Amar Fraz v The Director of Border Revenue

This is an appeal against a review decision letter dated 21 April 2021 (and updated on 27 May 2021) by the Border Force not to restore 30 iPhone model XS which had been seized on importation at Stanstead Airport.

The form of the hearing was V (video) using HMCTS’s video hearing service. A face-to-face hearing was not held because of the COVID-19 pandemic. Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

At the hearing, Mr Fraz represented himself and the Director of Border Revenue was represented by Ms Koll-Jones.

Contrary to the Tribunal’s directions released on 2 November 2021, Mr Fraz did not provide a witness statement in respect of his own evidence, but we decided that he should be permitted to give oral evidence - on which he was cross-examined. A witness statement was provided in respect of the evidence of Mark Collins, the Border Force officer who conducted the review. We admitted the statement as his evidence in chief, and he was cross-examined by Mr Fraz.

Mr Fraz submitted a witness statement from Arthur Bronfman dated 6 January 2022. The Tribunal’s directions of 2 November 2021 provided that any party seeking to rely on a witness statement must call that witness to be available for cross-examination (unless notified in advance by the other party that the evidence of that witness is not in dispute). Ms Kell-Jones told us that the Border Force had not given any notification to Mr Fraz in respect of Mr Bronfman’s witness statement. As no notification had been given by the Border Force that Mr Bronfman’s evidence was not in dispute, Mr Fraz should have secured the attendance of Mr Bronfman at the hearing so that he could be cross-examined on his statement. But, having heard the submissions of the parties, we decided to admit Mr Bronfman’s witness statement as evidence but only to give it such weight as we thought appropriate.

On the day after the hearing, Mr Fraz wrote to the Tribunal applying to admit additional evidence, being an exchange of emails with FedEx on 4 December 2020 relating to the customs clearance of the phones that are the subject of this appeal. The Border Force strongly objected to the admission of this evidence as it had been provided out of time and was not available to be examined and addressed before us. We decided that it was in the interests of justice that this evidence should be admitted as it was material to the credibility of Mr Fraz’s submission that the seized phones were being reimported into the UK following their export for repair. We were satisfied that the objections of the Border Force could be met by directing that Mr Fraz provides the attachments to the email, and giving the Border Force the right to make written submissions in respect of the new evidence. We therefore directed that Mr Fraz provided copies of the attachments to FedEx’s email, that the Border Force should be able to make written submissions in respect of this evidence, and that Mr Fraz should have an opportunity to file a written reply to such submissions. This decision takes account of the new evidence and the written submissions of the parties.

For the most part, the background facts are not in dispute, and we find them to be as follows.

At the relevant time, Mr Fraz was in business on his own account selling used or second-hand mobile phones. He regularly imported mobile phones (his evidence was that in 2020 he was importing three or four batches each month – although in lesser quantities that the phones under appeal), which are then sold through the internet.

At the beginning of October 2020, Mr Fraz purchased 30 iPhones from ARA Global Group in Florida, USA. The invoice dated 5 October 2020 describes the phones as “Apple iPhone X 64GB Grade B”. The invoice price was US$10,950, with shipping of US$60 - making a total price payable of $11,010. Included in the bundle of evidence was a confirmation of payment issued by World First UK Limited, evidencing the payment of US$11,010 via SWIFT to ARA Global Group’s bank account in Florida. The value date for the payment is 5 October 2020. Also included in the bundle are (a) a copy of FedEx’s consignment note stating that the goods were shipped on 14 October 2020, the weight of the goods was 5kg, and the customs value of the goods was £8000, and (b) FedEx’s duty and tax invoice dated 21 October 2020 showing import VAT paid of £1600 plus FedEx’s fee of £12. Also included in the bundle is a print-out of transactions on Mr Fraz’s business bank account for 30 October 2020, which shows an electronic payment of £1612 being made to FedEx on that date. It is not disputed that Mr Fraz imported these mobile phones and paid import VAT on them.

