In the Court of Justice of the EU (“CJEU”) judgment of 23 November 2023 in case C-653/22 J.P. Mali, the CJEU ruled on the EU principle of proportionality with respect to the imposition of penalties for underpayment of customs duties (including anti-dumping duties) in Member States.
The case concerned Hungarian company J.P. Mali, which imported into Hungary bicycles and bicycle parts declared as originating in Taiwan. For context, both bicycles and bicycle parts originating in China have been subject to significant anti-dumping duties for many years and there is a long, well-known history of circumvention of these anti-dumping duties.
Despite a statement from the Taiwanese Chamber of Commerce (“CoC”) that the goods at issue originated in Taiwan, the European Anti-Fraud Office (“OLAF”) concluded that J.P. Mali’s Taiwanese supplier made false declarations to obfuscate the Chinese origin of, in particular, bicycle parts in order to evade the applicable anti-dumping duties. As the bicycle parts were of Chinese origin, the anti-dumping duties were due. Hungarian customs thus collected the duties from J.P. Mali’s customs representative, who paid the duties.
Hungarian customs also considered that J.P. Mali, as a contracting party to the transaction, was liable for an administrative fine of 50% of the unpaid anti-dumping duties. J.P. Mali argued, in vain, that the false origin declaration was not attributable to J.P. Mali because it could only obtain limited information on the production and origin of the goods at issue and, therefore, had to rely on the statement of the Taiwanese CoC when declaring the origin of the goods at issue.
The referring judge asked the CJEU whether the imposition of an administrative fine of 50% of the underpaid duties was in line with the general principle of proportionality, as enshrined in Article 42 of the Union Customs Code (“UCC”).
The CJEU found that a penalty of 50% is effective and dissuasive as it will induce economic operators to take all necessary measures to ensure the data they provide to customs authorities is correct. This is in line with the key objective of the EU customs union, which is to ensure the implementation of tariff measures and other common commercial policy measures (such as anti-dumping duties).Thus, the CJEU did not consider the 50% rate to be excessive. The CJEU found further support for its position in the fact that, under Hungarian customs law, administrative fines can range from 25% to 200% of underpaid duties, depending on the behavior of the company concerned.