In the days leading up to the end of the year, the co-editors of the Argentine Customs Code, Ricardo Xavier Basaldúa, Enrique Barreira and Hector Vidal Albarracin, agreed to conduct an interview with Customs News on the evolution of international trade and customs law.
In view of their recognized intellectual nobility, these men shed light on a series of legal issues of 2022 to share their perspective on the future. Among them, the commemoration of the 75th Anniversary of the General Agreement on Tariffs and Trade (GATT) of 1947. At the national level, the celebration of the 40 Years of Decree 1001/1082 by which the Customs Code was regulated, the creation of the Import System of the Argentine Republic (SIRA) with Joint General Resolution 5271/2022, the proposal of the National Government to dollarize penalties and -of course- the Plenary ruling of the National Tax Court on export duties. In this broad conversation, Basaldúa, Barreira and Vidal Albarracín address all these issues and present their general vision for the country and the world, with a view to driving them forward.
(The interview has been lightly edited for length.)
International framework
Customs News: What is the current situation at the WTO?
Ricardo BasaldúaThe World Trade Organization is the successor of the GATT, the expression of the new economic legal order established after the Second World War. The GATT ultimately represented a reaction to protectionism and the establishment of multilateralism with the rejection of discrimination between the goods of different countries. The GATT of 1947 worked acceptably well and gave rise to the Eighth Uruguay Round, which incorporated the services sector, intellectual property rights and the new dispute settlement system. The World Trade Organization was also established. Consequently, this organization, whose creation was attempted in 1947, was achieved in 1995.
The WTO, which seemed to be the consolidation of the multilateral trade system, is currently undergoing a global crisis. When globalization came about, it was believed that it would mean the triumph of transnational or multilateral companies, based on the fact that cheaper means of transport and the progress of the means of communication would allow the expansion of industries in different countries, with a favorable result for the United States and the European Union. In fact, the “Asian Tigers” and China emerged, achieving an enormous share in international trade, which put the situation of the United States and the European Union in jeopardy. Consequently, although the great defenders of multilateralism, who had been Franklin Roosevelt (United States) and Wilson Churchill (United Kingdom), carried this flag towards non-discrimination and free trade, the United States changed its position to return to protectionism. This is clearly seen with the government of Donald Trump, who was moving away from the disciplines of the GATT. Multilateralism is now being replaced by regionalism, which is a way for countries to stand up to free trade, out of the need to protect themselves against the power of globalization, with all the negative consequences it brings, and the challenges of global competition. Thus, Trump began to ignore the functioning of the GATT, because the United States could no longer impose its will, nor could Europe, in the face of the growth of emerging countries. The Ninth Round, which began in 2001 in Doha, has not yet been concluded due to a lack of consensus. Despite the years that have passed since the beginning of the Round, the confrontation between developed countries that produce industrial goods and countries with raw materials and agricultural and livestock products, which do not have access to the markets of the United States and Europe, continues. Thus, this multilateral negotiation forum is not working for countries to agree on the development of international trade.
The United States has also refused to appoint the members to be replaced on the WTO's Permanent Appellate Body. None of the seven members whose terms expired have yet been replaced. This means that the body cannot function. The system of peaceful settlement of trade disputes is therefore suspended.
On the other hand, we are witnessing the decline of the United States and Europe in the face of the economic and commercial expansion of countries in the East.
Thus, the crisis is not only affecting the WTO, but we have seen the reappearance of bilateralism (e.g., U.S. treaties with Chile, Peru, Colombia, and Panama) and regionalism based on plurilateral treaties, such as the USMCA, which has replaced NAFTA and where the United States has imposed new rules on its partners Canada and Mexico, making it more difficult for them to access its market. It also included a clause to prevent Mexico from acquiring raw materials or components from China and thus allow this country to indirectly enter the United States through the free trade zone.
We are witnessing a world order where international law and free trade are being left aside.
Russia's invasion of Ukraine is proving that the United Nations is also failing to provide solutions. It has become ineffective in the face of Russia's veto as a member of the Security Council and the Assembly has not dared to do anything other than issue a statement condemning the invasion. In short, we are talking about a breach of the rules of the UN Charter that guarantee the territorial integrity of countries and their sovereignty.
Nor is the law working in international trade. If we project this to other integration systems, such as MERCOSUR, the rules are not working either. Even with regard to the application of the dispute settlement system, the MERCOSUR countries are not resorting to the law to resolve conflicts within the framework of the Olivos Protocol.
