§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lang.]
10.40 pm§ Mr. Tom Benyon (Abingdon)I am glad to have the opportunity to raise a matter of general importance, which relates to Oxford Textile Mills, a company in my constituency. It is the type of company that the Government should do everything to encourage. It employs many of my constituents and has a considerable record of entrepreneurial skill in its ability to seek out opportunities during a difficult recession and to maximise them. I am delighted that it should be employing more people in my constituency.
The issue is of general interest and concerns the way in which my company feels that it has been treated by Her Majesty's Customs and Excise. The debate does not concern the conduct or courtesy displayed by officials of Her Majesty's Customs and Excise. In my view, they have behaved properly throughout according to the guidelines under which they work. It is important that companies and individuals should understand the burden of taxation that they will inevitably suffer. Companies find that the uncertainty of taxation is intolerable. They find it difficult to know whether they can import and sell at the right price, or how to organise their corporate affairs.
Edmund Burke said:
To tax and to please, no more than to love and to be wise, is not given to men.I am fully aware of that, and so is my constituent company. However, it at least wishes to know the rate of tax that it is to suffer. The tax law should be clear and concise and should be obeyed. In the circumstance that I am about to relate, the law is unclear, inconcise and open to dispute. My constituent company, Oxford Textile Mills, has been importing Jamaican carpets. The dispute falls broadly into three areas. In 1975 the company imported carpet from Jamaica and was taxed in one way. In 1980, having carried out—as the company believed—the identical procedure, it discovered that it was about to be taxed differently, and retrospectively to boot.The company feels that the interpretation that now seems to be given of the rules under the LOME convention is unfair. Oxford Textile Mills commenced the importation of Jamaican carpets in early 1980. Good value for money was offered, not least because of the tariff preference. The company would not have considered making such low-priced carpet itself but was happy to purchase it from a carpet manufacturer in the Caribbean who badly needed the business to support an efficient, happy, but ailing, plant, which employed about 200 people near Kingston. The company was confident that the product complied with the required regulations not only from its experience in 1975 at all stages in manufacture but from Jamaican Customs verification on the export documentation.
This compliance was later confirmed by the production of a letter from Her Majesty's Customs confirming the fact that back in 1975 the product complied with the regulations. The carpet being imported in 1980 was in one case exactly the same product, and in the other two cases there were style variations of exactly the same manufacture as the carpet imported in 1975 when the 116 company had been assured that the circumstances were as it believed them to be. The same civil servant—I do not wish to name him—was the Customs officer throughout.
The first communication on 17 March 1981 from Her Majesty's Customs questioning the Lomé convention compliance was enough for the company to suspend further orders from Jamaica. This subsequently resulted in the Jamaican carpet mill having to shed three-quarters of its labour force, and there were untold problems of supply replacements for the company. It was, however, confident that this suspension would be only temporary. Very little correspondence took place between the parties—the company, the Customs and, indeed, the suppliers in Jamaica—from May 1981 until April 1982 other than by my constituents to press for clarification of the rules.
In April of this year, Her Majesty's Customs finally confirmed that it would not allow the tariff preference. Why was there such a delay? The long drawn-out way in which Her Majesty's Customs operated, with little official documentation or detail, gave the company cause for disquiet.
The second part of the argument concerns the actual duty element. The loss of tariff preference meant that my constituent company was faced with a claim of 23 per cent. duty—some £27,440.73 on this specific consignment, 20 months after the company received it. More than a month elapsed between the arrival of the relevant shipment and the first communication from Her Majesty's Customs. Even before that first communication, most of the carpet was sold with a large amount eventually being re-exported. At that time, the company was confident that the interest of Her Majesty's Customs was only a formality, to confirm the status which the company was confident existed.
Now, Her Majesty's Customs doubt, even at this stage, whether my constituent company could reclaim this duty on a re-exported carpet as Oxford Textile Mills did not indicate at the time of import that that might be the case. What an incredible state of affairs. One can well understand the surprise of the company as it felt that there was no duty at the time of import, and thus no reason to make such a statement as duty was not expected to be reclaimed.
The final part of the argument revolves round the interpretation used for Her Majesty's Customs decision, its change of view since 1975, and the total lack of further new supply possibilities from Jamaica with this duty of 23 per cent. being a complete barrier to the continuation of this type of business. These aspects are currently being pursued by the Hon. Hugh L. Shearer, Minister of Foreign Affairs for Jamaica, with the Lomé authorities. I should also mention that before the debate tonight, I had a meeting with Mr. Norman Rae, the Trade Commissioner for Jamaica, who told me that it was difficult for the Jamaican carpet manufacturers to comply with the Customs' authorities wishes—that the backing of the carpet be also made in Jamaica. It is difficult for them to make the backing for the carpet. All they can make is the material which goes on top of the backing.
