Prohibitions and the violation of inaccurate declaration

1. Introit

For some time now, there has been an increase in questions regarding the formalities of the complementary documentation and/or previous interventions provided by administrators to the verification process. Minor and correctable errors appear to be insurmountable and of sufficient importance to make the document provided lose its legal validity.

Similarly, we have noticed an increase in the number of classificatory criticisms made at the time of documentary control, which are accompanied by the alleged invalidity of part of the complementary documentation and/or previous interventions presented.

In both cases, these claims often end up generating the instruction of two contentious proceedings in which the inspector accuses the taxpayers of committing the infraction of inaccurate declaration. The complaint is based on and strengthened by the alleged lack of application of certain complementary documentation and/or prior intervention, which transforms the cargo into prohibited import merchandise.

The impact of these complaints is therefore tremendous, since while the alleged prohibition and the existence of the alleged infringement are being debated, the merchandise cannot enter the market precisely because of the alleged prohibition of entry.

It is clear that the primary function of Customs is precisely to control the entry of goods whose import is prohibited. However, we note the danger of the detailed trend, which in many cases shows a certain haste when determining that entries are prohibited, for reasons that, in the end, turn out to be minor. As always, strict adherence to the law and the principle of legality is required in this matter. 

Otherwise, the verifier would assume the powers of a legislator (determining a prohibition when the legislator did not impose it) and would proceed against the constitutional rights of the administered, such as the freedom to engage in lawful industry and commerce and to import and export goods.

2. The customs declaration

Certainly, the importation of goods must be carried out through authorized places and during authorized hours. In addition, the due intervention of Customs is required. To this end, a prior declaration of entry is required.

The customs declaration is the act carried out in the manner provided by Customs, through which the interested parties indicate the customs regime to be applied to the goods and communicate the elements whose declaration is required by Customs for the application of this regime. 

It is, therefore, a written declaration, made to Customs by the person who has legal availability of the merchandise, for the purpose of subjecting it to customs control. Without this prior written declaration, the merchandise cannot enter or leave -regularly- the customs territory.

The violation of the proper customs control that must be carried out on goods entering or leaving our customs territory may constitute the crime of smuggling. Therefore, this prior declaration, which anticipates a regular import or export operation, is the essence of the customs regime.

This customs declaration must be true and accurate and it is the duty of the declarant to identify all the necessary elements that must be taken into account by the customs service for the correct classification and valuation of the merchandise, as well as to properly exercise all the control functions that are its responsibility.

This declaration, which is made before Customs, is what initiates customs clearance and, through it, the declarant requests that Customs authorize the requested customs destination. 

3. The violation of inaccurate declaration

The customs declaration is unalterable and cannot be modified or corrected once submitted, except in exceptional cases.  Therefore, once this declaration is made, it binds and commits the declarant. This implies that the declarant is responsible for the accuracy and truthfulness of the declaration. 

Therefore, to the extent that the customs service authorizes the destination in the confidence that the declaration is true and complete, any differences found in violation of that confidence may be subject to sanctions. 

Considering the importance of the confidential clearance scheme, the only system that allows the current volume of international merchandise traffic, it is evident that it is necessary to sanction those who violate that trust and make a declaration that differs from the result of the customs inspection.

The Customs Code has imposed the duty of truthfulness and accuracy of the customs declaration and has provided for penalizing inaccurate declarations with the rate provided for in article 954. Anyone who, in order to carry out any import or export operation, makes a declaration to the customs service that differs from the result of the verification is sanctioned, to the extent that it produces or could have produced: (a) a fiscal loss, (b) a violation of a prohibition and/or (c) the entry or exit from or to abroad of an amount other than that which corresponds.

The type provided for in subsection b) requires a declaration that differs from the result of the inspection and is likely to lead to a violation of a prohibition on the import or export of goods. The sanction provided for is a fine of one to five times the customs value of the offending goods.

4. Prohibitions in the Customs Code

It is clear that in order to determine whether the conduct displayed by the taxpayer is appropriate to the type of infraction of inaccurate declaration, provided for in subsection b), there must be a prohibition of import or export violated. Otherwise, an exact adaptation to the type would not be verified.

If we talk about prohibitions in customs matters, we must refer to Section VIII. Import and export bans. In the Customs Code, import or export prohibitions are distinguished: a) according to their purpose as economic or non-economic and b) according to their scope as absolute or relative.

