Over-invoicing to avoid anti-dumping duties - Federal Court of Justice Ruling of 06.09.2022 - 1 StR 389/21

In 2013, definitive anti-dumping duties on photovoltaic modules from China had been imposed by the EU*. Chinese companies whose undertakings were accepted by the Commission were exempted from these anti-dumping duties under certain conditions**. These included S. Ltd. based in the People's Republic of China, whose wholly owned subsidiary was the German company Su. GmbH was.

Pursuant to Article 3(1) of the Anti-Dumping Regulation, photovoltaic modules falling within CN codes ex 8541 40 90 (TARIC codes 8541 40 90 21, 8541 40 90 29, 8541 40 90 31 and 8541 40 90 39) and invoiced by companies from which undertakings were accepted by the Commission and whose names were listed in the Annex to the Implementing Decision 2013/707/EU were exempt from the anti-dumping duty, provided that, inter alia, an undertaking invoice was presented for such imports. An undertaking invoice was defined as a commercial invoice containing at least the elements and the declaration stipulated in Annex III to the anti-dumping Regulation. This specifically required a description of the terms and conditions of sale, including the unit price (watts), the applicable payment terms, the applicable delivery terms, and any overall price discounts and quantity rebates.

In 2013, the defendants and others conspired to import solar modules from China into the territory of the European Union ostensibly at the agreed minimum import price by submitting inaccurate undertaking invoices and export commitment certificates, and to sell them to the first independent customer ostensibly at a sales price above the minimum import price, thereby obtaining an exemption from the antidumping and countervailing duties. In fact, the modules were to be sold below the minimum import price to independent customers in the European Union.

Therefore, the customs declarations submitted on behalf of Su. GmbH, the actual import price below the minimum import price was not declared; rather, the customs value was overdeclared - so-called over-invoicing - and by submitting inaccurate undertaking invoices and export undertaking certificates, a purchase of the solar modules at the minimum import price and the intended resale to a first independent customer at a minimum import price increased by sales overheads and a profit mark-up was feigned. The inflated sales prices were either not to be paid in full in the first place or to be repaid later ("kickback").

In the indictment, the public prosecutor accused the defendants of evading anti-dumping and countervailing duties totaling €21,060,140.36 in 172 cases between 2013 and 2017.

The Nuremberg-Fürth Regional Court acquitted the defendants on legal grounds*** in a judgment dated May 5, 2021. The public prosecutor's appeal against this was successful. In its judgment of September 6, 2022, the Federal Court of Justice overturned the acquittals and referred the case back to a different Commercial Criminal Division of the Nuremberg-Fürth Regional Court.

In its reasoning, the Federal Supreme Court focuses in particular on the incorrectness of the content of the submitted undertaking invoices:  

"Nevertheless, a customs debt arose in each case in connection with the imports of the solar modules because the commitment invoices submitted by the defendant M. did not show the actual purchase price - as required. The fact that the prices shown were formally agreed does not stand in the way of this, because these prices were either not to be paid from the outset or were to be partially repaid later. In this respect, the sale at the higher prices was a sham transaction intended to conceal the sale at lower prices. Sham transactions and sham acts are irrelevant for taxation purposes. If a legal transaction conceals another legal transaction, the concealed legal transaction is relevant for taxation (Sec. 41 (2) AO). Price discounts were to be disclosed anyway according to the wording of the implementing regulations. By referring to these invoices with incorrect content, the defendant made incorrect statements at the same time."

This does not seem unproblematic. It is true that, pursuant to Article 3(2)(a) of the Anti-dumping Regulation, a customs debt was incurred if it was found that one or more conditions of Article 3(1) of the Anti-dumping Regulation had not been met in respect of the imports. According to this provision, however, only "an undertaking invoice" had to be submitted. In purely formal terms, however, this had been done, even if these undertaking invoices contained complete but substantively incorrect information.

