Article 124 UCC: systematics, coherence and the limits of the extinguish-ment of a customs debt

Categories of extinguishment

1. Formal termination of the debt (parts a and d)

• a. The customs debt is extinguished when, pursuant to Article 103 of the UCC, it can no longer be notified to the debtor. In that case, the right to notify the customs debt has expired.
• d. The customs debt is also extinguished in respect of goods declared for a customs procedure giving rise to an obligation to pay import or export duties when the customs declaration in question is invalidated.

Some cases touch on the formal basis of the customs claim. When the customs debt can no longer be notified (a), or when the customs declaration is invalidated (d), there is no legal basis for collection. The extinguishment here results directly from the expiry of the basis for the decision or the levy. The fact that there is a time limit for the notification of the customs debt and that the customs authorities may no longer issue a notification after that time limit has expired is related to legal certainty.  

2. Financial settlement (parts b and c)

The second category concerns the extinguishment of the customs debt:

• b. Through payment of the duties owed.
• c. By remission of those duties.

Here, the Union risk is explicitly redeemed (payment) or deliberately waived (remission). The payment of duties (b) is the classic example: the debt ceases to exist through full payment. Remission (c) creates the same result, but through a decision by the customs authority that waives the obligation to pay. In both cases, the Union's financial interest disappears in an explicit manner.

3. Extinguishment due to actual impossibility of economic utilisation (parts e, f and g)

The common thread in this group is that when the goods can no longer have any economic use within the Union, the justification for paying customs duties also ceases to apply.

• e. Confiscation or seizure and simultaneous or subsequent confiscation of the goods.
• f. Destruction under customs supervision or abandonment to the state.
• g. The customs debt shall be extinguished when goods have been completely destroyed or irretrievably lost due to their nature, force majeure or unforeseen circumstances, or on the instructions of the customs authorities. They shall be considered irretrievably lost as soon as they are no longer usable by anyone.

When goods are seized and confiscated (e), destroyed under customs supervision or surrendered to the state (f), or when there is total destruction or irretrievable loss due to force majeure or the nature of the goods (g), the economic destination that gave rise to the customs debt is effectively excluded. The goods can no longer be placed on the Union market and therefore no longer generate a tariff risk.

4. Extinction through regularisation (parts h, i, j and k)

The most sophisticated category is found in parts h to k, which together form a nuanced mechanism for correcting errors and regularisation.

• h. The customs debt incurred as a result of a non-compliance under Article 79 of the UCC (non-compliance on importation) or Article 82 of the UCC (non-compliance on exportation) shall be extinguished if: (i) the omission in question has not had any real consequences for the proper functioning of the procedure concerned and did not involve any attempt at deception, and (ii) all formalities to regularise the situation of the goods are subsequently completed.
• i. Extinguishment on export with the consent of the customs authorities of goods released for free circulation on the basis of end-use.
• j. Extinguishment when the preferential tariff treatment referred to in Article 78 of the UCC is cancelled.
• k. The customs debt incurred under Article 79 of the UCC shall be extinguished when the debtor proves to the customs authorities that the goods have not been used or consumed in the Union and have left the customs territory, subject to the exclusion for attempted deception in paragraph 6.

This category constitutes the most nuanced application of Article 124(1) of the UCC and acts as a legal remedy: once it has been established that the Union has not suffered any loss and that there was no fraudulent intent, the debt may still be extinguished.

The additional provisions: paragraphs 2 to 7 of Article 124 of the UCC

Article 124 contains more than just the list in paragraph 1. The subsequent paragraphs determine the scope and limits of the cancellation.

Paragraph 2 – Extinguishment does not prevent penalties

Where the customs debt is extinguished on the basis of point (e) (seizure/confiscation), this does not affect the possibility of imposing penalties if the legislation of a Member State provides that import duties or the existence of a customs debt serve as a basis for determining penalties.

In this context, reference should also be made to Article 125 of the UCC, which similarly provides that the extinguishment of the customs debt on the basis of Article 124(1)(h) does not prevent Member States from imposing penalties for non-compliance with customs legislation.

Criminal or administrative law follows its own logic, independent of the extinguishment of the tax liability. 

Paragraph 3 – Remains of destroyed goods

When applying point (g), residues and waste are considered to be non-Union goods. This legal fiction ensures that residues do not tacitly enter into free circulation.

Paragraph 4 – Fixed percentages for irretrievable loss

Where fixed percentages for irretrievable loss arising from the nature of the goods apply, they shall be applied unless the interested party demonstrates a greater actual loss. The fourth paragraph confirms the strict rules of evidence in loss situations.

Paragraph 5 – Remission is personal

If several customs debtors are jointly and severally liable for the same customs debt (within the meaning of Article 84 of the UCC), remission shall only apply to the person(s) in respect of whom the remission decision has been taken. A customs debt may therefore be extinguished in respect of one or more specific debtors and at the same time not in respect of one or more jointly and severally liable co-debtors.

Paragraph 6 – The absolute limit: attempted fraud

Under point (k), extinction is excluded for anyone who has attempted deception. Paragraph 6 thus enshrines the principle that Article 124 of the UCC does not function as a free pass for fraudulent acts. Would you like to know more about the scope of Article 124(6) of the UCC? Read our recent blog ‘Article 124 (6) UCC: the meaning of the notion ‘deception’ in customs law’ here.

The essence of Article 124(7) of the CCN is as follows:

Paragraph 7 - Remuneration mechanism within the extinction regime

Article 124 of the DWU ends on a positive note. Whereas paragraph 6 formulates an exclusion with regard to Article 124(1)(k) of the UCC—no cancellation with regard to a person who can be accused of attempted deception —paragraph 7 essentially forms the positive counterpart: it opens the door to cancellation for those who can demonstrate that they have not committed fraud and have actively contributed to the fight against fraud.

Paragraph 6 closes the door to cancellation in case of fraud, even if goods have left the Union unused and there is therefore no basis for the levy of duties, while paragraph 7 opens the door to cancellation in the absence of fraud and a contribution to the fight against fraud. Paragraph 7 is therefore not only a 'no fraud provision', but also aims to provide a positive incentive: cooperation in fraud prevention or detection can be legally rewarded with the remission of the customs debt for that person. Paragraph 7 is in line with the third pillar of Article 124 UCC – no deception – but goes a step further as it promotes the proactive integrity of market participants. Paragraph 7 also fits logically within the system of Article 124 UCC, which is entirely based on risk elimination, proportionality and good faith.

Article 124 UCC: a coherent structure, not a random list

Although points (a) to (k) of Article 124(1) of the UCC range from formal situations to practical destruction and complex regularisation in cases of non-compliance, there is coherence.

The basic principle is that a customs debt is extinguished when the tariff risk to the Union has objectively disappeared or when full and verifiable regularisation justifies it, but not in the case of insufficient evidence. In the case of failure to comply without actual consequences and leaving the EU without use or consumption, there must be no attempt at deception.

Article 124 UCC essentially revolves around three pillars:

• the absence of tariff risk;
• complete regularisation;
• the absence of fraud or culpability.

Viewed in this light, the article provides a strict and coherent limitation of the power to levy duties, which can be very valuable in customs practice. It takes the sharp edges off. However, its application in practice requires a solid file and accurate documentation.

Questions about customs issues

Ploums' Customs, Trade & Logistics team has a specialised customs practice in which we advise on the full spectrum of customs issues and litigate against customs decisions. We offer a one-stop shop for customs matters, including civil recourse, liability issues relating to customs services, export control and sanctions regulations. If you have any questions, please feel free to contact Jikke Biermasz or Arjan Wolkers.