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Netherlands: Customs duty refund opportunities; recalls and warranties (CJEU judgment)

Netherlands: Customs duty refund opportunities

The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning a recall and warranty, finding that the period for price adjustments had been extended from one year to three years, and concluded that recalls necessary to avoid risks of failure must be treated equally as defective goods.


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The CJEU judgment is viewed as providing greater opportunities for customs duty refunds in situations involving recalls and warranties. 

The case concerned a challenge of the validity of the 12-month period of Article 145(3) of the Community Customs Code Implementing Provision (CCCIP) with respect to three types of automobiles (“types A, C and D”). For car type A, the risk of a mechanical failure was identified and the manufacturer requested all cars of a certain production run to be examined and, as a precaution, replaced a number of parts free of charge. Due to the warranty obligations, the manufacturer reimbursed the entity conducting the examination for all expenses. Types C and D showed some failures in the second or third year after release for free circulation (import). The entity was reimbursed by the manufacturer due to the warranty obligation.

When the entity applied for a refund of customs duties based on Article 236 Community Customs Code for types A, C and D, the customs inspector denied the claim asserting that: (1) the replaced parts of type A were not defective; and (2) the repair of types C and D took place more than 12 months after release for free circulation. The Dutch Supreme Court ultimately submitted two preliminary questions to the CJEU regarding the validity of Article 145(3) CCCIP and the interpretation of “defective goods” within the meaning of Article 145(2) CCCIP.

Interpretation of “defective goods”

The CJEU found that the concept of “defective goods” covers situations when it is established that, at the time of acceptance of the declaration for entry into free circulation for specific goods, there was a manufacture-related risk that the goods might become defective in use, and in view of this, the seller (pursuant to a contractual warranty towards the buyer) grants the latter a price reduction in the form of reimbursement of the costs incurred by the buyer in modifying the goods in order to exclude that risk.

12-month time limit invalid

Furthermore, the CJEU found that Article 145(3) CCCIP, insofar as it provides for a time limit of 12 months from acceptance of the declaration for entry into free circulation of the goods within which an adjustment of the price actually paid or payable must be made, was invalid. This means that recalls and warranty costs will lead to a refund for a period of three years after release for free circulation—of particular interest to importers that are reimbursed for warranty repairs by the manufacturer of the goods.

KPMG observation

The Community Customs Code has now been replaced by the Union Customs Code. The 12-month limitation of Article 145(3) still exists under the current law. Article 132, letter c, Union Customs Code Implementation Regulation (UCC-IR) also limits refunds to 12 months after release for circulation. Even though the reasoning of the CJEU to declare Article 145(3) CCCIP invalid could also apply to Article 132, letter c, UCC-IR, the latter remains valid. It is not clear yet whether the European Commission will adjust Article 132, letter c, in accordance with the findings of this case.


Read a November 2017 report prepared by the KPMG member firm in the Netherlands

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