Borenius attorneys defend major industrial products importer in precedent-setting case
On 12 August 2020 a Decision of the St. Petersburg and Leningrad Region Commercial Court invalidating customs decisions amending (supplementing) information stated in a goods declaration became effective.
Between 2015 and 2017 a limited liability company that was a wholly owned subsidiary of a European company acquired industrial products from the European company to sell on the EAEU domestic market. In 2018 the European company decided that the subsidiary would distribute all of its 2015-2017 profits as dividends to the sole participant.
The customs held the position that the dividends the subsidiary paid the European company should be included in the customs value of the goods imported in 2015-2017. This position is a very dangerous direction of customs authority practice for European companies because their subsidiaries regularly pay out dividends. If the courts encouraged such a practice it would result in huge additional charges on the customs value of imported goods.
The Borenius attorneys sustained the position that, economically, such dividends are income from corporate rights, not sale and purchase dealings. In other words, they are not part of the price of the imported goods. Therefore, dividends should not be included in the customs value of imported goods because their sale does not depend on the buyer’s obligation to pay out dividends and will happen whether or not this is done.
The 13th Commercial Court of Appeal fully agreed with the Borenius attorneys’ position and criticized the customs arguments.
We hope this precedent-setting dispute will cause the customs authorities to change the direction of their practice and will help to further protect other market players.