THE BOTTOM LINE
- Anti-Dumping Duties are Hard to Dodge: Routing goods through a third country for minor processing, such as cutting large rolls of material into smaller ones, will not change the country of origin. Businesses may face unexpected, substantial anti-dumping duties if the original source is a targeted country like China.
- Scrutinize Your Suppliers’ Operations: Relying solely on a supplier’s documentation is risky. This ruling shows that customs authorities, aided by EU-level investigations (like OLAF), will investigate the actual manufacturing capabilities of your suppliers. Due diligence must go beyond paperwork.
- The “Substantial Transformation” Test is Strict: For customs purposes, origin is determined by where the ‘last substantial transformation’ occurred. Simple repackaging, assembly, or minor finishing touches are insufficient. The process must create a genuinely new product or represent a critical stage of manufacturing.
THE DETAILS
This case revolved around a shipment of aluminium foil imported into the EU by a German company. The goods were declared as originating from Vietnam, a country not subject to anti-dumping duties on this product. However, Dutch Customs, acting on findings from the EU’s anti-fraud office (OLAF), challenged this declaration. They argued the foil was actually of Chinese origin and had only undergone minimal processing in Vietnam to circumvent the steep 35.6% anti-dumping tariffs applicable to Chinese aluminium foil. The court was asked to determine whether the operations in Vietnam were significant enough to legally change the foil’s country of origin.
The court’s decision hinged on the ‘substantial transformation’ rule under Article 60 of the Union Customs Code. This principle states that goods produced in more than one country originate from where they underwent their “last, substantial, economically justified processing.” The investigation revealed that the Vietnamese supplier did not manufacture the foil from raw materials. Instead, it imported large ‘jumbo rolls’ of foil (primarily from China) and simply rewound them onto smaller, consumer-sized rolls. The court classified this as a ‘simple operation,’ not a substantial transformation. It did not create a new product nor did it constitute a key stage of manufacturing.
With the Vietnamese origin disproven, Dutch Customs had to demonstrate that the foil was, in fact, Chinese. They successfully did so by presenting OLAF’s evidence, which included shipping data showing a consistent and significant flow of jumbo rolls from China to the specific Vietnamese supplier. The Vietnamese authorities even corroborated this, admitting the supplier lacked true manufacturing facilities and had used falsified documents. The court found this evidence compelling, establishing China as the true country of origin and upholding the €25,000 bill for back-duties and interest. This serves as a stark reminder that customs authorities have sophisticated tools to trace a product’s true journey.
SOURCE
Source: Rechtbank Noord-Holland