We live in a world that is trying to solve its major problems through negotiations and not through pre-established legal rules, with the aggravating factor that all countries increased their military budgets as a result of the war unleashed by Russia at a time when the opposite was expected, to address environmental problems. Thus, at the climate summit held in November in Egypt to protect the ozone layer. In other words, as a result of the war, energy problems are being solved by countries again resorting to coal and other non-renewable sources. As you can see, this war has tremendous consequences. Just at the time when we most need to have disciplines to protect our environment, everything is being postponed.
My vision, then, is not optimistic because in the world we are not trying to resolve conflicts in accordance with the law and attending to the urgent needs that our planet requires in order to survive.
The situation in Argentina
AN: Could you provide a brief overview of the regulations of the Customs Code?
Hector Vidal Albarracin: It is important to note that, prior to the regulation of Law 22.415, all customs matters were systematically and orderly unified in the Customs Code (CA). This meant that people could approach customs law easily, and also an advance in jurisprudence and doctrine. In addition to this richness, we are talking about forty years of stability because it was a basic legislation that was maintained over time, but as systematic legislation it needed regulation, which was provided through Decree 1001/1982 and its successive partial law reforms. I will pause here to highlight that, in order to maintain systematization, the regulations had to be issued within this framework. Regulations were issued on relevant aspects of the CA such as the crime of smuggling of narcotics and weapons, and other modifications that generate a series of conflicts that arise regarding the proportionality of the penalties. Then, there are laws that try to update the law regarding petty smuggling. Law 25.063, which refers to personal property, has two customs reforms, article 10 referring to the definition of merchandise and article 37 linked to the figure of customs brokers. The second part causes a graft on the concept of merchandise by including services, breaking with the traditional line of the concept of merchandise.
Progress continues to be made in an attempt to update the CA as needed. Here comes the implementation of the Maria System, a computer system where the way of declaring is fulfilled by classifying the junk, causing a special situation because the declarant has to refer to a technical concept such as the tariff position. Then the Customs stops classifying and goes more to monitoring. Article 957 is removed, which exempted inaccuracy from punishment when the declaration was true and complete.
The last partial reform is Law 25.986, which affects an important aspect from a criminal point of view. In this effort to punish those who commit crimes, it is considered that by increasing the penalties, these crimes will not be committed; the penalties for certain cases of aggravated smuggling will be increased excessively.
Since then, although the CA has remained in force, it has had patches that have caused the systematization to break down somewhat. For example, the Couriers that emerged after the CA have a regulation through resolutions that give them unequal treatment compared to the customs broker, who must comply with a series of requirements.
We are truly convinced that a comprehensive reform is needed, covering the entire CA. It is worth mentioning the reform work that was carried out during the pandemic, with great effort from the private sector, which was to be added to that carried out by customs, which was never completed.
AN: What is your opinion on the Plenary ruling of the National Tax Court on export duties?
Enrique Barreira: The Plenary Session of April 26, 2022 has very particular characteristics because it does not fulfill the function that corresponds to a plenary session. The plenary session is the union of all the chambers corresponding to a jurisdictional body, in this case the National Tax Court (TFN), which is an administrative court with autonomy and without hierarchical subjection, so it has a certain freedom. It is equated in stability with the Federal Chamber, which gives it a certain solvency to resolve freely. Stammler said that stability occurs in a judge when he has freedom and autonomy, but that it is a spiritual question. It is the possibility of resolving what he considers to be fair.
The plenary sessions are intended to resolve divergent issues between the sentences issued by different chambers. To do this, it will be necessary that there are precedents found within the same TFN between several chambers of the same specialty. Apparently this is not the case, because the plenary session was not requested by the litigants on a specific case, but convened by the Presidency of the TFN. Regarding the possibility or not of there being a manifestation of constitutionality or unconstitutionality resolved by the TFN, this is prohibited by the CA to the extent that, being an administrative court, it cannot establish questions to the authority of the Executive Branch. On the other hand, the characteristic of questioning or knowing about the legitimacy of a law with respect to the National Constitution only occurs in the federal jurisdiction and must be done through the judges who depend on the Supreme Court.
It is correct that the TFN cannot declare the constitutionality or unconstitutionality of a norm. This does not prevent the judge from saying: “I cannot judge, but I state that it would be possible that this was not constitutional, and I bring it to light so that it can be ruled on for greater knowledge by the competent persons.” When I was a lawyer for the National Customs Administration, in the rulings we had to make we had to respect those established by the State Attorney's Office of the Nation because we were part of the body of State attorneys and we had to obey the doctrine. However, we were allowed to state whether it was constitutional or not for the sole purpose of being able to intervene for the knowledge of the National Customs Administrator in the event that he wanted to make a consultation with a higher authority.