Mr Fraz’s evidence is that when he inspected these phones on arrival, their batteries were degraded. He contacted ARA Global Group, and they agreed to replace the batteries for a total fee of US$450. Mr Fraz says that he couriered the mobile phones back to ARA Global Group, who replaced the batteries. Included in the bundle was a copy of a FedEx consignment note stating that the goods were shipped by Mr Fraz to ARA Global Group on 2 November 2020. The description of the goods was “iphones sent for repair”, the weight of the goods was 5kg, and the customs value was £300. As the consignment note travels with the goods (indeed, it states on its face that it is to be placed in a pouch and affixed to the shipment), we asked Mr Fraz about the provenance of the copy included in the bundle. He explained that a copy of the consignment note was available from his online account with FedEx, and he had just printed it.

Following repair, Mr Fraz’s evidence was that the phones were then shipped back to him. Included in the bundle is a copy of ARA Global Group’s invoice dated 4 November 2020 with a description “Apple iPhone X 64GB – Battery change service” for a total price of US$450. The FedEx consignment note affixed to the parcel (a copy of which was included in the bundle) described the contents as “Repaired Cell Phones”. The ship date was 3 December 2020, the weight of the goods was given as 4.98kg, and the customs value was given as £10 each, making a total of £300. Mr Fraz said that the customs value was the repair costs, not the value of the goods, and in marking the parcel as containing “repaired cell phones” and showing the costs of repair (not the market value of the phones), he was following guidance.

On 4 December 2020 FedEx emailed Mr Fraz as follows:

Why the goods are entering the UK e.g. home use, repair, exhibition, GB returns, etc...;

GB Returns must be within 3 years – evidence of export required

Exhibition – dates, importer EORI, place etc.,

Clear description and tariff heading if available;

Confirmation of fair market value.

Mr Fraz replied later that same day as follows:

Mr Fraz’s evidence is that FedEx subsequently informed him that the duty status of the goods had been clarified and checked with customs, who were happy with the explanation, and that customs had cleared the import of the phones.

On 6 December 2020, the Border Force intercepted a parcel addressed to Mr Fraz at the FedEx depot at Stansted Airport. A Border Force officer inspected the parcel and made some open-source checks on the likely value of the phones. These indicated that the true value of a “B grade” phones was between £350 and £450 per phone, so the total value of the consignment was between £10,500 and £13,500.

As the phones appeared to be undervalued and accompanied by an untrue declaration, the parcel was seized on 6 December 2020 pursuant to s139 of the Customs and Excise Management Act 1979 (“CEMA”) as liable to forfeiture under ss 49(1)(e) and 167(1)(a) CEMA. A Notice of Seizure dated 16 December 2020 was sent to Mr Fraz. The Notice set out Mr Fraz’s right to challenge the seizure by condemnation proceedings in the Magistrates Court. As Mr Fraz did not challenge the legality of the seizure by condemnation proceedings, the phones were deemed condemned as forfeit to the Crown under paragraph 5, Schedule 3, CEMA, and the phones were deemed to have been improperly imported.

Mr Fraz wrote to the Border Force on 6 January 2021 requesting restoration of the mobile phones. In his letter he said:

Mr Fraz also completed Form 12A (request for restoration) giving the following reasons for restoration:

The Border Forced acknowledged receipt of this letter on 11 January 2021.

During the course of his evidence, Mr Fraz said that shortly after he wrote this email, he realised that his “initial wording was confused”. He explained that at the time he was “having personal circumstances” and did not give the email full attention. He therefore telephoned the Border Force’s National Post-Seizure Unit (“NPSU”) in order to clarify the statement in the letter – that the phones were returning to the UK following repair, rather than coming into the UK for repair. The Border Force telephone lines are only open for one hour each day, and he was left on hold for a long time. Eventually he managed to speak to a Border Force officer, who told him that no one had yet looked into his case, but once someone had, they would get in touch with him about his case, and he would then have an opportunity to explain what had happened. Mr Fraz telephoned the NPSU again a few days later and was assured that his case would be looked into. Mr Fraz thought that someone would telephone him, and he would then have the opportunity to explain what had happened.

