If your company wants to import goods into an EU country, it is necessary to appoint a representative for customs purposes. In this article we analyse the regulation of the Civil Code and the EU Customs Code, what is the direct and indirect representation of a foreign company and what are its effects.
Difference between direct and indirect representation
Index of contents
Direct representation is where the agent acts on behalf of and in the name of another person, who is the principal.
Requirements for direct representation
Direct representation is that in which the agent acts on behalf of and in the name of another person, who is the principal. For direct representation to exist, several requirements must be met, which are as follows:
- That the principal grants a power of attorney in favour of the agent in which the limits of the legal business to be carried out by the agent are established.
- There must be a “comtemplatio domini”, that is to say, both the agent and the principal must be aware of the actions that are being carried out in the name of others.
On the other hand, indirect representation is that in which the agent acts on behalf of the principal, but not in the name of the principal, to carry out a legal transaction with a third person. It is regulated in Article 1717 of the Civil Code, which states the following:
When the agent acts in his own name, the principal has no action against the persons with whom the agent has contracted, nor do they have any action against the principal.
In this case, the agent is directly bound in favour of the person with whom he has contracted, as if the matter were his personal. The exception is the case in which the matter concerns the principal’s own property.
The provisions of this Article are without prejudice to the actions between principal and agent.
To make it easier to understand, here is a simple example:
Raúl grants a power of attorney to María to buy two houses in Madrid, in his name and on his behalf, with certain characteristics and prices. María finds the properties that meet the requirements and makes the purchase. In this case, we are dealing with a case of direct representation.
Regulation of customs representation in the Customs Code of the European Union
According to EU customs regulations, companies that are not established in the EU must appoint a representative for customs purposes when importing goods into the EU.
Customs representative: meaning and requirements
The Customs Code of the European Union regulates the figure of the customs representative in articles 18 and following and establishes that:
- Any person may appoint a customs representative.
- The customs representative may be represented either directly where he acts in the name and on behalf of another person or indirectly where he acts in his own name but on behalf of another person.
- Customs representatives must be established in the customs territory of the Union, unless they act on behalf of persons who are not required to be established in the customs territory of the Union.
- Member States of the European Union may define the conditions under which a customs representative may provide services in the Member State in which he is established.
- The customs representative shall declare to the customs authorities whether he is acting on behalf of the represented person and indicate whether the representation is direct or indirect.
- The customs authorities may require the production of proof of the customs representative’s authority to represent.
Consequences of direct representation
When indirect representation is granted to customs agents, they are jointly and severally liable for any customs debts such as import and export duties, making it more complicated for companies to find agents in these cases.
To be a customs broker a person must have a registered office or a permanent establishment in the European Union.
Responsibilities of customs representation
- Tax liability vis-à-vis the tax authorities. The customs representative must provide a guarantee to secure payment from the client.
- Liability of the customs representative to his client for breach of contract. This liability arises, for example, if the goods are lost during transport.
- Criminal liability of the customs representative for the commission of a criminal offense. This liability arises even if the representative is a legal person, since the Criminal Code provides for the criminal liability of legal persons for certain offenses.
In this regard, it is important to cite a case analysed by the High Court of Justice of the European Union in May 2023, concerning the joint and several liability of the customs representative for the payment of import VAT. In this case, the Italian authorities claimed against the customs representative with an indirect representation of an importing company that was in insolvency proceedings. The Italian administration could not collect the VAT directly from the importing company and decided to reclaim the payment from the customs agent as it considered him to be jointly and severally liable for the payment of VAT.
The customs representative acknowledges that he acted in his own name and on behalf of the carrier company on the basis of a mandate, but argues that there is no rule in the Italian legal system governing the indirect customs representative’s liability for the payment of import VAT. The High Court of Justice of the European Union rules that the indirect customs representative is liable only for the payment of the customs duties due on the goods which he has declared at that customs office, but not for the payment of import VAT.
If your company needs a customs representative, direct or indirect, contact our team of experts in business consultancy to analyse your case, verify the type of representation that best suits your circumstances (direct or indirect) and carry out all the formalities for the granting of the power of attorney (within the limits agreed) and the execution of the assignment, always within the limits of the regulations.