Mr. Shearer voiced confidence that steps will be taken and that the carpet will not be liable to duty in future. Mr. Norman Rae has doubts about whether that is possible.
I should like Her Majesty's Customs to be clear that my constituents are not arguing that it has no right to change its mind on whether a product meets the Lomé requirements. They are arguing about the backdating of 117 the decisions to cover imports of 11 February 1981 and the fact that its final decision was not communicated to the company until 28 April 1982. This will cripple the company. It will make it extremely difficult for it to operate. My constituent company has done all that was possible to verify compliance, including checking as hard as it was able with Her Majesty's Customs. It sensibly suspended any additional orders until notice of the final outcome was received. It is unreasonable that anyone should expect that it should incorporate a contingency duty of 23 per cent. in the light of all the firm information that was received at the time.
I realise the great difficulty under which my hon. Friend operates tonight. He is bound by the rules and regulations under which we all have to suffer. I understand—I am sure that my constituency company does—that if it has been caught up in a quirk in the legislation it is difficult to see how my hon. Friend can turn the legislation on its head. I am sure that we all understand that he can do only so much. However, I hope that he will agree that the situation is unsatisfactory. The company is in great distress. It is in great doubt. In the event of it having to pay what might be upwards of £100,000, it will be in great difficulty. I have every reason to suppose that that is not an exaggeration. I do not want to be alarmist, but job opportunities which might have been created may no longer be created. It could be that unemployment will rise in my constituency as a result.
I hope that my hon. Friend will do all that he can to help. I know of the characteristic flexibility and humanity which he employs in reviewing these matters and I hope that he will do all that he can to ensure that the position of my constituency company is eased. Possibly he will be able to clarify the re-exporting position with a view to seeing whether he can help the company in that way and, at worst, to say whether any staged payments for the company might be envisaged. I realise how difficult it might be for him to be positive in his answer tonight, but if he can give an assurance that he will do all that he can to help it will be most welcome to me and my constituent company.
§ The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne)I have every possible sympathy with the problems of Oxford Textile Mills to which my hon. Friend the Member for Abingdon (Mr. Benyon) has drawn the attention of the House. I assure him that Customs and Excise fully understand and sympathise with the problems which have arisen. Unfortunately, I am not sure that I shall be able to offer my hon. Friend a great deal of comfort. Oxford Textile Mills has effectively come up against the rules of the Community and their impact on the importation of goods from the so-called Lomé convention countries.
As my hon. Friend recognised, the carpets which the company imported from Jamaica in February 1981 were admitted free of Customs duty under the terms of the Lomé convention. Otherwise they would have attracted a tariff of 23 per cent. as coming outwith the Community. Goods from Lomé convention countries are admitted into the European Community free of duty provided that they have been either wholly produced or sufficiently worked or processed in qualifying States to satisfy the origin rules laid down in protocol 1 of the Lomé convention.
118 The entitlement of such goods to preference treatment is established at the time of importation by production to the Customs of a special certificate known as an EUR 1. That certificate must bear a declaration, signed by the exporter, confirming that the goods have met the requirements of the origin rules. It must also have been stamped and certificated by the Customs authorities of the exporting country. That is what happened with the goods from the factory in my hon. Friend's constituency.
Preference is granted at the time of importation on production of the document in order not to hold up trade, but the certifying authorities in the exporting country are unlikely to have had either the resources or the time to make a detailed investigation into all the facts before issuing every EUR 1 certificate. They are not expected to do so.
It is for that reason that the Lomé convention provides for the Customs of the importing country to ask the certifying authority in the exporting country to verify whether the information concerning the origin of the goods is accurate. Those verification inquiries may arise either as a result of random checks, as I am led to believe happened with the carpets that my hon. Friend mentioned, or when the Customs in the importing country— in the United Kingdom in that case—has reason to doubt the accuracy of the declaration.
Because of the risk that a verification inquiry may show that goods admitted to a preference were not entitled to it, it is the practice of Customs and Excise invariably to inform the importer when an inquiry has been launched and to advise him that if the goods turn out not to be entitled to duty-free admission or reduced rate of duty, he will have to pay Customs duty at the full rate. It then informs the importer of the progress of the inquiry and its result.
That is the background. I shall now refer to the carpets imported by Oxford Textile Mills. They were admitted free of duty on 11 February 1981 on production of the EUR 1 certificate, completed by the exporter, a company called Jamaica Carpet Mills, to which my hon. Friend referred, and issued by the Jamaica Customs Department. On 17 March, just over a month after the entry of the carpets, Customs and Excise told Oxford Textile Mills by letter that it had decided to open a verification inquiry.
