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Customs Talks: Duty risk - relocation of production may lead to penal duties

Published on: 30 maart 2023
Type of publication Insight
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In the current global trade situation, supply chain bottlenecks may form a strain on your business. It may make sense to take another look at your current supply chain. Companies that have outsourced part of their production cycle, or are looking into relocation production, should be particularly aware of the importance of the origin of goods. If production is relocated to a new supplier or a new country, it is important to check whether any trade bans or measures are in place which might impose additional duties or restrictions. The origin of the goods is highly relevant and the true origin of the goods should be determined carefully. An airtight import strategy is crucial to prevent unnecessary expenses and penal duties.

Düsseldorf Fiscal Court decision: anti-dumping duties apply to transshipment

A recent German case provides further insights. The German Customs Administration levied anti-dumping duties on screws imported from Indonesia into the EU in a case in which they assumed that it concerned a transshipment of Chinese screws via Indonesia rather than the goods having their origin in Indonesia. The Court assumed that Indonesian origin could only be established if it could be substantiated that actual production took place and the production activities were economically justified, and not only used to avoid anti-dumping duties. The Court ruled that this was not the case. As a result, anti-dumping duties were imposed.

Origin of goods and duty risk - relocation of production can lead to the levying of penal duties

In our globalised world, economic relationships are important and can be used to influence and (re)direct trade for economic, diplomatic or political reasons. This may take the form of for example embargoes, anti-dumping measures, or import bans. The German anti-dumping case underlines once again how important it is to have a clear view of your entire supply chain, especially when setting up new sources of supply or doing business with new international trade partners. In such cases, it should be carefully checked what the true origin of the goods is and whether any bans or trade policy measures are applicable. To read more about the German anti-dumping case, we refer to the publication on the website of Baker Tilly Rechtsanwaltsgesellschaft mbH., the Baker Tilly International member firm in Germany.

Stay alert!

Country-of-origin rules and Customs remain a point of attention for companies with international operations. It is advisable to make sure you are aware of the latest developments in the areas of case law, trade law and applicable embargoes or restrictions.

Would you like to know more about the customs and VAT obligations relating to the flow of goods in which your company is involved? Our experts would be happy to assist you. Please contact us.

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly consultant.