Working with UK, EU and US policymakers to reverse a complicated import tax error.
CLF Distribution Ltd is the leading UK wholesaler of premium sports nutrition, organic and health food products, vitamin and mineral supplements, personal care and household products. Employing more than 80 staff, CLF offer over 15,000 products from over 800 leading brands to thousands of leading specialist retailers, gymnasia, and other outlets. A number of these products are imported from the United States, with one of the key manufacturers being Dymatize Nutrition, a high-quality nutritional supplement maker based in Texas.
CLF was presented with an unexpectedly huge bill for back duty from Her Majesty’s Revenue and Customs (HMRC) based on products that they had imported from the US containing whey protein, a key ingredient of many sports nutrition products. Many of these products were produced by Dymatize, threatening a successful and beneficial trading partnership. Imports to the EU of food products made from whey protein are subject to different rates of import tariffs depending on the percentage of milk and other fats present. A specific analytical test for milk fat is laid down by European legislation (Article 2(3)(b) Commission Regulation 900/2008 EC) and it is this test that determines the rate of tax that is paid.
This test was, however, giving erroneous results, which resulted in HMRC’s demand for a sum of tax much higher than should be paid. Despite CLF notifying the relevant authorities, including HMRC of the flawed test, the demand for back duty was not withdrawn: HMRC argued that since the test was specified within the legislation it was obliged to demand the higher rate. Given this, CLF and Dymatize approached Whitehouse to help highlight the obvious injustice and find a solution to the problem.
The first step was to summarise this complicated problem for policy-makers, producing briefing notes and correspondence that explained the background to the issue in clear, straightforward terms and underlining the impact that the erroneous test was having on a law-abiding EU employer.
With the support of independent analysis, Whitehouse was able to show that the scientific test specified within the relevant legislation was flawed and that the amount of tax CLF was being asked to pay was unfair.
Whitehouse rapidly built a good working relationship with the European Commission, which agreed to analyse this problem. Whitehouse also forged links with sympathetic Members of the European Parliament, who worked to ensure that finding a solution was high on the Commission’s agenda.
Given the international dimension to this problem, Whitehouse also worked closely with the US Department of Commerce, the Food and Drug Administration and the US Mission to the EU. Whitehouse highlighted the impact of this flawed legislation on US exporters and sought to place the issue in the context of the on-going negotiations over the Transatlantic Trade and Investment Partnership. The US authorities were fully briefed and able to make representations to EU officials.
Whitehouse also worked with British Parliamentarians and the Treasury to ensure that HMRC repeatedly postponed any action related to their demand for back duty.
The European Commission agreed to work on and present to Member States two solutions to the problem. The first provided short term relief to affected companies around the EU, including CLF, and partners outside of the EU, such as Dymatize. In addition, the Commission agreed to work on a longer term solution which would permanently fix the problem.
The short term solution is now law and work has commenced on the long term solution, which will be ready shortly.
It is extremely rare that an amendment to European legislation has been made within a relatively short space of time. As a result of this work, CLF will not face HMRC’s demand for a large sum in back duty and can now confidently plan for the future, whilst Dymatize retains access to important EU markets.
Without a doubt we would not be approaching a successful conclusion to this issue were it not for Whitehouse. To achieve a change in legislation within the EU is very difficult as it requires repeated interactions with numerous different bodies. Whitehouse managed this process extremely well, developing tailored messaging for each individual that we saw and convincing all the key players within Europe that the test within the legislation was unfair, wrong and needed changing.
Whitehouse’s grasp of complex taxation and scientific issues was impressive: allied to their knowledge of the key institutions to approach, and the specific personnel we should be talking to, it was also extremely effective – I can now consider this problem solved and focus on growing my business once again.