What a great feeling. The first European Conference of the ICPA in presence after years. And I had the opportunity to be there as a speaker.

When preparing the session, I was thinking what I could present. I thought some practical issues were the best. So, I started with the title: „Stepstones to be considered when importing goods into Germany”.
I have now been working in the customs area for more than 30 years. And still the same mistakes happen. Not because something is done wrong. Just because of the unawareness about issues you should take care of. So, I started with compliance, went over to classification and valuation and ended with special procedures keeping a focus on VAT and practical issues like representation.

Most surprisingly was, however, that there are still many questions with respect to representation.

Persons that are not resident in the EU customs territory are not entitled to file a customs declaration. They need a representative. An indirect representative to be more precise. Owning an EORI-number or a VAT-ID is not enough.

The Union Customs Code knows two kinds of representations: Direct representation and indirect representation.

Direct representation means that the customs declaration is issued in the name and on the account of the represented person. The customs declarant, however, will become the import duty debtor.

In direct representation the represented person becomes the import duty debtor because the customs declaration is filed in their name. Direct representation is not possible for a non- EU resident because in direct representation they would be considered to file the customs declaration. And this is not possible for a non-EU resident.

Indirect representation means that the representative is filing a customs declaration in their own name but on the account of the represented person. Thus, the representative is becoming the import duty debtor in joint liability with the represented person, because the representative is fining an own customs declaration.

In Germany it is very hard to find a forwarding agent who takes action as an indirect representative. German freight forwarders and forwarding agents shy the risk. Due to the fact that the forwarding agent would be filing an own declaration they would be directly responsible for the content.

A lot of information is necessary for the preparation of a customs declaration for e.g., entering goods into free circulation. Customs auditors will follow the audit path in the bookkeeping and the accounting will be checked. A company typically/usually does not want to have a forwarding agent to have access to its accounting. And especially in times of increasing trade sanctions a forwarding agenda (agent?) does not want to be made responsible, should any shipment violate sanctions.

Since the forwarding agent is liable for the import duty in joint liability with the represented person, they also carry the risk of the payment. If their client goes into insolvency, they would still have to pay the amounts due to customs.

On the other side in other EU member states indirect representation is the regular kind of representation. This might be a result of legal history. Indirect representation is not a form that is directly known in the civil German law and therefore more or less unknown to the practice.

If a non-EU resident company nevertheless decides to supply goods into Germany, clearing goods free circulation, from a VAT perspective the place of supply is normally in Germany. The invoice to the customer must show VAT and it is necessary to register for VAT. A VAT registration in Germany is no witchcraft, but the tax authorities will ask for a lot of information that has to be provided in German. Preliminary VAT returns on a monthly basis, EC sales lists and an annual VAT declaration have to be prepared and filed to the tax office in charge.

But beware. As a result of the reverse charge system, it might be possible that there is no turnover transaction that triggers the need for registration. Then the deduction of the import VAT as input VAT can be in danger. You should check the VAT process before making any decision on how to structure the supply chain.

The most frequently asked question after explaining the situation in Germany was: Does Germany not want us to import goods? The answer is of course: “no”. But the authorities want to be able to audit. They need access to books, documents and to the people who are responsible. Safety and security are a great issue. And many rules simply will not be considered, when the authorities have no competence to react, because the responsible person is in another country outside the EU where they have no authority.

If you have any questions regarding the proper structure of the supply chain, we are always happy to support you.


Herbert Bayer

Rechtsanwalt, Diplom-Finanzwirt (FH)