Direct or indirect representation at customs: who carries the customs debt?

Key points

• Under direct representation the broker acts in the name of and on behalf of the importer. The importer is then the declarant and the debtor.
• Under indirect representation the broker acts in his own name on behalf of another. The broker is then the declarant himself, and the importer is jointly liable.
• A declarant must be established in the EU. A company from outside the EU can therefore only import through indirect representation.
• Anyone who fails to state that he is acting as a representative is deemed to have acted in his own name and on his own behalf.
• A direct representative can still become a debtor if he knew, or ought reasonably to have known, that the declaration data were incorrect.

A demand for payment of 84,000 euro, two years after the last shipment, covering a run of declarations using a commodity code that customs will not accept in hindsight. The first question on the table is not whether the code was right. The question is whose name those declarations were in.

That answer is fixed the moment you sign the authorisation, years before anyone looks at it. In day to day traffic you notice nothing: the import declaration goes in, the container is released and nobody asks about the form of representation. Only on a check afterwards does it become clear what you agreed to.

The difference sits in a single word on the declaration.

What does the law say about representation?

The Union Customs Code recognises two forms, and only two. Article 18 puts it like this: the representative acts either in the name of and on behalf of another person, which is direct representation, or in his own name but on behalf of another person, which is indirect representation.

There is no middle form. And anyone who omits to state that he is acting as a representative is deemed to have acted in his own name and on his own behalf. That is not a formality but a fallback written into the law, and it leads straight to liability.

The representative must in principle be established in the customs territory of the Union. A party from outside the EU can fill the role where it meets part of the AEO criteria, but that is the exception rather than the rule.

Who is the declarant, and why is that the question that matters?

The declarant is the party whose name is on the customs declaration, and that party carries the customs debt. Under direct representation that is the importer. The broker is then, in the customs authority’s own words, the extended arm: he presses the button, but the declaration belongs to his client.

Under indirect representation that shifts. The broker is the declarant himself and therefore the debtor for the duty on import. The represented party is jointly liable. Customs can approach either, and in practice picks whichever is easiest to reach and best able to pay.

That is why indirect representation is nearly always more expensive. The service provider takes a risk onto his own balance sheet that has nothing to do with the quality of his work: he is liable for a recovery arising from data you supplied. A provider who offers indirect representation at the same rate as direct has not thought that risk through.

When do you have no choice?

A declarant must be established in the customs territory of the Union. There are a few exceptions to that requirement, among them declarations for customs transit, temporary admission and occasional declarations at the inspector’s discretion.

For ordinary imports this means something very concrete: a company with no establishment in the EU cannot be the declarant and therefore cannot use direct representation. Where an American or British seller wants to act as importer himself, because he sells DDP for instance, indirect representation is the only route. Without a party willing to take that role, the shipment does not enter free circulation.

This is often confused with fiscal representation, which is a different arrangement with a different authority. Fiscal representation concerns VAT with the tax administration, customs representation concerns the declaration with the customs authority. What each role covers is set out further in our piece on what a customs broker does.

So the direct representative runs no risk at all?

That is the assumption, and it is not quite right. Article 77(3) of the Union Customs Code draws the circle of debtors wider than the declarant alone. Anyone who provided data while knowing, or having reason to know, that they were incorrect can become a debtor too.

In practice that question comes down to diligence. A broker who copies a commodity code straight off a packing list while the description says something else stands weaker than one who tests the code and records the discrepancy. The same goes for a customs value that visibly omits the freight to the place of unloading.

What we cannot predict is how a court weighs that in an individual case. The case law here moves and depends heavily on what sits in the file. What we do know is that a file with a documented check almost always fares better than a file without one.

What do you settle in advance?

Four things, and together they cost an hour.

• Record the form of representation in writing in the authorisation, per form, not as an open mandate covering everything.
• Check that your provider actually applies the form that is on paper in the declarations. That is readable from the declaration data.
• Agree who determines the commodity code and the customs value, and who keeps the supporting evidence.
• Under indirect representation, ask what guarantee your provider has lodged, because your throughput stalls on it if it is too tight.

Our advice to Dutch and European importers is nearly always direct representation. You keep the declaration in your own name, you do not pay for a risk you already carry, and you build a customs history of your own that counts if you later apply for an AEO authorisation. Indirect representation is there for the cases where nothing else works, not as a default choice.

Frequently asked questions

Q: What is the difference between direct and indirect representation?

Ans: Under direct representation the broker declares in the name of and on behalf of the importer, who is therefore the declarant and the debtor. Under indirect representation the broker declares in his own name on behalf of another and is himself the declarant and debtor, with the client jointly liable.

Q: Must a non-EU company use indirect representation?

Ans: For an ordinary import declaration yes, because the declarant has to be established in the customs territory of the Union. Exceptions apply to customs transit, temporary admission and occasional declarations, but do not count on them as a matter of course.

Q: Can my broker still be held liable under direct representation?

Ans: Yes. Anyone supplying data for the declaration while knowing, or having reason to know, that it was incorrect can become a debtor under Article 77(3) of the Union Customs Code, even where the importer is the declarant.

Q: What happens if the form of representation is not stated?

Ans: The representative is then deemed to have acted in his own name and on his own behalf. He is the declarant and carries the full customs debt, whatever the parties agreed between themselves.

Q: Is indirect representation more expensive?

Ans: As a rule yes, because the provider takes the risk of a recovery onto his own balance sheet and has to lodge extra security for it. A provider who charges the same for both has probably not priced that risk.

Not certain which form is being used to declare on your behalf right now? We read it from your declaration data, record the correct form in the authorisation and take over the customs handling, in direct representation where that is possible and indirect where it is required.