The Federal Court of Justice thus concluded from the incorrect content of the undertaking invoice that an invoice meeting the requirements of the Anti-Dumping Regulation had not been submitted (cf. Weidemann, wistra 2023, 271, 273). There is justified criticism of this, most recently by Weidemann, wistra 2023, 271, 273 f. with further references:

"It is problematic, however, whether the wording of the cited implementing regulations is so unambiguous that it focuses on the correctness of the content and not merely on the formal conformity of the invoice with the conditions mentioned in the accepted undertaking. If the submission of an undertaking invoice which does not reflect the true content of the transaction is a breach of the undertaking, then Article 8 of the Anti-Dumping Regulation is relevant. According to its paragraph 9, the acceptance of the undertaking is revoked only after an elaborate procedure by decision or regulation, and only then the customs debt is incurred. This could indicate the correctness of the view of Herrmann / Trapp and Schöler, according to which the DVO cited by the BGH only focus on the formal compliance with the obligation to submit an undertaking invoice, and that its substantive examination is reserved for the procedure pursuant to Article 8 (9) of the Anti-dumping Regulation. This also seems to be supported by Commission Decision 2013/423/EU 22 , according to recital 17 of which the anti-dumping duty imposed pursuant to Article 7 of the basic Regulation shall apply in case of breach or withdrawal of the undertaking or in case of withdrawal of acceptance pursuant to Article 8(9) of the basic Regulation - i.e. in any event not before and not as a result of a mere breach of the undertaking. The factual effect of administrative decisions, as highlighted in paragraph 16 of the discussion judgment, could mean that - as long as the acceptance of the undertaking is not revoked - the duty exemption granted on the basis of the acceptance of the undertaking remains in force, even if an undertaking invoice with incorrect contents is submitted.

The possibility of incurring a customs debt in the case of an incorrect undertaking invoice should have been better clarified by the ECJ, since the correct application of Union law is by no means obvious here (acte-clair). As a domestic court of last instance, the BGH could have, or even had to, initiate preliminary ruling proceedings before the ECJ on the question of the interpretation of the cited DVO pursuant to Art. 267 TFEU - provided that it considers a decision on this question, as it says in Art. 267 TFEU, 'necessary for the rendering of its judgment'. The Senate, however, undermines this relevance to the decision by putting its judgment on a second foot: It sees evasion already in the fact that the defendants have obtained an unlawful tax or customs benefit, which precisely does not presuppose a customs debt. Thus, the question under Union law whether the presentation of the false undertaking invoice triggers a customs debt is no longer relevant for the decision, and the referral to the ECJ is unnecessary."

However, legitimate doubts are also raised about the viability of this "second foot".

Irrespective of this, however, the practice of criminal tax law must be guided by this case law of the 1st Senate of the Federal Court of Justice, which is exclusively responsible for criminal tax law in the last instance. An undertaking invoice submitted for the purpose of avoiding anti-dumping duties must be correct in its entirety, otherwise an anti-dumping duty debt will be incurred upon importation. If this is not established, a tax evasion occurs. This results in the offence of tax evasion. By referring to an incorrect undertaking invoice, the party concerned also makes incorrect statements, i.e. commits one of the offences of tax evasion. If he/she accepts that the content of the invoice is incorrect, he/she acts intentionally and is liable to prosecution for tax evasion.

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* cf. Art. 1 para. 1 of the Implementing Council Regulation (EU) no. 1238/2013: "A definitive anti-dumping duty is hereby imposed on imports of crystalline silicon photovoltaic modules or panels and cells of the type used in crystalline silicon photovoltaic modules or panels (the thickness of the cells does not exceed 400 micrometers), currently classifiable within CN codes ex 8501 31 00, ex 8501 32 00, ex 8501 33 00, ex 8501 34 00, ex 8501 61 20, ex 8501 61 80, ex 8501 62 00, ex 8501 63 00, ex 8501 64 00 and ex 8541 40 90 (TARIC codes 8501 31 00 81, 8501 31 00 89, 8501 32 00 41, 8501 32 00 49, 8501 33 00 61, 8501 33 00 69, 8501 34 00 41, 8501 34 00 49, 8501 61 20 41, 8501 61 20 49, 8501 61 80 41, 8501 61 80 49, 8501 62 00 61, 8501 62 00 69, 8501 63 00 41, 8501 63 00 49, 8501 64 00 41, 8501 64 00 49, 8541 40 90 21, 8541 40 90 29, 8541 40 90 31 and 8541 40 90 39), originating in or consigned from the People's Republic of China; except goods in transit within the meaning of Article V of the GATT. "
** cf. Art. 8(1) Regulation (EU) 2016/1036: "Where the existence of dumping and injury has been provisionally established, the Commission may, in accordance with the advisory procedure referred to in Article 15(2), accept satisfactory voluntary undertakings from an exporter to revise its prices or to cease exports at dumped prices, provided that it is satisfied that the injurious effects of dumping will thereby be eliminated."
*** Nuremberg-Fürth Regional Court, Judgment of 05.05.2021 - 3 KLs 504 Js 2388/18