On 1 March 2021, the Border Force wrote to Mr Fraz noting that the goods were coming into the UK for repair and advising that the Border Force would only consider restoring goods to the legal owner. He was therefore asked to confirm ownership of the phones. He was also asked for his VAT registration number, and:

On 2 March 2021, Mr Fraz emailed the Border Force as follows:

On 10 March 2021, the Border Force wrote to Mr Fraz refusing restoration. The reasons given for the refusal were:

In the end, the Border Force treated Mr Fraz’s correspondence as a request for a review, and the review team wrote to Mr Fraz on 10 March 2021 stating that they would conduct a review. The letter stated:

Mr Fraz’s then representatives, Altion Law, wrote to the review team on 18 March 2021 making the following points in support of restoration:

A review decision refusing restoration was issued by Mr Collins on 21 April 2021. In his letter Mr Collins stated that the policy of the Border Force was not normally to restore seized goods especially if there are aggravating factors such as a failure to declare the goods. However, each case is considered on its merits to determine whether restoration can be offered exceptionally. The following were given as the reasons for Mr Collins deciding not to restore the goods:

“These goods were coming into the UK for repair”

“The true customs declaration was made”

“If customs require the export documents and these can be provided once the goods are repaired”

As Mr Collins decision did not appear to have taken Altion Law’s letter into account, Altion Law wrote to Mr Collins on 28 April 2021 asking him to reconsider his decision. With this letter was enclosed Altion Law’s first letter of 18 March, together with copies of the many documents already mentioned.

In addition, a document headed “Invoice for Customs Purposes” was included. This is dated 3 December 2020 and described the goods as “Repaired cell phones Country of Manufacture USA”, with a unit value of £10 and total value of £300. The tariff code is 8517 (since the hearing, we have looked up this heading in the UK Integrated Tariff, and this heading is for telephone sets, including smartphones). The document gives as the “Reason for Export” “Repaired Cell Phones”. The declaration at the foot of the document is signed by A Fraz.

Mr Collins replied with his updated review decision by letter dated 27 May 2021. In the letter, Mr Collins states that this letter is to be read in conjunction with his previous letter. He gave the following as the reasons why he decided to uphold the decision to refuse restoration:

Mr Fraz now appeals against that review decision.

In addition to the documentary evidence described above, we heard oral evidence from Mr Fraz and Mr Collins. Mr Fraz also submitted a witness statement from Arthur Bronfman dated 6 January 2022.

We find Mr Collins’ evidence to be credible and reliable. He was measured in the evidence that he gave, and his evidence was consistent with the documentary evidence before us.

We found Mr Fraz’s oral evidence to be troubling. In part this might well be due to being a litigant-in-person, and his unfamiliarity and understandable nervousness with proceedings in a Tribunal. However, even taking this into account, his evidence was not always consistent, and some of his evidence was not credible. We agree with Mr Collins, and find, that the clear meaning of Mr Fraz’s letter of 6 January 2021 is that the phones were being imported for the purposes of repair and would be exported from the UK following repair. Our finding in this regard is reinforced by the language used by Mr Fraz in Form 12A which, in our view, is even clearer. We also agree with Mr Collins, and find, that Mr Fraz was an experienced businessman, and fully understood the difference between import and export. We do not believe Mr Fraz’s evidence that he was confused when he wrote this letter of completed Form 12A because he was suffering from “personal circumstances” – he never told us what those circumstances were, nor why they had the effect of confusing him. We find that Mr Fraz was not confused when he wrote that letter and completed the form, and fully intended the letter and form to have the meaning that they carry. The language of both is clear. The fact that they state that Mr Fraz will provide the Border Force with proof of the export once the phones have been repaired demonstrates that Mr Fraz was well aware of what he was saying and meant.

In these circumstances, we find that Mr Fraz is not a credible and reliable witness, and we therefore place little weight on Mr Fraz’s oral evidence, save to the extent that it is corroborated by other evidence before us.

Mr Bronfman is a director of ARA Global Group. In his witness statement, Mr Bronfman says that he can confirm that on 3 December 2020 he returned 30 Apple iPhone Xs to Mr Fraz following the batteries being changed. Mr Bronfman states that as Mr Fraz was not happy with the health of the batteries, he agreed to accept a return of the phones for repair at a price of $450 – being $15 per battery change (at the time equating to £300).

As Mr Bronfman did not attend the hearing and could not be cross-examined on his witness statement, we place little weight upon it.

Section 49 CEMA provides for the forfeiture of goods which are found (prior to their release from a customs procedure) not to correspond to information provided in respect of their import under Part 1, Taxation (Cross-border Trade) Act 2018. Goods may be forfeit under s167(1) CEMA if a person makes an untrue declaration or statement to a Border Force officer in respect of those goods.

