[2025] UKUT 00142 (TCC)

First, as the FTT itself recorded at [153] of the Decision:

This is relevant to the general equity issue, but it is appropriate to record our view now that although we are satisfied the FTT’s construction was clearly right, reaching that conclusion has not been straightforward.

That point is underlined by the fact that HMRC has consistently contended for a different interpretation of the rules, one that we have rejected.

Amendment of a customs declaration

The declarant shall, upon application, be permitted to amend one or more of the particulars of the customs declaration after that declaration has been accepted by customs. The amendment shall not render the customs declaration applicable to goods other than those which it originally covered.

No such amendment shall be permitted where it is applied for after any of the following events:

the customs authorities have informed the declarant that they intend to examine the goods;

the customs authorities have established that the particulars of the customs declaration are incorrect;

the customs authorities have released the goods.

Upon application by the declarant, within three years of the date of acceptance of the customs declaration, the amendment of the customs declaration may be permitted after the release of the goods in order for the declarant to comply with his or her obligations relating to the placing of the goods under the customs procedure concerned.

…an amount of import or export duty shall be repaid or remitted in the interest of equity where a customs debt is incurred under special circumstances in which no deception or obvious negligence may be attributed to the debtor.

The special circumstances referred to in paragraph 1 shall be deemed to exist where it is clear from the circumstances of the case that the debtor is in an exceptional situation as compared with other operators engaged in the same business, and that, in the absence of such circumstances, he or she would not have suffered disadvantage by the collection of the amount of import or export duty.

The provision is, quite clearly, a general equitable provision permitting the repayment or remission of a customs debt where “special circumstances” exist. As such, this is par excellence a case of a judicial discretion, where significant weight must attach to the judgement of the decision-maker – here, the FTT – and where an appellate tribunal may only interfere where there has been an error of law by the FTT in considering how its discretion should be exercised. In relation to “exceptional circumstances” for tariff purposes, this point was recently made in Uflex Europe Ltd v HMRC [2025] UKUT 00057 (TCC), at [29]-[32].

Article 120 UCC structures the discretion in a number of ways:

First, whatever the “special circumstances”, repayment or remission of a duty is not permitted where there is (i) deception or (ii) obvious negligence attributable to the debtor (here: Canadian Solar). It was not contended, either before the FTT or this tribunal, that there was any deception on the part of Canadian Solar. It was contended, both before the FTT and this tribunal, that this was a case of obvious negligence attributable to the debtor, and that for this reason special circumstances could not be found. HMRC contended that the FTT erred in concluding, as it did, that there was no obvious negligence on the part of Canadian Solar.

Secondly, special circumstances are deemed to exist “where it is clear from the circumstances of the case that the debtor is in an exceptional situation as compared with other operators engaged in the same business, and that, in the absence of such circumstances, he or she would not have suffered disadvantage by the collection of the amount of import or export duty”: Article 120(2) UCC. Where it is clear that such circumstances pertain, the FTT is obliged to find special circumstances, but the wording of Article 120 UCC is unequivocal this is not the only case where special circumstances may be found to exist. Special circumstances are not exclusively defined in Article 120 UCC: all Article 120(2) UCC does is identify one case where “special circumstances” will be deemed to exist.

Before us, HMRC appeared to contend that the only case of “special circumstances” was that described in Article 120(2) UCC, and that the FTT had erred in concluding that this was a case of “deemed” special circumstance within Article 120(2) UCC. As to this:

The FFT’s conclusions on the question of special circumstances are set out in the following paragraphs:

It is evident from this passage that the FTT was considering the application of Article 120 UCC in a “rolled up” way, dealing with (i) “deception”, (ii) “obvious negligence” and (iii) “special circumstances”. Given that this appears to be how the FTT was addressed in argument (see [133] to [148] of the Decision and [10(3)] of this decision), and given that a number of factual points go both to “obvious negligence” and “special circumstances”, we do not consider that the FTT can be criticised for dealing with matters in a “rolled up” way although (as we shall see) that is one of the points HMRC relied upon in this appeal.

Any consideration of “special circumstances” obviously ought to consider whether this is a case of “deemed” special circumstance, and the FTT obviously did so in the passage we have quoted. But that does not preclude a wider investigation of what “special circumstances” may exist, and it is clear to us that the FTT was (as it was entitled to do) roaming more widely to consider facts and matters going to special circumstance beyond those relevant to any “deemed” special circumstance. Nor did the Tribunal actually say it was obliged to find “special circumstances”, because such were “deemed” to exist. It seems to us that the Tribunal’s consideration was of a wider range of factors, including the “deemed” circumstance, and that in light of these factors, the FTT concluded that remission of the charges was justified by virtue of Article 120 UCC.

If and to the extent that HMRC were contending that the only “special circumstances” that could engage Article 120 UCC were the “deemed” special circumstances set out in Article 120(2) UCC, then we reject that contention. For the reasons given, “special circumstances” can exist even where “deemed special circumstances” do not exist: it is simply that the FTT’s judicial discretion is wider in such cases to the extent that the FTT is not obliged to find that special circumstances exist.

