In February 2024, UK Parliament passed the Customs (Preferential Trade Arrangements: Error in Evidence of Origin) Regulations 2024, holding proof of origin providers—ordinarily, exporters or suppliers—liable for errors in evidence of origin. In most cases, even though the evidence provider is the supplier or exporter, it is the importer that is assessed fines and sanctions for incorrect proofs of origin. This new UK regulation is a game changer in the area of origin and preference, holding exporters accountable for the statements they make, and setting forth notification requirements and penalties of up to £1000,- when there are material mistakes in the preferential origin statement which result in erroneous claims that the goods are of UK origin.

This blog delves into deeper detail on the new protocol and consequences for UK exporters, as well as how this new regulation compares to penalties for proof of origin errors in EU countries, for example Belgium and the Netherlands.

Preferential trade arrangements: error in evidence of origin—who is affected?

On the 13th of March 2024, the Error in Evidence of Origin regulation entered into force in the UK, obligating exporters to notify Customs of any material error in evidence that goods originate from the United Kingdom and setting forth consequences if one fails to do so. This means that as of this date, when the provided proof of origin is not correct, the issuing party has the obligation to inform the authorities of the material mistakes. Material error in this sense means an error that could affect the accuracy or validity of the provided evidence for claiming origin.

For the moment, the notification and the subsequent penalties are only applicable for UK-originating goods that fall under free trade agreements listed in the schedule attached to the regulation. These are the following:

• UK-Canada TCA
• UK-Turkey FTA
• UK-Iceland, Liechtenstein, and Norway FTA
• UK-New Zealand FTA
• CPTPP

Once notified of the violation, HMRC or any relevant tribunal will review the case and has the discretion to determine the exact height of the fine, with a maximum fine of £1000,-. While the regulation stipulates that the party is not liable to a penalty if there is a reasonable excuse for the failure to comply with the obligation to notify, what types of circumstances are deemed to be reasonable are not clarified.

However, two instances are noted that are explicitly not considered reasonable excuses:

• when reliance was placed by the person on another person to perform any task; and
• when the failure is attributable wholly or partly to the conduct of another person on whom reliance was so placed.

Under these circumstances, even if a person is acting in good faith, e.g., in situations where they relied on a supplier to provide information on proof of preferential origin, they may be subject to a fine.

The regulation does not explicitly determine whether the penalty applies for each transaction for which the exporter failed to have proof of preferential origin.

How does Belgium handle errors in proofs of origin?

In principle, for every violation of a Customs- and Excise-related rule, the Belgian customs authorities have the right to issue a fine, and this may even happen when an economic operator is acting in good faith. While these penalties are typically assessed to the importer, Belgian legislation explicitly mentions a clause that is fixed towards deceiving foreign customs authorities or any other mistakes that were made in documents linked to origin declarations.

While the rules are not as specific as they are in the UK, the Customs and Excise law (AWDA) sets forth penalties that can range from fixed fees to prison sentences. It is likely that the penalty for having material mistakes in a proof of origin will fall under Article 260 of the AWDA, which states that delivering false documents with the intention to defraud customs authorities in a different country or to receive a preferential regime in this other country should be punishable by a fine of €250 to €625. In principle, this would also apply to exporters.

In addition, the AWDA by its nature is based on criminal law, which means that any wrongdoing could lead to criminal prosecution and a criminal record. Article 260 only talks about situations where the party acts willingly and knowingly. But what happens in cases where the party is acting in good faith and mistakes are unintentional?

There is a so-called ‘catch all’ clause in Article 261 of the AWDA, which mentions that any other act that violates the rules mentioned in the AWDA or other customs regulations should be punishable by a penalty of €125 to €1250. There is also a possibility to settle a bad track record, pursuant to Article 263 AWDA. The settlement usually consists of a fine plus a payment of potential duties.

The AWDA is currently undergoing major reform, which may address penalties and criminality in cases where parties are acting in good faith based on information provided.

How does the Netherlands handle errors in proofs of origin?

In the Netherlands, the penalties for erroneous evidence of origin can either be of administrative or criminal nature, depending on the form of the violation. It is even possible that, in certain situations, the sanction can lead to a prison sentence, depending on the gravity of the offense and whether there was an intention to defraud the Dutch customs authorities.

For our matter at hand, a material mistake in proof of origin for exporters, the applicable article is not mentioned explicitly in the Dutch General Customs Act (ADW). However, potentially applicable articles are Article 10:5 (1)(a) or Article 10:5 (1)(b) (1°) ADW, which address wrongly preparing declarations or providing incorrect information. These could in principle lead to a prison sentence of up to six months or a fine of the third category (indexed every year, anno 2024 maximum €10.300,-). If there is intent to defraud the customs authorities, consequences can be even stiffer, with six months in prison and up to €103.000,- in fines. However, before the stage of fines and prison sentences is reached, there will always be a possibility to remedy the situation by way of a settlement together with Dutch customs.

Conclusion: An unprecedented accountability for UK exporters

As we can see, all three countries assess consequences for providing erroneous proofs of origin, and the fines can be quite hefty if you do not pay attention. However, the new UK law explicitly holds UK exporters accountable for accuracy. This will certainly trigger more rigorous processes on the part of exporters to ensure preferential evidence documentation is correct.

When issuing proofs of origin, you should always be certain that the proof you create is correct. This means that the materials must be of preferential origin or meet the product-specific origin rules during the production process. By implementing a solid process for origin management, supported by software that automates the collection, calculation, and issuance of proofs, exporters can avoid penalties.

Would you like assurance that your origin operations are in compliance? Contact the Portorium team for an assessment.