2011, more than three years after the relevant importations.

Findings of Fact

The First-tier Tribunal found that all garlic originated in China, the certificates of origin were known to be false by their makers, and FMX presented these certificates to HMRC. Although FMX was not implicated in the underlying fraud, it had committed an act liable to give rise to criminal court proceedings under section 167(3) of the Customs and Excise Management Act 1979, which creates a strict liability offence.

Issues

The main issue concerned the meaning and effect of article 221(4) of the Customs Code (Council Regulation (EEC) No 2913/92), specifically whether the three-year time limit for communicating customs debts under article 221(3) is automatically displaced where the customs debt results from an act liable to give rise to criminal court proceedings, and what conditions then apply.

FMX’s Argument

FMX contended that article 221(4) confers an option on member states to provide an alternative fixed time limit. If no such provision exists (as in the UK), the three-year time limit remains in force, as any other outcome would offend the EU principle of legal certainty.

HMRC’s Argument

HMRC submitted that the three-year time limit is automatically displaced where the criminal proceedings condition is satisfied, and legal certainty may be met by a combination of national law provisions or the general EU law requirement to act within a reasonable time.

Judgment

Lord Briggs (with whom Lord Reed, Lord Hodge and Lord Kitchin agreed)

Lord Briggs held that article 221(4) disapplies the three-year time limit where the criminal proceedings condition is satisfied. The language and purpose of article 221(4) indicate that the three-year period is regarded as inappropriate for cases where there is a prospect of criminal court proceedings, rather than as a period from which member states have an option to depart.

“The permission given to communicate such a debt after the expiry of the three-year period is, nonetheless, subject to any relevant conditions in the ‘provisions in force’ which, as appears from article 4(23), includes Community or national provisions.”

Lord Briggs rejected arguments that UK law provisions such as abuse of process or laches could fill the gap, noting:

“Both abuse of process and laches are concerned with the conduct of, or delayed institution of, legal proceedings. But this case is concerned with the need, recognised by the EU principle of legal certainty, for there to be some control upon the timing of the communication of a customs debt, rather than upon the institution of subsequent legal proceedings.”

Lord Briggs concluded that where no national provisions exist, EU law fills the lacuna through the requirement to communicate within a reasonable time:

“It is precisely to fill such a lacuna that the EU law requirement to take relevant steps within a reasonable time exists.”

On the facts, communication within four months of the related FtT decision was clearly within reasonable time.

Lady Arden

Lady Arden agreed the appeal should be allowed but reached this conclusion partly by a different route placing more reliance on domestic law. She emphasised that article 221(4) defers to national law regarding conditions for valid communication, and EU law’s reasonable time principle could not restrict the operation of domestic law to which EU law defers.

Implications

This decision clarifies that where customs debts arise from acts liable to give rise to criminal proceedings, the ordinary three-year communication period under article 221(3) is automatically disapplied. In the absence of specific national provisions providing a substitute time limit, the EU law principle requiring communication within a reasonable time applies. This ensures protection of EU finances while maintaining legal certainty for traders through the reasonable time requirement. The case distinguishes the Customs Code provisions from those in Regulation No 2988/95, where member states had an explicit option to provide longer periods.

Verdict: Appeal allowed. The Supreme Court restored the decision of the Upper Tribunal. HMRC’s communication of the post-clearance customs debt was valid as it was made within a reasonable time after the three-year limit was disapplied under article 221(4) of the Customs Code.

Source: FMX Food Merchants Import Export Co Ltd v Revenue and Customs [2020] UKSC 1