Of course, under the terms of the relevant Customs documentation, it is spelt out clearly, as the factory must have been aware:
Customs have the right to require verification subsequently by the preference country that the goods did originate as claimed. If such verification reveals that the goods did not in fact originate there in accordance with the origin rules, the importer will be required to pay the full customs charges due.That should have served as an alert. I think that it did make the people concerned aware, from what my hon. Friend said to the factory, that the goods were under scrutiny.
Customs and Excise asked the Jamaica Customs Department if it could confirm that the manufacture of the carpets was in accordance with the rules laid down. A reply was received from Jamaica, dated 10 April 1981, which mentioned that imported polypropylene primary backing had been used in making the carpets.
The Community rules under the Lomé convention do not allow the use of polypropylene that has been woven into fabric unless it has been made in a Lomé country or in the European Community. 119 Customs and Excise sent a second letter on 28 May 1981 to the Jamaica Customs Department pointing out that, on the face of it, the use of polypropylene backing, if imported from a country that is not party to the Lomé convention, made the carpets ineligible for preference.
§ Mr. BenyonMy hon. Friend must be aware that, as I understand it from conversations tonight, Jamaica cannot make backing and must import it. Moreover, my constituents feel that changing the duty on the basis of the backing is rather like changing the duty on a car because the wheels are made of a different substance from the rest of the car. They believe that it is the fabric, not the backing, that is imported.
§ Mr. Bruce-GardyneI am afraid that there does not seem to be any dispute between Customs and Excise and the Jamaican authorities that the incorporation of the backing invalidated the carpets for Lomé convention treatment.
Perhaps I should deal with the point that my hon. Friend made about other similar or identical carpets that the company had previously imported from Jamaica. There is some doubt about the precise constitution of the backing of the previous carpets that are involved in this case. They may have qualified under the Lomé convention rules in a way that the present carpets did not. They may not have done and perhaps should have been called upon for Customs duty. If they did qualify, they were not rolled out. There was no intention to rake back over history.
My hon. Friend mentioned the possibility of £100,000 being at risk. I am not sure of the origin of that figure. I can only assume that it relates to the thought that there would be an attempt to back track previous consignments of carpets that might not have qualified under the Lomé convention rules but which were allowed through, free of duty. I should like to make it quite clear that there is no question under our rules of back tracking. Therefore, the £27,000 that has been quoted in correspondence with the company as its liability to duty is the maximum.
It is freely admitted that a long delay occurred after the letter from Customs and Excise was sent to the Jamaican authorities on 28 May 1981. That was the responsibility of the Jamaican authorities. There was an interminable delay in obtaining any responses from them. They apologised for the delay when, eventually, in March this year, they confirmed that the polypropylene fabric of tariff 120 heading 51. had been imported from the United States and that its use rendered the carpets ineligible for preferential treatment.
Customs and Excise and I accept that there was a long delay in establishing the appropriate treatment of the carpets. Unfortunately, this provision of the Lomé convention rules provides for the post hoc verification of importation.
I am told that a few years ago an Italian importer challenged the right of the Italian Customs and Excise to reclaim duty in respect of consignments that were subsequently found to be ineligible for Lomé convention treatment. He lost his case hands down.
There is no doubt that under Community and United Kingdom law, duty is reclaimable where it can be established that the goods were not entitled to Lomé convention treatment. The only alternative would be for the importer to pay a substantial deposit. In the overwhelming majority of cases the deposit would not be forfeited, and we feel that most importers would not thank us for going down that road.
Customs and Excise is sympathetic to the firm and the problems that have arisen. I understand that it has offered to discuss arrangements for the payment of the outstanding duty by instalments.
Oxford Textile Mills has said that many of the carpets were subsequently re-exported. Customs and Excise is prepared to consider whether the amount of duty for which the company is liable could be reduced if re-exports to third countries qualify under Community rules for re-export relief. I have asked Customs and Excise to keep me informed on that aspect and we shall look at it with as much sympathy as possible.
I understand the anxiety and distress that has been caused to the firm. My hon. Friend acknowledged that Customs and Excise has applied the rules of the Community, and there is no dispute between the Jamaican authorities and our Customs and Excise about the liability of the carpets to Community duty.
I hope that Oxford Textile Mills will be prepared to enter into consultations with Customs and Excise with a view to arranging an acceptable phasing of the duty payments. Customs and Excise will certainly examine carefully the proposition that part of the duty should not be paid because some carpets were re-exported. I hope that we shall reach an acceptable solution.
§ Question put and agreed to.
§ Adjourned accordingly at eight minutes past Eleven o'clock.