Customs Authority Undertakes to Cease Excess Import Fee Collection

In this article, we review a judgment of the Central District Court (Lod), sitting as the Administrative Court. The judgment, delivered on April 1, 2025, by the Honorable Judge Shmuel Bornstein, concerns a notice of cessation of overcollection of import fees filed by the Customs Authority in the context of a class action proceeding.

Section 9 of the Class Actions Law, 5766-2006 (the “Law”), establishes a mechanism governing restitution claims against a public authority. Under this mechanism, once a motion to certify a class action is filed against an authority, the authority is afforded a period of 90 days in which to notify the court that it has ceased the collection giving rise to the motion. In such circumstances, pursuant to Section 9(b) of the Law, the court shall not certify the class action if it is established that the authority indeed ceased the challenged collection no later than the determining date. At the same time, Section 9(c) of the Law authorizes the court to award compensation to the applicant and legal fees to counsel, notwithstanding dismissal of the certification motion.

Factual Background

In the certification motion filed on March 19, 2024, the Company alleged that the Customs Authority, through the “Global Gateway” system it operates, was overcollecting import fees – namely, computer fees for goods valued at more than USD 1,000, half computer fees for goods valued at no more than USD 1,000, and security fees for goods valued at more than USD 500.

The Company argued that the Customs Authority had set the applicable fee rates at amounts exceeding those permitted under the periodic adjustment mechanism prescribed in Regulation 11A(c) of the Customs Regulations, 5725-1965.

On June 17, 2024, before the expiry of the 90-day period from the date on which the certification motion was filed, the Customs Authority submitted a notice of cessation pursuant to Section 9(b) of the Law. In that notice, it stated that, following its review of the allegations raised in the certification motion, as well as in another certification motion concerning the collection of half computer fees contrary to its published notices, it had decided to promote a legislative amendment that would prescribe the import fee rates in question [CA 37565-09-22 Alison Sam v. Customs Authority (the “Sam matter”)]. Pending completion of the legislative process, the Authority undertook to update the “Global Gateway” system and to collect the fee amounts in accordance with the allegations set out in the certification motion, as detailed in Section 11 of the notice of cessation.

The Customs Authority further stated that the “Global Gateway” system had been updated on June 13, 2024, and that on June 16, 2024, it had published on its website the correct import fee rates for the years 2022-2024, followed by an additional update on June 18, 2024, to correct a clerical error in the initial publication. The Authority also stated that it would take steps to update the official records accordingly, and that the legislative process had in fact commenced even before the certification motion was filed.

Following submission of the notice of cessation, and in response to clarification questions directed to the Customs Authority by the Company, the Authority filed a supplementary clarification. In that clarification, the Authority undertook that, until enactment of the legislative amendment, it would calculate the import fee rates for 2025 onward in accordance with the mechanism set out in the notice of cessation.

With respect to outstanding historical debts not yet collected, the Customs Authority clarified that, since implementation of the “Global Gateway” system, only 88 cases had been identified (and, upon manual review, 58 cases) in which a fee had been assessed but not yet paid. The Authority further stated that, to the extent any such historical debts are collected in the future, collection would be made in accordance with the import fee rates specified in the notice of cessation.

The Authority further clarified that the potential refund amount for the period from March 2022 through March 2024 totaled NIS 6,622,388. This figure does not include the overcollection in 2022 of computer fees in the amount of NIS 788,244, as that amount must be offset against the amount under collected in respect of the security fee. Likewise, the figure does not include the overcollection in 2023 of half computer fees in the amount of NIS 226,701, representing the overcollection for the period from January 1, 2023 through March 5, 2023, since that period overlaps with the period relevant to the class action in the Sam matter.

Following negotiations between the parties, agreements were reached regarding the terms of cessation. It was agreed that, pending the legislative amendment, the update and determination of fee rates for 2025 onward would be carried out in accordance with the mechanism detailed in the notice of cessation, pursuant to the periodic adjustment mechanism set out in Regulation 11A(c) of the Customs Regulations, while taking cumulative index differentials into account and disregarding the effect of periodic rounding.

As to outstanding historical debts not yet collected, it was agreed that the reviews conducted and the measures taken ensured full cessation of the overcollection. It was explained that the 58 identified cases generally concerned declarations of transaction values below USD 75 (in which case no customs duties or fees are payable), which, upon inspection, were found to reflect actual transaction values exceeding USD 100. As for the additional cases, it was stated that it is possible that no fees were collected at all, or that fees were collected according to the previous rates; in any event, given the de minimis sums involved, there was no practical benefit in pursuing further review.

The Court’s Ruling

After reviewing the notice of cessation and the clarifications submitted, the Court held that the Customs Authority’s conduct constituted a valid cessation within the meaning of Section 9(b) of the Law, and accordingly ruled that the motion for certification should not be granted.

With respect to compensation and legal fees, the Court approved the parties’ agreements, pursuant to which the Customs Authority would pay the Company NIS 70,000 as compensation and its counsel NIS 530,000 in legal fees, for a total of NIS 600,000 inclusive of VAT.

In determining the compensation and legal fees, the Court noted several relevant considerations, including the effort invested and the risk assumed by the Company and its counsel; the extended dialogue they conducted with the Authority; the benefit generated by the motion for the represented group and the public at large, as reflected in the revision of the import fee rates and the subsequent legislative amendment; the procedural stage at which the proceeding concluded and the resulting savings in judicial resources; the potential refund amount, even though no actual refund was ultimately made; and the fact that payment would be made from the public purse.

[CA (Administrative Central) 45318-03-24 S. Ruthana Trading Ltd. v. Israel Customs Authority (Nevo 1.4.2025)]

The Company is represented by Adv. Abd Alaziz Ibrahim

The Israel Customs Authority is represented by Adv. Noga Dagan