As for customs duties, I have a position taken some time ago, in 2008, as a consequence of the so-called “countryside war” that began at the end of 2007, when there was a significant increase in the price of soybeans worldwide due to poor harvests in several countries. The price of soybeans rose so much that it surprised the National Government with a sudden increase. Since soybeans are managed through a specific tax system (Law 21.453) developed by the National Grain Board, in conversations with the private sector – I was a Customs lawyer appointed to collaborate in the development of this regulation – one of the issues was to find a system under which exporters would not be challenged by a rapid increase in export duties when the time came to export. It happened that the period that corresponded between the moment in which the negotiation with the foreigner could be generated to ensure the future distribution that the agricultural product could have abroad, was much earlier than the moment in which the harvest was produced and eventually the production of oil or flour from the material for export.
In the meantime, it could happen that the State established a modification of the export tariff, which at that time was managed by the ministers of economy, who could suddenly modify the export duty, in view of the sales already generated by those who needed a distribution line abroad, such as the exporters, which were already fixed. Consequently, in that meantime a loss of all profit could be generated. An agreement was reached between the National Grain Board and the exporting group trying to obtain reciprocal benefits: “We are going to give you a DJVE in which the tariff will be frozen, but you have to comply with that DJVE at least 90 percent, otherwise we will apply a fine of 15 percent for not exporting what the state thought could be exported.”. In this way, the State was assured of what was going to be exported, which would mean that it would have foreign currency income depending on the fine or coarse harvest. And from the point of view of the exporter, he had the security that when he exported, the export duty would not be increased in such a way as to cancel out all the profit. It was a relationship ““win to win” (I win and you win).
In 2008, the law was modified as a result of the desire of the Executive Power to take control of part of the increase in the price of soybeans, through a retroactive increase in the tariff. This was Law 26351, by virtue of which the retroactive nature of the applicable norm was established, which rose by 27 percent. And even if it had already been paid with the DJVE, now more had to be paid, unless the corresponding acquisition had been made and it had not been fed back later. It was a matter that was left in the hands of the ONCCA (National Office of Agricultural Trade Control). This brought to light another issue, that the Executive Power, through the ministers, could establish the tariff. This arose from a delegation that made the law based on a jurisprudence that had been given in the 60s, questioned at that time and that was only won in the first instance by the exporter, saying that the tax is something delicate that must be approved by the National Congress. Consequently, a power that is proper to the representative of the people cannot be delegated to an official of the Executive Branch. There was a need to adapt it quickly. There were no maximum or minimum limits established above which there would be any reasonableness in the increase.
This was finally resolved by the Supreme Court ruling in the “Camaronera Patagónica” case in April 2014. It was clearly stated that although there was a possibility of urgency in virtue of the economic conditions that existed to establish a tariff modification, if this was delegated to the Executive, it had to be predetermined with certain limits, limits that cannot be excessive in the sense of leaving a limit that can be 5% or 55% to the discretion. The problem is in confiscation. When a substantial part of a company’s assets is captured with the tax, something occurs that is against a fundamental right of the National Constitution, such as the right to property. It happens that one pays income tax, profits, export duties, as well as value added tax and municipal taxes. The sum of these jurisdictions, which establish various taxes, rates and contributions, today are taxing in some cases more than 50% of what the exporter can earn. If we add to this the hidden tax the exchange rate controlled by the PEN through the Central Bank, where for each dollar an official exchange rate is applied that has nothing to do with reality, what is being done is to keep part of the exporter's assets. It is a hidden tax, as Otero Monsegur said in the 1960s, when Illia established the decree that established this exchange rate. It is the truth. It happens that sometimes it is not convenient to see the truth, for political reasons and intellectual dishonesty.
There is no vocation on the part of the political party, members of Congress, to exercise the activity of the State to order in accordance with the National Constitution. Because no society can function without rules and the maximum rules are dictated by the Constitution. And when it comes to rights, reference is made to life, liberty and property. These are rights that no one can deny.
AN: Do you agree with the National Government's idea of dollarizing penalties, both for criminal and customs violations, setting the application of the exchange rate for the purposes of effective payment on the previous day?
Hector Vidal Albarracin:The 2022 national budget project contains a proposal that aims to dollarize certain customs penalties. We agree with an update that maintains the value of the currency, but it is not appropriate to tie it to the dollar, much less to fix it to the exchange rate because that is ignoring that the fine is of a criminal nature and never generates profits.