Items liable to be forfeit can be seized by a Border Force officer under s139(1) CEMA. Schedule 3, CEMA provides for appeals to the Magistrates Court against decisions by the Border Force to seize items. If no such appeal is made, then on the expiry of one month from the date of seizure “the thing in question shall be deemed to have been duly condemned and forfeited” (paragraph 5, Schedule 3, CEMA). In its decision in HMRC v Jones et al [2011] EWCA Civ 824, the Court of Appeal held that these deeming provisions apply for all purposes. As Mr Fraz did not challenge the seizure of the phones in the Magistrates Court, we are bound by the deeming provisions of Schedule 3 and have to treat the mobile phones as having been imported in breach of the requirements of ss49 and 167 CEMA.

The important point to note is that the effect of paragraph 5 means that we are bound to treat the import as in breach of the law, even if Mr Fraz could prove that he would have been successful before the Magistrates Court had he pursued condemnation proceedings there.

Section 152(b) CEMA gives the Border Force power to restore goods that they have seized. This power is exercised at the discretion of the Border Force and may be subject to conditions. However, the Border Force must act reasonably and proportionately in exercising their discretion. Appeals against restoration decisions (including decisions following a review) are made to this Tribunal under s16, Finance Act 1994 (“FA 1994”). Section 16(4) FA 1994 provides that:

Our powers in respect of these kinds of appeal are therefore limited. If we find that the Border Force’s decision was one that could not have been reasonably arrived at, then we have the power to require the Border Force to conduct a further review of their decision. In deciding whether the Border Force’s decision was unreasonable we can take into account all the evidence placed before us (even if such evidence was not made available to the Border Force at the time they made their decision) - but we do not have power to substitute our own view for that of the Border Force – we can only direct that the Border Force conduct a further review of their decision.

The burden of demonstrating that the Border Force’s decision was unreasonable lies with the appellant – in this case Mr Fraz.

Section 36, Taxation (Cross-border Trade) Act 2018 makes provision for relief from import taxes where goods are exported from the UK for repair or processing and are then imported back into the UK. For the relief – known as outward processing relief – to apply, the “outward processing procedure” must be followed.

The bases on which Mr Collins decided to refuse restoration can be summarised as follows:

Ms Kell-Jones submits that we should not place any weight on the exchange of emails between FedEx and Mr Fraz on 4 December 2020. These had not been provided to Mr Collins during the process of reviewing whether the decision to not restore the goods was reasonable. They had only been provided at a late stage, after the hearing, and without Mr Collins having the opportunity to comment on them in open court. Further, these additional documents do not take Mr Fraz’s appeal any further, as they do not expressly link the phones that were seized to the phones that had previously been imported in October (and on which duty had been paid) – for example by giving details of serial or IMEI numbers of the phones. In addition, the fact that the phones cleared FedEx’s checks does not mean that they would automatically clear the Border Force’s checks. FedEx’s email dated 4 December 2020 states “Please note: Undervalued items risk seizure or detention by HMRC”.

Mr Fraz submits that the decision not to restore the phones was unreasonable for the following reasons:

The main issue of disputed fact is whether the phones that were seized had previously been imported by Mr Fraz in October 2020 (on which import VAT had been paid), but were returned to the seller in the USA for repair, and were then reimported (and seized) in December.

Mr Collins, in his evidence, said that he had wanted to see evidence that showed that the phones imported in October were the very same phones that were seized. And there was nothing in any of the documentation provided to him by Mr Fraz that linked the two imports – in particular none of the documentation referred to the serial or IMEI numbers given to the phones. Although Mr Fraz had provided evidence showing that he had paid for the phones imported in October, and had paid import VAT on those phones, he had not provided any evidence of having paid for the repairs, or the return shipping. Nor had he provided copies of any of his correspondence with ARA Global Group complaining that the batteries were dead and needed to be replaced.

Mr Fraz submitted that he had no reason to want to evade import VAT – as he was VAT registered at the time, and therefore could claim an input credit for any VAT suffered on import. Mr Collins’ evidence was that he was aware of VAT registered traders underdeclaring values on import, as they intended to sell the imported goods outside their legitimate business, and not declare the profits that they had made. So, the fact that Mr Fraz was VAT registered at the time did not wholly eliminate the possibility that he was indifferent to the VAT charged on import.