Economic prohibitions are those established to ensure an adequate income for national labor or to combat unemployment; to execute monetary, exchange or foreign trade policy; to promote, protect or conserve national productive activities of goods or services; to stabilize internal prices; to meet the needs of public finances; to protect intellectual property rights; to safeguard good faith in business.

Non-economic prohibitions are those determined to safeguard national defense; international policy; public security; public morality and good customs; public health; food policy or animal health; the protection of artistic, historical, archaeological or scientific heritage; the conservation of animal or plant species or the preservation of the environment.

Absolute prohibitions are those that prevent all persons from importing or exporting certain goods, and relative prohibitions are those that provide for exceptions in favor of one or more persons.

In terms of prohibitions, the general principle is impediment. ab initio to import or export certain goods. The exception is an authorization for certain persons subject to a special regime with submission to certain obligations. The authorization may be established by the Executive Branch and, depending on the authorization, the merchandise will have a restrictive regime in relation to its use and availability.

When a violation of a prohibition is found, the type provided for in art. 954, subsection b) is not in doubt. For example, if the importation of merchandise with permitted entry or exit is declared and it is found during the verification that it is merchandise in relation to which there is an import or export prohibition, the conduct displayed merits reproach for an infraction.

5. The scope of the term prohibition and prior interventions

As we anticipated, there have been quite a few controversies surrounding this offence, in the case of goods whose definitive entry requires prior intervention by the State. This is the case of goods whose entry is not prohibited, but which require, for their release to the market, the prior intervention of competent bodies. 

These are presumed entries that deserve special attention and must be supervised or validated, even if there is no prohibition regarding the merchandise. We can include in this point merchandise that requires a prior intervention by the National Animal Health Service (SENASA), National Food Institute (INAL), Argentine Legal Metric System (SIMELA), National Administration of Medicines, Food and Medical Technology (ANMAT) or that requires an Electrical Safety Certificate for its entry, among other prior interventions.

And even worse is the case of Import Licences (automatic and non-automatic) or the so-called SIRA (Argentine Republic Import System), given that they are generalized prior interventions.  

In all these cases, before documenting the final destination for import for consumption and given the requirement for prior validation, the importer must manage a prior certificate/license/registration with the enforcement authority.

There have been many doubts about defining whether the presentation for clearance of merchandise that requires prior intervention, with the intervention, license or SIRA issued with some error, is sufficient to configure the infringement analyzed here. This means considering that the error renders the intervention/license/SIRA presented or generated ineligible and thus, the merchandise thus presented for clearance is prohibited.

We do not share this position. Prior interventions, and especially SIRA, cannot be compared to a prohibition. This would be an analogical application of the concept of prohibition, which is prohibited in criminal matters based on the principle of typicality. 

On the contrary, we consider that merchandise that requires prior validation for its import is not prohibited import merchandise, but rather merchandise that is permitted for import with prior procedures that must be completed for its import or, even in many cases, for its commercialization. 

This is especially the case with SIRA, as it is simply a prior monitoring system. 

6. The doctrine of the Supreme Court

The doctrine of the Court, “Nate Navegación y Tecnología Marítima SA”, is a few years old, I would say more than ten, since we are talking about a case from 2012. However, it continues to be decisive for the resolution of this type of dispute. Especially considering that in this year 2023, the High Court has ratified its full and current application, by resolving a new case in an analogous manner. 

Although in the “Nate” case, the alleged infringement was the violation of obligations imposed as a condition for a benefit (provided for in arts. 965 and 966 of the CA), the truth is that the type of infringement alleged in that case requires the non-compliance with an obligation that would have conditioned the granting of an exception to an import prohibition. Therefore, it was necessary to elucidate whether there was an import prohibition, a necessary condition for compliance with the type analyzed, as in the issues analyzed in this article.

Therefore, we understand that the “Nate” doctrine is strictly applicable to the issue at hand and this has been recently validated by the Supreme Court in the “Casas” case, as we will see below. Let us look at the doctrine.

In the “Nate” case, there was an operation of lease in which Citibank and Nate participated, under whose auspices a ship was definitively imported from Paraguay. The bank acted as importer, but later handed it over to the company Nate, for its exploitation, under the terms previously defined in the contract of lease.

Customs considered that this delivery (from the importing bank to Nate) represented a breach of the requirements established in the regulations, which required the importer to be the direct user of the imported goods.