What has happened in our country is that inflation has advanced and has depreciated the penalty. When the convertibility law was passed, the repeal of what the CA provided for in article 926, which established the update, occurred, in such a way that the penalties have lost their value. So, one thing is to update so that it maintains its value and another thing is to tie it to the dollar, a currency that is governed by dissimilar rules. This indeterminacy of the penalty is unconstitutional because the author of the punishable conduct, his action has to be tied to a penalty. Here we speak of proportionality where the purpose of the penalty is general prevention.
We must take into account what was previously mentioned about patches and regulatory reforms. I mean that these loose laws that aim to remedy a specific problem are completely forgotten. That is when a circuit breaker occurs. In addition, the penalty is linked to the elimination of trial and other institutions that are related to conduct and the situation that is triggered by the dollar is going to be difficult to comply with. This is what the 2022 budget bill causes with the idea of dollarization of customs penalties.
AN: And what can you tell us about the new SIRA customs procedure?
Enrique Barreira: The question is about the SIRA, which replaces the SIMI, which in turn replaced the DEJAI. They are very similar mechanisms to each other, if not almost identical, which establish a system originally created by a resolution of an autonomous entity. In the case of the SIMI, it was analyzed as a gateway to determine the scope of the automatic and non-automatic licenses that are regulated by the Tariff Licensing Agreement provided for in the WTO and the GATT of 1947.
There is a fundamental right, which is the freedom of trade, contemplated in article 14 of the National Constitution. However, the National Government considers that freedom of trade only operates within the national territory, it is as if they were ignoring the idea that freedom of trade is covering trade with foreign countries. This is not so because freedom of navigation is proof that the Constitution was in charge of that. In addition, there is a ruling by the Constitutional Convention that was reflected in the Constitution of 1853, where it was made clear that the idea was to establish freedom of trade that would allow trade with all countries of the world in an effective manner. On this point, the Constitution establishes in article 75, section 2 that it is the exclusive power of Congress to apply customs duties on imports and exports, as well as valuations on which tariffs would fall. In addition, section 13 establishes that trade relations with the rest of the world are the power of Congress. This means that it is not limited to a tax problem, but that Congress has control over the way in which the country will relate to other countries. For this reason, an interruption in the flow of imported or exported goods must arise from the law or at least establish a clear policy on how the problem of import and export will be dealt with on the basis of Congress, as the Camaronera ruling says. One thing is to apply a tariff and another thing is to apply a prohibition, because this is expressly prohibited in the GATT: “Quantitative restrictions cannot be applied.” It also states that the only way to regulate the flow is through the tariff. This must be remembered for the purposes of handling customs valuation, which should not be used to regulate imports and exports. Therefore, without the intervention of Congress, without the intervention of the Executive Branch, restrictions on imports and exports are established on the basis of a regime established by an autonomous entity such as the AFIP. This is how the DJAI was born, then followed by SIMI and SIRA.
This is related to licenses. I emphasize that in customs law, an attempt was made to unify them in a single text to have guarantees for both customs and the importer and exporter. What is more, the regulatory Decree that Héctor Vidal Albarracín spoke about is structuring, supporting each of the norms in the corresponding article of the CA. Precisely because the regulation can never go beyond the law.
There is an usurpation of the PL by the DJAI, SIMI and SIRA, which makes the rules emerging from these mechanisms unconstitutional because they lack the legal basis necessary to generate restrictions on the individual rights of importers and exporters. It is very difficult for the Judiciary to resolve this if it enters into a head-on collision with the PEN and leaves the country in a situation of total lack of regulation of imports and exports. Consequently, there is a difficult relationship to make between doing justice to the importer or exporter, which means destroying the SIRA system, or establishing some provision without destroying an institution such as the Constitution.
This is the problem posed by SIRA and licenses, with the aggravating factor that automatic licenses are the only ones that can be applied in accordance with the WTO. Non-automatic licenses require a rule that prohibits import or export in a specific way. Automatic licenses are the only ones authorized by the country. The delay in eternal It is nothing more than a restriction proven by the panel set up by the WTO in 2014, also due to a quantity of doctrine that has existed on this issue previously.
AN: How convenient is it for Customs to be within an organization whose objective is to collect taxes?
