The origin of products imported into Europe has a particular significance, because – depending on where the products actually originate from – a relevant customs duty or taxation can be charged or levied.
In order to fully understand what the “Rule of Origin” stands for, it is opportune to better define the meaning thereof according to applicable European Law, and in particular EU Regulation no. 952/2013, which more precisely sets forth that:
(i) goods wholly obtained in a single Country or territory shall be deemed as having their origin in that Country or territory;
(ii) goods whose production involves more than one Country or territory shall be deemed to originate in the Country or territory where they underwent their last substantial, economically justified processing or working in an undertaking equipped for that purpose, resulting in the manufacturing of a new product or constituting a significant stage of such manufacturing (Articles 32-34 and 60 of EU Regulation 2446/2015).
While certain non-EU member-States (in particular, Developing Countries) enjoy a preferential treatment (i.e., low customs duties or import taxation), the “non-preferential” origin represents the general rule applicable to products coming from countries (among them, U.S.A. and China) with which the European Union has not entered into specific agreements: in such a case, the ordinary duty rate applicable pursuant to the EU common customs tariff is levied on all relevant imported products.
The current complexity of production processes implies that most industrial products are the result of a combination of several processing stages and manufactured parts, carried out in different countries, inclusive of raw materials of different origins.
In order to challenge the possible frauds relating to the multi-States processing of a product which can cause doubts on its actual origin, the Olaf (European Anti-Fraud Office) investigates on several possible cases, in connection with relevant denunciations from interested third parties (inclusive of European competitors of extra-European manufacturers who exports to Europe). Olaf issues reports, usually consulted by local Customs authorities and agents upon carrying out the checking of products upon their importation into the EU territory. Sometimes, though, such Customs authorities just apply the findings and recommendations of the Olaf reports, without examining the details of the actual imported products in order to verify whether there was a real fraud in the declaration of origin thereof (aimed at paying lower customs duties).
By means of a recent judgment, the Italian Supreme Court (Tax Section, Order dated 24 July 2020 (2 July 2019), no. 15864) has held that, whenever the revision of the customs origin is the result of an OLAF investigation, the burden of proving that the information is directly and specifically related to the goods which are being checked for customs purposes, properly lies with the acting Customs authority.
The Court has in fact denied any relevance to an assessment which was merely referring to an OLAF report but was missing any proper evidence of the irregularity of the specific transaction involved. This, based on the key legal principle that the importer/taxpayer is always entitled to fully challenge the findings of the Olaf report, and, in particular, to argue that such report does not precisely refer to the disputed imported product.
In the relevant case examined by the Italian Supreme, according to the Customs agent the origin of certain steel products stated by the importer to be Thai, was not the actual origin, which should on the contrary be Chinese: because of such alleged different origin, the Customs agent wanted to disallow the preferential origin of those steel products, supported by a report issued by Olaf, with the consequent application of an anti-dumping duty of 85%.
It is significant to note, however, that in such a case, Olaf’s alerts were limited to informing the Italian Customs of a possible evasion of anti-dumping duties, as the supplier was included in a long list of parties considered to have ceased trading. No specific examination of the actual origin of those products was carried out by the agent.
After having excluded the value as privileged evidence for the Olaf reports and information, the Italian Supreme Court has therefore held that: “having in mind the import of products assertedly originating from Thailand, in order to establish whether they should be subject to anti-dumping duties, two alternatives are in principle possible: either the adoption by the Council, following the necessary investigations, of an autonomous regulation, extending such duties to products imported from certain specific countries, once it has been ascertained the real existence of relevant elusive trade practices; or, otherwise, the full demonstration of the actual Chinese origin of those products is required”. This, because whenever the review of the customs origin results from an OLAF investigation, the burden of proving that the relevant information directly and specifically relates to those imported products lies with the Customs authority, as a customs assessment exclusively based on an OLAF report – provided that its contents do not unequivocally refer to the disputed transaction – shall be held to be invalid.
Prof. Avv. Salvatore Vitale
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