We agree with Mr Collins that the evidence linking the two imports is thin, but there is documentary evidence to support Mr Fraz’s case. In particular, the email exchange between Mr Fraz and FedEx on 4 December is corroborative of Mr Fraz’s account. Whilst we recognise that the documentation does not identify the particular phones by reference to serial numbers or IMEI numbers, we note that the tracking number given in Mr Fraz’s email to FedEx is the same as the tracking number given on the FedEx consignment note for 2 November. Although we place limited weight on Mr Bronfman’s witness statement, it does support Mr Fraz’s account.

There is also documentary evidence that Mr Fraz had sent phones to ARA Global Group for repair. This includes the FedEx consignment note dated 2 November 2020 evidencing that phones had been sent by Mr Fraz to ARA Global Group, ARA Global Group’s invoice dated 4 November 2020 with the description of having provided a “battery change service”, and the FedEx consignment note accompanying the return with the description “repaired cell phones”.

Taking all of this into account, we find that it is more likely than not that the phones that were seized by the Border Force were the same phones that were imported by Mr Fraz in October 2020.

Could Mr Fraz have claimed outward processing relief? Ms Koll-Jones submits that even if the phones were eligible for this relief, Mr Fraz could not have claimed it, as he was not appropriately authorised. However, it appears to us that as it was FedEx that were dealing with the import formalities for Mr Fraz (his unchallenged evidence was that he had no access himself to the CHIEF systems), perhaps it would be FedEx (and not Mr Fraz) that would require any authorisation.

We note that FedEx’s email of 4 December 2020 refers to “GB returns” as being a reason for import – in which case FedEx require evidence of export in the previous three years. The tenor of their email is that relief from import duty is available if the goods had been previously exported, and that the only requirement to claim that relief is to provide proof that the goods had been exported within the previous three years. The CHIEF records relating to the seized phones were not included in the bundle, and therefore we do not know if FedEx sought to claim outward processing relief on Mr Fraz’s behalf. It appears to us that Mr Fraz would have been eligible to claim outward processing relief – but in view of the fact that he did not challenge the seizure in the Magistrates Court, we are bound by the deeming provisions in paragraph 5, Schedule 3, CEMA, which have the effect in this case of deeming such relief not to have been claimed, and that the relief did therefore not apply to the import of the seized phones.

Although Mr Fraz is an experienced businessman who has regularly imported goods, we find that this does not mean that he is knowledgeable about import formalities. In common with many other businesses, he relies upon customs agents (in this case FedEx) do deal with these formalities on his behalf. To the extent that there was a failure in complying with the formalities needed to claim outward processing relief, we find that this should not be held against Mr Fraz in determining whether the phones should be restored.

Notwithstanding the effect of paragraph 5, Schedule 3, CEMA, which deems the seized phones did not benefit from outward processing relief, we find that the fact that (i) duty had been paid on the phones when they were previously imported in October 2020; and (ii) were potentially eligible for outward processing relief when re-imported in December 2020 is a mitigating factor which might justify departure from the Border Force’s normal non-restoration policy. For this reason, we find that the decision of the Border Force not to restore the phones was unreasonable and disproportionate.

As the Border Force will need to undertake a further review of their decision, we address the various factors raised by Mr Collins and Mr Fraz, and make the following findings which the Border Force will need to take into account when reaching their decision. We find that:

We make the following further observations. Mr Fraz has asserted that the Border Force should have made enquiries of ARA Global Group before seizing the phones, as they would then have ascertained that the phones were being returned by him following repair. The obligation is on Mr Fraz to correctly describe the goods being imported, and to ensure that the relevant evidence of the prior export is provided to the Border Force on reimportation. It is not for the Border Force to search for this evidence for him. There is no duty on the Border Force to make enquiries of the seller before seizing goods.

Mr Fraz does not appear to be aware that HM Revenue and Customs no longer undertake checks on goods entering the UK. Customs controls on goods entering the UK are undertaken by the Border Force.

We find that the decision of the Respondent to refuse restoration of the phones is one that could not have been reasonably arrived at for the purposes of s16(4) FA 1994.

We direct that the Respondent conducts a further review of its original decision in accordance with the following directions:

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.