Ricardo X. Basaldúa: It is not convenient for Customs to be within an organization whose function is to collect taxes. AFIP is the Federal Administration of Public Revenues and, as such, whoever is in charge has to think about how to collect taxes. Currently, all customs offices in the world have more important functions than collecting taxes. The control exercised at the borders takes into account fundamentally security, public health, animal health, protection of the environment, our fauna, etc. On the other hand, modern customs systems use suspensive customs destinations, such as temporary import, import transit, storage depot, that is, destinations that tend to facilitate transport, trade and industry, for example, with the temporary import destination for industrial transformation in our country. In no suspensive destination, neither import nor export, are taxes applied. As a result, customs are not primarily thinking about taxes, but about other issues related to the security of foreign trade, the facilitation of international trade and the protection of the common good by preventing the entry of dangerous or harmful goods. The latest WTO agreement, of which our country is a party, is the Trade Facilitation Agreement approved in 2013 and imposes a series of obligations on us that have nothing to do with tax collection.
Please note that the United States, since 2001, has transformed its traditional customs service into the United States Customs and Border Protection Office (Customs and Border Protection “CBP”), linking this service closely with the security system. It is clear that customs have the function of protecting the security and well-being of countries in matters related to public health, animal and plant health, etc. The entire set of prohibitions on imports and exports is entrusted to customs; therefore, they cannot be managed by a person in charge of an administrative body dedicated to tax collection. Customs must be outside of this body called AFIP, which has not added “customs” to its name even after the regrettable forced merger with Customs. Customs always enjoyed autonomy until the unconsulted and improvised reform of decree 618/97, which should be repealed.
AN: Are you writing something about customs?
Ricardo X Basaldúa: I am writing about a phenomenon that is taking place in the world today: regionalism. As we have pointed out, multilateralism is not working today and in the face of globalization all countries are looking for ways to relate to each other through integration agreements. That is why the book I am finishing will be called “Right of integration”, where in addition to an essential general theoretical part, I deal in particular with the different integration processes, from the European Union to the recent T-MEC, through ALADI, Mercosur, the Andean Community and the Central American Common Market.
The future
AN: I ask you for a final reflection to appreciate the value of legal rules from a political and economic perspective.
Enrique Barreira: Society cannot function if there are no clear rules, which require a certain amount of power to enforce them against those who do not want to perceive them. No society can function without clear rules that are followed.. The function of ensuring that these rules are followed belongs to the power of the State. For this reason, the State is the embodiment of a coercive power. This must be shared by society in order to avoid dictatorship. In democracy, the people govern through their representatives. A Nobel Prize winner considered that the problem of democracy was that it needed to be maintained with the majority, which had to be established on the basis of certain concessions that should not be in the general interest.
It is also said by the great Argentine political scientist and jurist Mario Justo López in the book “The politician and the development of Argentine politics”. He said: “There is a theoretical aspect and an architectural aspect of the power of the State. The theoretical is the struggle to try to see who is going to handle the power. The architectural is the creation based on the ends that suit society. The problem is that one does not exhaust the other and does not overlap with the other. We had this in Aristotle where politics establishes that the death of democracy comes with demagogy and demagogy is nothing more than concessions to those who are going to support the majority. This is resolved with social ethics.
Hector Vidal Albarracin: I understand that both from a political and economic point of view, It is essential to build trust. At the national level, we see a lack of confidence in our authorities. We do not believe in our authorities, therefore the rules cannot work. There is no respect for the rules or the authority. Everything we have talked about regarding foreign trade and customs law must first be updated and the twists and turns that have been modified in this system of partial reforms must be adjusted. A new comprehensive reform is needed that covers all aspects. If we want to involve young people, we have to include technological advances such as e-commerce, blockchain and smart contracts. Lawyers have to try to keep up to date on these aspects in order to try to regulate them, but never stop collecting them and giving them the value they have.
Ricardo X BasaldúaOne of the issues that concerns me is how international trade is developing, increasingly separated from compliance with established standards. Laws are essential to restore the balance between the weak and the strong.. In the law of the jungle, the lion rules; therefore, it is a matter of a relationship of forces, not a fair relationship. Countries need laws that protect them from the most powerful countries. At this time, the situation that is occurring with respect to the non-compliance with norms at the international and national level causes uncertainty and the solutions that end up being imposed are not equitable. Therefore, it is important to realize what this lack of knowledge of the institutions, of the United Nations organization, of the WTO means. Also the lack of knowledge of our countries that have created a MERCOSUR with the Treaty of Asunción. In short, I am concerned about the distancing from the law, a discipline that is designed to promote justice.
* The interview was conducted at the facilities of the Círculo Italiano, City of Buenos Aires.
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