Update Regarding Customs Fines Applied In Circumstances Relating To Exchange Controls and Currency Flow

Those who operate in foreign trade are aware that their activity is subject to compliance with customs and exchange regulations, and that non-compliance may result in the application of sanctions provided for in the respective legal systems.
 
In this regard, breach of obligations regulated by the Customs Code may result in sanctions by Customs, while non-compliance of foreign exchange regulations may result in administrative procedures by the Central Bank of Argentina such as implementing Criminal Tax Law.
 
In contrast with this logical and legal system, it has been observed for some time that Customs’ authorities impose fines for alleged violations called "Inaccurate Declaration" (Section 954 of the Customs Code) on foreign trade operators that do not record inflow or outflow of foreign currency in relation to import and export transactions documented with Customs.
 
In fact, in January 2012, the General Customs Administration (“DGA”) issued a General Instruction (Instruction No. 2/2012) for all operational areas of the agency to apply a fine for "Inaccurate Declaration" on exporters who do not report the inflow of foreign currency associated with the performed transaction.
 
With respect to this issue, the Argentine Tax Court issued a decision that revoked a customs fine that had been applied to an importer on the grounds that the importer had failed to pay the price of the imported goods abroad (“Helm Argentina SRL vs. DGA”, Case No. 32,738, ruling dated August 29, 2014, issued by Tribunal G).
 
The Court highlights that the outflow of foreign currency, for the purpose of settling a sales invoice of a commercial transaction, is different from the declaration made by the importer to the customs authority; therefore, cannot be grounds for the application of the sanction provided for in cases of inaccurate declarations (Section 954, Subsection 1, paragraph c. of the Customs Code).
 
In particular, the Court states: “…due to failure to verify one of the requirements established for the offense in question (difference between the declaration and the result of the inspection), the grounds invoked by the appealed resolution do not justify application of the alleged violation.”
 
Unfortunately, a decision was issued by a First Instance Federal Court in recent days reaching the opposite conclusion, in a case where a fine was applied to an exporter for alleged “Inaccurate Declaration”, on the grounds that there was no inflow of foreign currency as would have been the case upon the sale of goods abroad (“El Matrero S.A. vs. Estado Nacional –AFIP- Resol 16 – VIII” Case No. 35866/2012, ruling dated October 27, 2014, First Instance Federal Court on Contentious Administrative Matters No. 6 of the City of Buenos Aires).
 
The presiding judge rightly points out that the offense in the "Inaccurate Declaration" caters exclusively to the declaration made by the taxpayer when he reported the shipment of goods, without considering further actions of the taxpayer, but deviates from said criteria when upholding application of the fine, since the omission to report inflow and settlement of foreign currency is unequivocally an action subsequent to the declaration, which has no relevance to the violation that was wrongly assigned to the taxpayer.
 
Two considerations should be taken into account with respect to this issue.
 
Firstly, the strength of the arguments supporting the "Helm" ruling evidence the greater knowledge of tax law of the judges comprising the Federal Tax Court, who deal exclusively with customs issues.
 
Secondly, it is reasonable to believe that, if in the normal scheme of things the operational areas of Customs adjust their conduct to the provisions of the legislation, issuing an "Instruction" signed by the chief executive of the agency shows that there is probably a will to implement and support a course of action that does not fall within that framework.