Customs & Trade in Israel

24 August, 2022

Can the Online Tariff be Relied Upon?

Can importers and customs agents rely on the information in the online customs tariff system that appears on the Customs Authority’s website? It may seem like a trivial question, but we invite you to read the following astonishing (and real) story.

An importer sought to import grape juice from Argentina, and in order to know whether the grape juice is dutiable upon import to Israel he turned to a customs agent so that the agent may examine the matter for him.

The customs agent checked the Tax Authority’s website and submitted an inquiry to the Customs Authority through the digital customs agents’ inquiries system, reaching the clear conclusion that the grape juice is exempt from customs as it is produced in Argentina. The shipment was stopped by the Customs Authority upon arrival, and the Customs Authority found an error in its digital systems (including the online customs tariff). The true legal situation, under the Customs Tariff Order published in the Official Gazette, is that grape juice imported from Argentina is dutiable.

The importer was forced to pay the import duties for the shipment under protest, and demanded that the Customs Authority return paid duties due to the fact that he and his customs agent relied and acted upon the Customs Authority’s position, as presented on its website. The Customs Authority remained insistent, arguing that the customs agent should have examined the official order published in the Official Gazette and its various amendments, and not rely upon the information presented in the website.

The importer was forced to pay similar duties for a second shipment of imported grape juice which he was unable to cancel.

The importer therefore filed a monetary claim against the State of Israel, demanding it refund the paid taxes. He also filed a tort claim against the customs agent alleging professional negligence.

In its ruling, the Rishon Lezion Magistrate Court criticized the Customs Authority’s position, but still rejected the importer’s claim against both the Customs Authority and the customs agent.

This ruling is a true gem for the customs field, but in this short article we will focus on the main point: can the importer and his customs agent (and the rest of the importers in Israel) rely upon the online customs tariff, as it appears on the Tax Authority’s website?

As a basis for this review we will note that there is no dispute on the factual grounds of the case, i.e. that the information presented in the online customs tariff was inaccurate and that the true legal status of the grape juice from Argentina is that it is dutiable. Nor was it disputed that the Customs Authority is responsible for uploading inaccurate information to the online customs tariff system due to a database malfunction. The question remaining, as stated above, is whether the importer and his customs agent may rely upon the online customs tariff, as it appears on the Tax Authority’s website. In this regard, the Customs Authority argued that upon entering the online customs tariff system, a disclaimer is presented. The disclaimer notes that the website is intended for an initial estimate of import duties and that the Customs Tariff Order published in the Official Gazette is the binding document, warning importers and customs agents to exercise caution when using the online tariff.

The court remained unimpressed by the Customs Authority’s arguments, stating that:

“I think that setting a norm under which customs agents must examine each registry to determine the applicable law, under the ordinances, instead of relying on the information presented in the Tax Authority’s website, or on the result produced by software connected to the online system, is not consistent with the realities of the 21st century.

After all, this is exactly the reason why the state developed the website and approved the dedicated software connected to the online system: in order to ease and simplify import transactions, with the state uploading the up-to-date details of the Customs Tariff Order and custom rates, followed by the customs agents signing in to the online system and easily accessing the registries based on the information uploaded by the state on the one hand and the details of the actual transaction supplied by the customs agents on the other, all directly uploaded to the online system.

The Customs Tariff Order is not a self-evident piece of legislation. It is a complex, dynamic legislation that is updated dozens of times every year, with each amendment including (at times) many items. For example, in 2011 the Customs Tariff Order was updated on an average of twice a month. Therefore, in practice, examining the Customs Tariff Order itself as it is published in the Official Gazette, does not provide the full picture, as it is fully published only once a year, and at times only once every few years. In order to receive the full picture, the customs agent must review all customs, purchase tax and mandatory payments documents one by one, and see if there was any change relating to the item in question.

Under the circumstances of the Customs Tariff Order, its complexity and its many annual updates, this is truly a Sisyphean task. Placing such an obligation upon the customs agents, rather then relying upon the website, is driving the customs agent profession back to the previous century, prior to the era of computers and internet, and slowing down global trade. I believe this is not a promoting policy nor a desirable one.”

And what of the disclaimer presented upon entry to the online tariff system? As for that, the court ruled that “it was not stated anywhere in this notice that the information presented in the website may be inaccurate and the website user should not rely upon the information presented on the website. Therefore, the contents of the notice do not exempt the state from is liability for damages incurred by relying upon the website.”

Why then, you must be wondering, did the importer not receive the compensation he sought in his claim against the Customs Authority? The answer is that according to evidence presented to the court, the court found that the importer did not rely solely upon the counsel he received from the customs agent (or at least, did not sufficiently prove that he relied upon this counsel), and that he would have completed the grape juice import transaction even if the customs agent would have informed him that the goods are dutiable. Therefore, the court ruled that even if the Customs Authority is to blame for the inaccuracy in the customs tariff, the importer did not rely upon this mistake, and therefore the Customs Authority is not liable for the damages incurred.

This is a fascinating ruling that we will continue to expand upon in the future.

[TA 49524-01-13, Jerusalem Wineries V. The Tax Authority; before judge Rafi Aranya. Jerusalem Wineries represented by Adv. Kronfeld and Schwartz, the Tax Authority represented by Adv. Tehrani]

The content in this communication is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis. The firm does not undertake to update the information in this communication or its recipients about any normative, legal or other changes that may impact the subject matter of this communication.

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