In this regard, and given that the vessel could only be used by the importer, its transfer under the lease agreement, in the opinion of Customs, constituted a breach of the regime under which it was imported and consequently, in its opinion, entry was prohibited. Thus, Customs considered that failure to comply with this requirement, restriction or condition was comparable to a violation of a prohibition.

The Tax Court upheld the Customs' argument, but the Fourth Chamber of the Federal Administrative Appeals Court upheld the appeal and set aside the judgment. Finally, the Supreme Court, in a ruling dated June 12, 2012, admitted the extraordinary appeal filed by the Customs and confirmed the Chamber's ruling that rejected the customs conviction. In doing so, it adopted the opinion of the Tax Attorney.

In an opinion dated October 4, 2010, the Public Prosecutor stressed that all customs operations must be carried out following the established guidelines regarding schedules, methods, administrative procedures, declarations and payments of the corresponding taxes and other well-known requirements of such a delicate regime. But she stressed that this cannot imply the inversion of the fundamental rule enshrined in art. 19 of the National Constitution, elevating such requirements to the level of prohibition, which would only be lifted in cases where such legally and regulatory-determined steps were followed.

The doctrine is clear, in principle the prohibition must be express. Legal security presupposes the classification by law of the prohibited conduct. Otherwise, the concept of freedom of importation prevails as a general rule, since no one can be forced to do what the law does not mandate or deprived of what it does not prohibit, according to the constitutional mandate.

Although some years have passed since the “Nate” case, this doctrine has become relevant, given that recently, in August 2023, the Supreme Court validated its full application. 

In fact, this is a case in which the commission of the infraction of inaccurate declaration provided for in art. 954, subsection b) of the CA was being investigated and the alleged violation of a prohibition was being analyzed. In the case, the legitimacy of the export of a merchandise was being debated for whose exit the prior intervention of RENAR and the provision of the respective certificate was necessary.

In the ruling of Chamber 2 of the Federal Court of Salta, dated March 4, 2022, it was concluded that although there was no difference between the merchandise declared by the exporter and that verified by the customs service, the permit had stated that the cargo did not require prior intervention by RENAR, when the exported cargo required such intervention, because it was merchandise of an explosive nature. Thus, the Chamber considered that the omission of the contribution of the prior intervention of RENAR and the omission of indication of such circumstance in the declaration, constituted an offense that fell within the infraction of inaccurate declaration that, in addition, violated an export prohibition.

The Supreme Court, in its ruling of August 3, 2023, formally declared the extraordinary appeal admissible and ordered the revocation of the appealed judgment, considering applicable to the case under study the criteria established by the Supreme Court on June 12, 2012 in the "Nate" case, a judgment to whose grounds it is appropriate to refer, for the sake of brevity.

Thus, the High Court, in its current composition, has ratified the “Nate” doctrine and the proper interpretation of the concept of prohibition established in the Customs Code, giving preeminence to the principle of legality and legal certainty.

Judges are obliged to apply the law, that is, they must decide by applying the law, even when they consider it unjust. The division of powers provided for in the Constitution requires this. 

Legal certainty, in Badeni's words, presupposes the classification by law, in a generic or specific form, of the conduct that people are prohibited from carrying out, as well as the conduct that they can lawfully display in the sphere of social and commercial relations. It involves legally specifying the types of conduct that are permitted and those that are not, so that man can foresee and assess the legal effects and consequences of his acts. In short, legal certainty presupposes the full validity and compliance with the law by rulers and the governed. 

7. Final considerations

The acting officials must be cautious when reporting the administrators in the framework of customs operations that have prior interventions (today all of them given the generalized requirement of the SIRA), with possible formal defects. 

Not all errors invariably lead to the invalidity of the document or prior procedure, and even less so if this alleged lack of legal value can have the authority to transform this cargo into prohibited import or export merchandise. 

In this case, the Administration - of course depending on the magnitude of the error detected - should require the taxpayer to correct the error prior to the release of the merchandise to the market.

In order to formulate an infraction charge whose type expressly requires the violation of a prohibition, there must be an express prohibition. Otherwise, the type charged would be abused, violating the principle of legality and legal certainty.

Legal certainty presupposes the legal definition of prohibited conduct. Otherwise, freedom is the general rule, in this case, we are talking about freedom to import and export.