Customs Raises Unexpectedly High Duty Assessments on LCD Monitor Imports
Additional tax assessments again reveal the Netherlands to be the
odd one out in the EU.
Since early 2004 fierce discussion has ensued between the Dutch Customs
authorities and the business sector in connection with the import duties
payable on LCD monitor imports. The question has been whether imported LCD
monitors should be subject to import duties of 14% or none at all. In the
spring 2004 the Netherlands became the first EU member state to impose a
14% tax. As a result companies no longer traded and imported via the Netherlands.
The State Secretary for Finance eventually intervened in November 2004.
In this manner he endeavoured to create a situation which would put the
Netherlands back on the map as a country for the future importation of LCD
monitors and other electronic products.
The Dutch Customs authorities have completely unexpectedly introduced
importation criteria – newly published in November 2004 – and levies on
LCD monitors with retrospective effect on all such products which were imported
through the Netherlands by importers and logistical service providers in
the period from 2002 to 2004. These highly unexpected additional tax assessments
have dealt a heavy blow to those involved. This situation is in marked contrast
to the other EU countries, which have not issued additional assessments.
In particular, the actions of the Dutch Customs authorities have created
a great deal of uncertainty and confusion. The relevant market players,
which include a large number of foreign companies based in the Netherlands,
are increasingly wondering whether it is advisable to continue importing
their products, which are destined for various EU markets, through the Netherlands.
In addition to the financial losses suffered by these importers and logistical
service providers, this is seriously threatening the Netherlands’ position
as a base and transit country for the consumer electronics industry. Last
year and now again the Netherlands was and is again the odd man out in the
EU with a policy which may be described as unpredictable. Other EU member
states have not issued any additional import duty assessments, with the
result that any company which has routed its imports through the Netherlands
in recent years, is worse off than importers in, for example, Germany or
‘In legal terms these companies are in a strong position,’ says
de Bie, the head of the European International Trade, Customs and Value
Added Tax practice, of Greenberg Traurig LLP, attorneys and tax lawyers
in Amsterdam. ‘There are sound legal means through which these additional
assessments can be nullified but the business sector is naturally not waiting
for a move to the courts.’
In 2004 major difficulties arose in relation to the importation of LCD
and plasma monitors into the European Union. The question was whether they
should be regarded as television or video monitors, on the one hand or computer
monitors, on the other. In view of the fact that the difference could amount
to import duties of 14%, the value of a monitor is relatively high and the
profit margins are small, this is an exceedingly important issue for importers.
The greatest problem was not so much that import duties were payable but
that different rates were being applied in respect of identical monitors
in various EU member states. For example, no import duties have been levied
in Germany for a long time, while importers have been required to pay 14%
when importing the same monitors into the Netherlands. Once import duty
returns are filed and any duties payable have been remitted, these goods
can be freely transported and sold in the EU.
Fewer and fewer monitors through the Netherlands
It comes as no surprise that fewer and fewer monitors were imported through
the Netherlands in 2004 and that imports largely shifted to Germany. As
a result of growing pressure from the business sector, written parliamentary
questions addressed to the State Secretary for Finance and the fact that
the European Commission had failed to clarify how LCD monitors should be
dealt with, Wijn, the State Secretary for Finance, intervened at the end
of 2004. He issued specific criteria which needed to be satisfied, if an
LCD monitor was to be classified as a computer monitor. He wanted to create
a level playing field. All companies would know where they stood, if they
were importing monitors through the Netherlands. Obviously, these criteria
had negative implications for certain companies but at any rate there was
once again a clear direction that could be detected in the policy pursued
by the Dutch Customs authorities.
Erik de Bie continues: ‘Naturally, it is still strange that national
regulations have been promulgated, whereas it is really a question which
should be dealt with at the EU level. This is because such national policy
makes it possible for different import duty rates to be applied in respect
of identical goods in the various EU countries. It is thus a serious breach
of the EU principle that there should only be one external tariff.’
In spite of the State Secretary’s intention to create a level playing
field for future imports, it would appear that the Dutch Customs authorities
are seizing on the classification discussion and the State Secretary’s criteria
to re-examine those LCD monitors which have been imported through the Netherlands
in the past three years. Customs will be issuing additional tax assessments
in so far as any LCD monitor which was imported and declared to Customs
as a computer monitor in 2002, fails to comply with the criteria for such
monitors issued in November 2004. They will be required to pay import duties
of 14% instead of none at all. This will produce considerable costs for
the business sector.
Additional tax assessments only produce negative results
There are sound legal arguments why the Dutch Customs authorities cannot
apply this modified interpretation with retroactive effect. An application
to the Dutch or European courts may be expected to lead to the nullification
of numerous assessments. However, apart from the legal aspects of the matter,
the big question is what the Dutch Customs authorities actually wish to
achieve through these assessments. After all, the EU has not adopted the
criteria issued by the State Secretary, Wijn. Recent EU legislation governing
the classification of LCD monitors does not apply with retrospective effect.
No EU instructions have been issued to proceed with the issue of additional
tax assessments on a large scale.
As Erik de Bie says, ‘It raises the question as to why the Dutch government
nevertheless wishes to create expenses for businesses which are economically
active in the Netherlands. Equally important is the question why Customs
is again out of step with the other Customs authorities in the EU. It also
makes little sense in financial terms in view of the fact that the bulk
of the import duties collected by the Dutch Customs authorities have to
be remitted to the EU. The Dutch government therefore does not have any
direct financial interest in such actions.’
According to Erik de Bie, Customs will only achieve the following two
results: extensive costs for the business sector and confirmation of the
poor reputation which the Netherlands already has amongst LCD monitor importers.
With regard to the expenses, the additional tax assessments will be debited
to the importers’ profits and they will obviously no longer be able to pass
them on to the end users of these monitors. The bulk of LCD monitors are
imported by large international companies, which also manufacture and distribute
many other products in addition to monitors. In view of present and future
developments in the electronics industry it is not inconceivable that new
discussions will ensue about the classification of goods for Customs purposes.
© 2005 Greenberg Traurig
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