Most seriously, it was contended that the Decision failed sufficiently to state the reasons for the FTT’s conclusions, that the Decision was so deficient in this regard that it had to be set aside and the matter either remitted to the FTT or decided afresh by this tribunal.

It was contended that the FTT erred in finding that there was no “obvious negligence” on the part of Canadian Solar. If there was obvious negligence attributable to Canadian Solar, then the FTT was not entitled to find that Article 120 UCC was engaged.

It was contended that the FTT erred in finding that “special circumstances” existed, so as to entitle Canadian Solar to remission of the charges.

The negligence of the debtor – Canadian Solar – must be obvious, although the negligence can be attributed to it. Here, Canadian Solar were confronted with a question of TARIC Coding that was an extraordinarily difficult one: see the FTT’s Decision at [153].

Canadian Solar (responsibly) had lawyers under instruction proactively to monitor their international trade compliance: Decision at [27], quoted at [8(10)].

Those lawyers gave advice to Canadian Solar, which (we have found) was wrong, but not negligent. The FTT found as a fact that Sidley Autin’s advice to Canadian Solar was not culpable in this way: Decision at [153].

Canadian Solar followed that advice.

If the question of law or practice is obvious, then the trader might be excused not going to a lawyer, but would (in such circumstances) be liable to be found negligent if they got the answer to that question wrong.

On the other hand, if the question of law or practice was hard, the trader might well be excused getting the answer wrong, but would be liable to be found negligent if they did not take appropriate advice.

As the FTT noted, citing the decision in Sohl & Söhlke v Hauptzollamt Bremen C-48/98, where doubts exist, “the onus is on the trader to make inquiries and seek all possible clarification”. It is to be stressed that this reference to seeking “all possible clarification” cannot be intended to impose upon the trader a counsel of perfection. That would be to contradict the requirement for no “obvious negligence”. To the extent HMRC contended to the contrary, the FTT was right to reject that contention, which it did at [156], when rejecting the suggestion that Canadian Solar should have approached HMRC: the FTT there stated that “we do not consider that it was necessary for [Canadian Solar] also to approach HMRC for clarification”.

Although these points are clearly relevant to the question of obvious negligence, they are also relevant to special circumstances. In this case, Canadian Solar were obviously not negligent. Canadian Solar took careful steps to attempt to ensure compliance with an impossibly difficult legal regime. This fact, rightly, weighted heavily with the FTT:

At [156], the FTT noted the importance – as a fundamental aspect of the rule of law – of legal clarity: that “[i]f the law cannot be understood without recourse to governmental authorities then it cannot be said to be clear and comprehensible to the ordinary citizen. In this case, [Canadian Solar] had taken appropriate and sufficient steps to understand its legal obligations and had acted in accordance with its understanding”.

This is an important point going well beyond the question of “obvious negligence”. The FTT was noting that Canadian Solar was holding itself to high standards in a difficult situation. The FTT might also have noted that had Canadian Solar approached HMRC for advice, it would have received the wrong advice.

In this case, the respect to be accorded to the customs provisions is lessened by virtue of the fact that they are so difficult to comprehend. Moreover, HMRC itself had failed to comprehend them, for reasons we have described.

On the other hand, Canadian Solar had acted prudently and responsibly.

Moreover, in these difficult circumstances, not only had Canadian Solar acted reasonably and carefully in seeking legal advice, and taking it, but the application of the Solar Module Code was a very plausible reading of the rules: see [33] to [34] of this decision, as well as the reasoning in the Decision.

Indeed, Canadian Solar’s subsequent attempts to ascertain the correct position – which the FTT also considered, and which consideration we have set out at [8(11)] – shows just how difficult a position Canadian Solar found itself in, through no fault of its own.

It is also important to consider the complexity of the provisions in question. We accept that the phrase “consigned from Malaysia or Taiwan” used in the 2016 Implementing Regulations is less than wholly clear in circumstances where the cells are manufactured and originate in Taiwan but are then shipped to Vietnam where they are incorporated into modules before being imported into the EU. A detailed study of the legislative provisions, including the recitals and the legislative background, has led us to the conclusion that the phrase “consigned from Malaysia or Taiwan” includes cases, such as the present, where the cells are shipped to another jurisdiction before being imported into the EU. We have to acknowledge, however, that we reached that conclusion after we had the benefit of more than two days of skilled legal argument. The inherent ambiguity as to whether “consigned” means directly or indirectly “consigned”, as far as was drawn to our attention, was not specifically or clearly addressed in HMRC’s public guidance. We note also, that the Netherlands tax authorities and Mr Elsen of the Commission (and possibly the Amsterdam Court of Appeal) appear to have come to a different conclusion from that which we have reached. That, of itself, suggests that the conclusion reached by the Appellant was not obviously negligent.