The legal authority to impose wrong-doing penalties has been available to the UK's HM Revenue & Customs (HMRC) since April 2010. Recently, the United Kingdom Warehousing Association (UKWA) has seen evidence of an increased focus by HMRC on excise goods supply chains and also an increased willingness by the authority to impose wrong-doing penalties on storage companies and others. This is occurring in circumstances where HMRC is unable to recover the Excise Duty from those who own the goods and have evaded the duty, because those parties cannot be located.

HMRC has the authority to impose penalties on individuals and companies which handle goods on which Excise Duty has not been paid or deferred, or which have otherwise been improperly diverted from bonded storage. Such 'handling of goods' is deemed to include carrying, removing, depositing or keeping the goods and therefore extends to warehouse operators, hauliers and other parties in the supply chain who don't own the goods, but do have physical possession of them.

As a result, anyone who holds excise goods (such as alcohol or tobacco) on which duty has not been paid is potentially liable to a penalty of up to 100% of the unpaid Excise Duty. The actual amount of the penalty will be calculated by examining all of the circumstances, including whether the wrong-doing was deliberate, and whether any disclosure has been made to HMRC.

Warehouse operators, hauliers and other suppliers of third party logistics services may have a hold harmless or indemnity provision in their contract with their customer, which in theory allows them to recover fines and duty from the customer where the customer is at fault. Standard Terms and Conditions recommended by the British International Freight Association (BIFA), for example, include a standard clause of this type. However, this will clearly have little use if the 'guilty' customer has disappeared or is otherwise unable to be sued.

So what should an operator do to guard against the risk of unwittingly handling goods on which Excise Duty has not been paid or deferred?

They should look out for general indicators that duty may have been evaded. For example:

• supplies are offered via unsolicited e-mails/fliers with limited information about the supplier

• goods are offered at incredibly low prices

• the supplier insists on dealing in cash

• there is a lack of documentation such as purchase invoices, duty stamps and fiscal marks

In addition, there are specific steps which service providers should take. Warehouse operators who have non-excise warehouses should obtain evidence that duty has been paid whenever they receive goods. They should consider obtaining a signed declaration from their customer that the Excise Duty has been paid and/or include a warranty to this effect in their terms and conditions.

In the case of hauliers who are asked to move excise goods, the advised actions will depend on the origin and destination point. If the goods are being moved from an excise warehouse to another location, hauliers should ask for evidence that the Excise Duty has been paid and the goods have legitimately left the duty suspension regime. As with warehouse operators, hauliers should also consider obtaining a signed declaration from the customer that the Excise Duty has been paid and/or include a warranty to the same effect in their terms and conditions.

If the goods are being moved from an excise warehouse to another location and the haulier is told that duty is not payable, they should ask for evidence of the movement guarantee and the supporting documents. They should also consider whether the destination point is an excise warehouse which is known to them, and whether there are legitimate commercial reasons to explain why such a movement was required. If there is any doubt about the legitimacy of the movement, or the movement guarantee, operators should contact HMRC.

If goods are being collected from a small warehouse, or the movement is to what appears to be non-commercial premises, the haulier should take particular care to ensure that they obtain evidence that all Excise Duty has been paid.

Clearly, Warehouse operators, hauliers and other logistics service providers in the UK need to be vigilant in order to avoid increased exposure. Liability insurance coverage may assist; as long as an operator acts reasonably, the TT Club provides insurance for this type of demand and will also normally pay the costs of recovery from the customer or any other apparently liable party.

We gratefully acknowledge the assistance of Daniel Martin of Holman, Fenwick & Willan in the preparation of this article.