TC09657 - [2025] UKFTT 01208 (TC)

In 1997, before the accession of Estonia to the EU, butter was shipped from Estonia to the European Community and imported at a preferential rate of duty. This preferential treatment was based on the free trade agreement between the European Community and the Republic of Estonia.

Beemsterboer was a Dutch customs agent and it ‘cleared’ the butter through customs. To this end, it submitted to the Dutch authorities on behalf of Hoogwegt International BV (‘Hoogwegt’) a number of declarations for the release of the goods for home use (‘free circulation’). The customs declarations all referred to Estonia as the country of origin of the butter. Attached to each declaration as evidence of origin was an EUR.1 certificate, issued by the Estonian customs authorities at the request of the exporter, the Estonian firm AS Lacto Ltd (‘Lacto’).

Representatives of Hoogwegt had visited Lacto on a number of occasions before business relations were established in order to verify Lacto’s reliability. Hoogwegt also stipulated in the contracts which it concluded with Lacto that the butter to be exported must always be transported with documents showing its Estonian origin, that it must be accompanied by an EUR.1 certificate and that the Estonian origin of the butter must be clearly shown on the packaging.

It emerged during a customs inspection, jointly carried out by EU and Latvian authorities, that Lacto was no longer able to prove that the butter exported to the Community was of Estonian origin; in particular, it had not kept the original documents which could have confirmed the origin of the butter. It also transpired that the Estonian customs authorities had never carried out a proper inspection of Lacto but had just requested some general documents from time to time.

The Estonian customs inspectorate declared the EUR.1 certificates to be void and withdrew them. Later, following an objection lodged by Lacto, the Estonian Customs Board declared that administrative decision to be unlawful on formal grounds. Subsequently, the Dutch customs authorities sought recovery from Beemsterboer of customs duties.

A number of questions were referred to the CJEU, in one of which the Dutch court asked about the burden of proof in respect of the conditions laid down in the third subparagraph of Article 220(2)(b) of the Code, in other words, who bears the burden of proving that an EUR.1 certificate is based on an incorrect account of the facts provided by the exporter and who must prove that the issuing authorities were aware or should have been aware that the goods did not satisfy the conditions laid down for entitlement to preferential treatment.

The Advocate General began by observing (at [47]) that “Under the generally accepted rules of procedural law, the party relying on the conditions laid down in a provision must as a general rule prove that they have been satisfied.”

He went on to observe:

“48.

Normally, the authority responsible for the subsequent entry in the accounts of the amount legally owed will rely on the derogation laid down in the first part of the third subparagraph of the new version of Article 220(2)(b) of the Customs Code. In principle, then, that authority – as a rule, the customs authority of the importing Member State – bears the burden of proving that the exporter has indeed provided an incorrect account of the facts and that the incorrectness of the certificate arose as a result of that account.

49.

Allocation of the burden of proof along those lines is also justified, since, as a general rule, the authority is better able to provide evidence than, say, the importing undertaking. Through administrative cooperation with the authorities of the third country, it can establish what statements were actually made during the procedure there and on what, in the final analysis, the contents of the EUR.1 certificate were based. …

50.

It is also evident from the obligation on the exporter to keep his documents, however, that the production of proof by the competent authorities depends on the exporter’s cooperation. If, despite his obligation, the exporter does not keep the documents needed to verify the originating status of the exported goods, it becomes impossible for the customs authorities – for reasons beyond their control – to demonstrate whether correct or incorrect information has been provided. In such circumstances, it would be unfair to place the burden of proof on the customs authorities. According to settled case-law, the Community cannot be made to bear the adverse consequences of the wrongful acts of the suppliers of importers.

51.

If, then, the information originally provided by the exporter cannot be verified because he himself has not kept the appropriate documents, despite his obligation to do so, it is reasonable to reverse the burden of proof. The burden of proof in the context of the first part of the third subparagraph of the new version of Article 220(2)(b) of the Customs Code must then be placed on the debtor (the person liable for payment). In other words, it is then for the debtor to prove that the EUR.1 certificate issued by the third-country authorities was based on a correct account of the facts, since misconduct or error on the part of the exporter are among the normal commercial risks to which the person liable for payment is exposed and cannot be regarded as unforeseeable in the context of his commercial relations.”

At [53] the Advocate General deals with the situation where the authorities who issued an EUR.1 certificate were aware or should have been aware that the goods concerned did not satisfy the conditions for entitlement to preferential treatment. At [54] he observed that:

“As a rule, the person liable for payment, from whom import duties are to be recovered, will rely on this subsidiary exception. Thus, under the generally accepted rules of procedural law, that person must bear the burden of proof in respect of the second part of the third subparagraph of the new version of Article 220(2)(b) of the Customs Code.”

He discussed various policy arguments around this proposition (e.g. that it is difficult for a person liable for payment who is resident in the Community to assess, let alone prove, the information internally available to the competent authorities of a third country), but concluded (at [57]) that, “In these circumstances, the burden of proof can remain allocated in accordance with the generally accepted rules of procedural law: a reversal of the burden of proof is unnecessary.”

Turning to the ECJ’s judgment, at [39] it endorsed the general rule that:

“It must be stated in this respect that, in accordance with generally accepted rules on the allocation of the burden of proof, it is the responsibility of the customs authorities which wish to rely on the beginning of the third subparagraph of Article 220(2)(b) of the Customs Code to carry out post-clearance recovery to adduce, in support of their claim, evidence that the issue of incorrect certificates was due to an inaccurate account of the facts provided by the exporter.”

However, where, as was the case here, it was impossible for the customs authorities to establish whether the information provided for the issue of an EUR.1 certificate was correct or not, since the exporter had not retained possession of the supporting documents, despite being under an obligation to keep the appropriate documents for at least three years, the burden would be reversed.

Turning to the question who bears the burden of proving that the customs authorities which issued the EUR.1 certificate were aware or should have been aware that the goods did not satisfy the conditions laid down for entitlement to the preferential treatment, the Court held (at [45]-[46]) that “the person who relies on the third subparagraph of Article 220(2) (b) of the Customs Code, …, must adduce the evidence necessary for his claim to succeed.”