ECJ Decision: Interested parties must be heard prior to adverse decision

On 18 December 2008, the European Court of Justice issued its judgment in the Soprope-case (Case C-349/07, find the judgment here).

Soprope imported footwear, the preferential origin of which was the subject of a subsequent investigation by Portuguese customs. The investigations lead to the conclusion that the preferential certificates of origin were forged. Soprope was invited to respond to the draft findings within 8 days. Soprope did participate in a subsequent hearing, after which Portuguese customs concluded that their findings were not rebutted by Soprope, and issued an assessment for customs duties, thirteen days after they notified Soprope of their draft findings. This was in accordance with national Portuguese law which stipulates a period of 8 to 15 days for taxpayers to exercise their right to challenge an intended assessment in a hearing.

Soprope filed appeals against the assessment and argued in second instance, inter alia, that the first-instance court had not correctly applied the principle of respect for the rights of the defence as guaranteed by Community law.

The Portuguese second instance court then raised questions to the ECJ, enquiring if:

(1) the period of 8 to 15 days to exercise a right for a hearing with regard to an intended assessment is compatible with the principle of respect for the rights of the defence, and;
(2) whether a period of 13 days, reckoned from the notification made by the customs authority to a importer (in this case, a small Portuguese undertaking dealing in footwear) to exercise its right to a prior hearing within 8 days to the date of notification to pay import duties within 10 days in relation to 52 imports of footwear from the far east under the GSP made over a period of two and a half years (between 2000 and mid-2002), be considered reasonable for an importer to exercise its rights of defence?’

In its judgment the ECJ held:

"Observance of the rights of the defence is a general principle of Community law which applies where the authorities are minded to adopt a measure which will adversely affect an individual. In accordance with that principle, the addressees of decisions which significantly affect their interests must be placed in a position in which they can effectively make known their views as regards the information on which the authorities intend to base their decision. They must be given a sufficient period of time in which to do so (see, inter alia, Commission v Lisrestal and Others, paragraph 21, and Mediocurso v Commission, paragraph 36). "

The ECJ then decided:

"1. With regard to recovery of a customs debt for the purpose of effecting post-clearance recovery of customs import duties, a period of 8 to 15 days allowed to an importer suspected of having committed a customs offence in which to submit its observations complies in principle with the requirements of Community law.
2. It is for the national court before which the case has been brought to ascertain, having regard to the specific circumstances of the case, whether the period actually allowed to that importer made it possible for it to be given a proper hearing by the customs authorities.
3. The national court must also ascertain whether, in the light of the period which elapsed between the time when the authorities concerned received the importer’s observations and the date on which they took their decision, they can be deemed to have taken due account of the observations sent to them."

Thus, the ECJ confirms that customs authorities can not simply issue re-assessments where they find import declarations incorrect, but must grant the potential customs debtor a proper opportunity to present its views prior to the assessment being issued.

This is contrary to the rules of procedure as they apply in various EU countries, such as for example the Netherlands. In various judgments, Dutch courts have not confirmed that where no such pre-assessment procedure was followed, assessments must be anulled. Where more than 3 years lapsed between the relevant import and the date the assessment was issued (the statutory time bar for assessments under the EU Customs Code) the Dutch courts held that no new re-assessments could be imposed. This principle may, however, not apply in cases where criminal offenses were committed because in those cases the relevant time bar must be established by national law, which commonly provides for time bars in excess of 3 years.

Irish customs have meanwhile also adopted a "Soprope"-policy which can be found here.