Article 6.3: Penalty Disciplines

Penalties imposed for legal or administrative breaches must be fairly grounded on objective facts and must be commensurate with the severity of the infringement. Information on imposed penalties must be provided to the person responsible of the breach

What is covered?

Core obligation

This Measure on penalty disciplines essentially requires WTO Members to impose fair, penalties proportionate and in a transparent manner penalties for a breach of a customs law, regulation, or procedural requirement; and it also requires Members to impose the penalty only on the person(s) responsible for that violation. There shall be no breach of trust and an incentive for imposition of penalty.

What are penalties

As per definition in the Article, the term used “penalties” must be interpreted as referring to those penalties imposed by a Member’s customs administration for a breach of the Member’s customs laws, regulations or procedural requirements.

Person(s) causing the breach

Members shall ensure that only the person(s) who has caused the infringement must be penalized for the breach under its laws of the customs legal or administrative system. Hence, penalties must be imposed only on the responsible person(s) who has violated the customs rules.

Modalities for imposing penalties

To ensure fairness and impartiality, this Measure proceeds by requiring Members to determine and impose penalties on the responsible person(s) only on the basis of those specific facts and circumstances in which the breach arose. It thus suggests that penalties must be determined and imposed on a case-by-case basis.

Penalty imposed must be proportionate to the severity of the breach and not act mechanically. Additionally, it is required from Members to prescribe that, when penalties are being imposed, these must be mandatorily proportionate with the magnitude and severity of the infraction, and not disproportionately determined on arbitrary criteria which are unfair and objectively unjustifiable.

Conflict of interest

Member shall ensure to maintain measure to avoid conflict of interest in assessment of duties and penalty i.e. Personal promotion of the Customs official depending on unjustified imposition of penalty. Besides, imposition of unduly harsh penalties shall not become an incentive for cash rewards for the customs official.

Likewise, Members must arrange measures to restrain any motivational incentive provided to customs officials which encourages an even higher collection of penalties, incommensurate with the extent of the breach. This is to avoid that customs officials are incentivized to impose penalties because of vested interests or personal profits.

Providing complete information to the person

Each Member shall ensure to inform the person, when penalty is imposed, the following information in writing. In line with the whole architecture of the TFA, also this Measure requires a commitment from Members in terms of increased transparency and provision of information regarding the imposition of penalties. Members have in fact an obligation to provide to the concerned person(s) who has breached the customs laws, rules, regulations or procedures the following information in writing:

  • The nature of the breach and applicable law,
  • The amount or range of penalty prescribed, for the breached law, regulation and procedure applicable law, regulation or procedure under which the penalty for the breach has been reported, so that the person in question is can be aware of which parts of the legal or administrative system have been violated.

Voluntary disclosure by the person committing the breach

In cases where the person causing the breach voluntarily discloses the infringement before the same is detected by the authorities, the TFA encourages Members to consider this as a potentially mitigating factor in the process of determining the penalties. For instance, the customs authorities might want to reduce the level of penalties imposed for the violation of rules, following the voluntary disclosure of the breach by the affected person.
As the verb (and qualifying language) used does not entail a proper legal obligation – “the Member is encouraged, where appropriate” – this specific provision of Article 6.3 is not mandatory but leaves to Members the discretion to decide whether to implement it or not, in light of its “best endeavor” nature. Therefore, Members have the right to ponder whether they possess the appropriate capacity and willingness to implement this provision, as encouraged by the TFA.

Penalties on traffic in transit

The last paragraph of Article 6.3 makes clear that all the provisions contained in the Article must also apply to the penalties imposed for breaches of customs laws, regulations and procedures – as per understanding of paragraph 3.1 – committed during traffic in transit.

What is not covered?

The text is silent on the criteria for defining the facts and circumstances which should determine the amount and range of penalties. The text is also silent on the processing times of penalties.

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