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What Constitutes A Deceptive Description On Import Documents? Customs' Power To Forfeit Goods

Adv. Gill Nadel, Shai Babai

 

As we know, the extent of import taxes paid for imported products is primarily determined by their classification given by the Customs Tariff, which generally is based on the importer's declarations on the import documents. Usually, import declarations are accepted and goods are released for consumption, but sometimes the Customs Authority does not accept the declaration, and demands that tax differences be paid, and in some particularly grave cases when  suspicions of fraud  by  importer arise, Customs decides to seize and forfeit the goods.

 

The Customs Code, in the chapter dealing with forfeiting goods, gives the Customs Authority no less than 17 causes which allow it to forfeit imported goods. The most common cause is providing false or misleading information in import documents (reports, sales invoice, certificates, declarations etc). The question asked is: when partial information is provided does it give the Customs Authority cause for forfeiture? This is a question which the Magistrate's Court of Haifa has recently discussed.

 

The facts of the case and the claims of the parties

 

Lior Jack Sabach, an individual, imported products to Israel. These products were described in the import reports as "parts for boat engines". The same description was given by the exporter (vendor) in the declaration documents. Since these were transportation products, the Customs Authority demanded confirmation from the Supervisor of the Ministry of Transportation, before releasing the goods.

 

Following the Ministry of Transportation's response, and after additional research done by the Customs Authority, the Customs Authority reached the conclusion that the goods were not "parts for boat engines" as the exporter claimed, but actually whole engines for dirt bikes. Therefore the Authority decided that the importer had given false and misleading declarations regarding the nature of the imported goods, and informed the importer of its forfeiture.

 

In the court, the importer claimed that the engines were dual-purpose, which could be used either for jet skis or for dirt bikes, and therefore claimed that his declaration was correct.

 

In opposition The Customs Authority  claimed that in the tax  reports the importer claimed  that the products were parts for a boat engine (customs heading 84.09-9120), which are exempt from import taxes and from receiving the approval of the Ministry of Transportation,  whereas in his statement to court the importer claimed that the merchandise was intended for   jet skis' motors (customs heading 89.03-9910), which are exempt from Ministry of Transportation approval, but which are obliged in customs. Despite all this, the Customs Authority claimed, the parts were neither one of these and were infact motors for dirt bikes, whose customs heading is 94.07-3390 of the Customs Tariff Directive, which are obliged both in the approval of the Ministry of Transportation  and in paying  import taxes.

 

The court's decision:

 

Firstly, the court accepted the Customs Authority's position that the importer wrongly declared "engine parts", while actually importing whole engines, and this alone is sufficient to determine that it had supplied false and misleading information, such that the engines were lawfully forfeited.

As a factual matter, the court ruled that the Customs Authority had proved that the engines were, in fact, engines intended to be installed in dirt bikes, and not engines intended for installment in jet skis, that is the engines could not be used for two purposes, as the importer had claimed.

 

In light of the above findings of the court, there was no alternative but to rule that the importer had, in fact, provided false and misleading information, in order to avoid paying high customs and purchase tax under the customs heading relevant to dirt bike engines. Therefore the action was dismissed, and the importer was obliged in legal expenses and attorney's fees of 15,000 NIS.

 

Summary and conclusions:

This is a clear case of the importer giving misleading information, since it had been proved that the engines were not used for jet skis. The question that needs clarification is- what is the line beyond which it will be ruled that the information provided does not justify forfeiture? If we assume that the court would have ruled that the engines were for dual-usage (and ignoring the question of defining "part" rather than "engine"), would  the fact that the importer had described them as motors for jet skis only be sufficient  to justify their forfeiture?

 

According to the law and the case law, as soon as the Customs Authority proved that a substantive detail declared on the import documents was inaccurate, the importer had the burden of proof to show the court that he did not attempt to deliberately mislead the Customs Authority, and that the mistake was done in good faith. Therefore, even if the court had ruled that the engines were for dual-usage, this would not have been enough to acquit the importer of the accusation of misrepresentation, and he would have to  to further prove to the court that he did not deliberately try to mislead the Customs Authority.

 

This decision is a valuable lesson to  all those who deal with international trade:   declarations given on the import documents are extremely important, and t giving incorrect information regarding the source of the merchandise, its purchase price or its nature can lead to its  forfeiture  by the customs.

 

This case is another example of the importance of consulting trained professionals in the field of import, and of making sure  that all information  given in the process of import is accurate.

 

(Justice A. Doron, CA (Haifa) 21420-07-09 Lior Jack Sabach v. State of Israel- National Legal Division for Customs and VAT Cases- Tel Aviv. Decision issued 15.11.10; Advocates of parties- for the importer- Adv. Elad Altit. For Customs- Central Attorney's Office- Haifa- Civil.)

About the Author

Gill Nadel - Born in Israel in 1969, graduated from Bar Ilan University`s Faculty of Law (cum laude) and from the Department of Musicology. He also has a master`s degree in law from the same institution. Member of the Israel Bar since 1999. Speaks Hebrew, English and Polish. Fields of expertise: Commercial and Business Law, International Trade Law, Import and Export Law, Intellectual Property Law, Maritime and International Forwarding Law, Litigation and Court Representation. Adv. Nadel provides lectures on international trade law and import and export law to in courses organized by the Bar Ilan University Center for Commercial Law, Israel Bar, Israel Chambers of Commerce, Manufacturers Association of Israel, Israel Export Institute, Customs Brokers Association, International Forwarders, and more.