In intra-EU trade, goods move freely, meaning there is no need for customs clearance. With the withdrawal of the United Kingdom from the EU, this fundamental freedom of the EU will no longer apply to trade with UK. This change will have a significant impact on Finnish companies doing business with British companies. The United Kingdom is Finland’s sixth largest trading partner, so this change will have a significant impact on processes within companies.
It should be noted that a Finnish importer may authorize a representative to carry out the activities and procedures provided by the applicable customs legislation in Finland. Traditionally, companies use a freight forwarder to assist regarding import formalities when importing goods from third countries. This right is normally conferred on the freight forwarder or other representative by agreement. The terms of that agreement play an important role in clarifying the parties’ liabilities for the charges imposed by Customs in the event of an error or mistake made regarding customs formalities. Therefore, such agreement should be drafted carefully and taking into account the sanctioning nature of customs duties.
Within Finnish customs, a representative may act as a direct representative, indirect representative or direct representative under the responsibility of the guarantor. The form of representation chosen has a significant impact on liability issues in relation to Finnish Customs and the fees it imposes to the party importing or assisting in the importing process. For this reason, it is important to take into account the responsibilities imposed on the company by the various forms of representation.
Liability issues arise in particular when customs clearance is performed incorrectly. Duties, ex-post duties and duty increases are usually significant in cases of error and therefore give rise to a contractual disagreement on liability issues between the contracting parties. Conventionally, freight forwarders generally apply the NSAB 2015 terms and conditions when conducting their services. Read more about NSAB 2015 terms and conditions in our article.
In addition, it should be noted that the form of representation used must always be indicated on the customs declaration. The form of representation affects, among other things, the customs debt obligations of the importer and the agent, the use of the security lodged, the customs invoicing, the customs procedures used and the archiving obligations of the parties.
Hereinbelow, we briefly explain the different forms of customs representation and liability issues. Our business law office regularly advises, represents and drafts representation agreements on special issues related to customs operations. We are happy to assist in drafting agency agreements as well as in resolving liability issues in respect to customs formalities.
Where a direct representative is used in customs clearance, that representative shall normally lodge customs declarations in the name and on behalf of his principal. However, the direct representative shall be liable for the customs debt only in so far as the agent knew or should have known that the information given in the customs declaration was incorrect.
In principle, in direct representation, the principal is solely responsible for both the customs debt and post-clearance payments. In the case of direct representation, the time of payment of duties and other benefits are determined based on the principal’s terms agreed with the Finnish Customs, and any periodic breakdown is assigned and sent to the principal. Acting as a direct representative under the guarantor’s responsibility requires a special comprehensive guarantee commitment to be issued to the Finnish Customs.
In addition, the Customs customer must inform to the Customs how the comprehensive guarantee is distributed to the various forms of representation applied by the customer.
When using direct representation:
In indirect representation, the agent makes customs declarations on behalf of the importer, but in his own name, and thus acts with the same responsibility as the importer. Consequently, the indirect agent acts in the same way as the declarant. The security required for the debt or liability in that form of representation shall be required from the agent. In addition to the agent, the principal of the indirect representative is also liable for the customs debt and for post-clearance clearance.
In fact, Customs focuses its recovery measures primarily on the indirect representative. In principle, the importer will only be held liable if the indirect representative is declared insolvent. Since the agent lodges the customs declaration as an indirect representative, the breakdown is addressed and sent to the representative. It should be noted that an indirect representative cannot be used in special import procedures. Such procedures include end-use (temporary admission and end-use) and processing (inward and outward processing), or where national procedure codes are used for other customs procedures.
When using indirect representation:
When acting as a direct representative under the responsibility of the guarantor, a special comprehensive guarantee commitment must be given to the Finnish Customs. The direct representative, acting under the responsibility of the guarantor, gives a guarantee on behalf of his client that the customs debt incurred or likely to be incurred will be paid within the provided payment time. It should be noted, however, that representative, as guarantor, is not liable for any post-clearance clearance if he did not know or should not have known the information given in the customs declaration to be incorrect. The necessary guarantees are required from the agent. When the agent lodges the customs declaration as a direct representative under the responsibility of the guarantor, the breakdown shall be addressed and sent to the representative.
When using a direct representative under the responsibility of the guarantor:
We recommend that companies importing from the UK review and update their agreements with the customs agent;
Where appropriate, companies should draw up customs agreements if the company imports currently goods exclusively within the EU area;
Liability issues with different forms of representation should be carefully considered and reviewed;
Risk management with regard to customs clearance is recommended to be reviewed i.e., insurance coverage.
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Our legal experts will be happy to tell you more about the possibilities of using different forms of customs representation forms and liability issues arising from using such forms. We regularly draft agreements governing the use of different forms of representation in respect to importing goods to Finland. Our contact person for the topic is Oscari Seppälä.
LKOS Law Office is a specialist in business law. Our office has been selected as Finland’s transport law office 2020. We are specialised in customs clearance, company law, labor law, international trade law, contract law as well as transportation law.
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** This article is for informational purposes only and is not intended as legal advice.