The unconstitutionality of import tariffs on apparel imports

LEGIS No.214 / July - August 2019

Authors: Juan Esteban Sanín Gómez - María del Mar Arciniegas Perea.

The purpose of this article is to present the reasons for the request [1] for the declaration of unconstitutionality of Articles 274[2] and 275[3] of Law 1955 of 2019[4], to review what has happened to date following the enactment of the challenged law, to analyze the possible consequences of these events and to make some recommendations to the Government regarding the best way to act while the Constitutional Court issues its ruling.

The lawsuit

The request of unconstitutionality is based on two specific charges; 1) the violation of the Government's exclusive powers to regulate international trade and freely fix tariffs and 2) the violation of the principle of unity of matter.

Regarding the first charge, the Political Constitution is clear in indicating, in its articles 150 n. 19 paragraphs b) and c) and 189 n. 25, that there are exclusive powers regarding international trade and tariff management, both for the Congress and for the President of the Republic. It is established therein that the Congress is competent to dictate the general norms where the objectives and criteria to which the Government must be subject to regulate foreign trade and modify the tariff policy, including the tariffs "and other provisions concerning the customs regime". Accordingly, it establishes that it shall be the exclusive competence of the Government "to modify the tariffs, rates and other provisions concerning the customs regime" and to regulate foreign trade. Thus, it is clear that the competence of Congress extends to the creation of framework laws on customs and foreign trade and therefore, if a law is used to modify tariffs or rates, it would be usurping a function that is exclusive to the Government. The same degree of unconstitutionality would apply to a law that would appoint the ministers of the Office or diplomatic and consular agents, thereby eliminating the President's exclusive power and competence to do so.

The interpretation of these articles cannot be otherwise, since international trade requires a dynamism and a special flexibility that cannot be limited by the provisions of a law. And this is precisely what happened here: tariffs were set by means of a law, nullifying the power and obligation of the national government to establish them.

Regarding the second charge, Article 158 of the Political Constitution establishes the principle of unity of subject matter, stating that "all bills must refer to the same subject matter and provisions that do not relate to it shall be inadmissible". Having reviewed the objectives and goals of the PND, it is not found that there is any type of connection (thematic, causal, teleological or systematic) with the attacked norms, reason for which it cannot be predicted that they form an ordered and inseparable normative body. In addition, the NDP law -being a temporary law- elevates to permanent a tariff whose exclusive competence to decree it falls on the Government, which becomes a second reason to eliminate the rule from the legal system.

Trade unions such as ANALDEX, FENALCO and ANDI have filed their own lawsuits before the Constitutional Court, but also the Ministry of Finance [5] and the Ministry of Commerce, Industry and Tourism ("Mincit") [6], have expressed their intention to do the same.

What has happened since the enactment of the challenged law

The business day following the enactment of the PND, the Mincit published for comments a draft decree "partially modifying the customs tariff". Such decree contains, in its recitals, the fact that the PND contemplated "tariff measures for the importation of goods classified in chapters 61 and 62 of the Customs Tariff".  Said norm, in addition to fully reproducing what is set forth in the PND, is limited to exclude the application of the measures to imports with commercial value developed under the "Plan Vallejo", to imports from countries with which Colombia has international trade agreements in force and to indicate that, according to the provisions of paragraph 2 of article 2 of the Customs Framework Law[7], said decree would enter into force as from 90 common days counted from the date of its publication.

Then, the DIAN, citing the exception established in paragraph 2 of Article 2 of the Customs Framework Law [8] but without complying with the duty to explain the reasons of manifest urgency indicated in the aforementioned law, proceeded to add to numeral 1 of Article 1 of Resolution 00005 of 2003 the operation codes for ordinary imports of the goods referred to in the rules under attack. At the same time, according to FENALCO, the Central Level of the DIAN instructed the Sectional Customs Directors that, while the SYGA computerized customs system was being adjusted, the measures adopted by the PND should be implemented manually [9].

Given the impossibility of manually processing thousands of import declarations, the various DIAN offices decided to suspend the nationalization of goods "while instructions were received from the central level" [10], paralyzing the import of clothing throughout the country, thus generating "enormous cost overruns, the collapse of arrival points, shortages in stores and the consequent negative impact on the consumer" [11].

Finally, the DIAN, following a recommendation of the Triple A Committee [12], decided to suspend the immediate implementation of the import tariff on clothing while the regulatory decree came into force within the terms established by the National Government.

The possible consequences of these facts

In addition to being unconstitutional, the implementation of this measure is clearly inconvenient. This was stated by the Minister of Commerce when he indicated that "(...) the taxes will make clothing more expensive, will give an advantage to smugglers and will break the balance and structure of the production processes" [13]. In addition, it indicated that this "means an increase of approximately 25% in clothing prices, affecting 47 million Colombians and benefiting only one part of the sector" [14].

For its part, the Chamber of Commerce of Apparel argues that the measure is intended to protect the national industry from garments imported at very low prices from Asia and Africa, "places that mostly do not pay fair wages and generate an unbalanced competition since those countries pay US$50 per month vs. US$400 in Colombia" [15]. It is curious that this argument is made when many of those interested in keeping this tariff are large importers of yarn and fiber for textile production in Asia.

Some recommendations for the proper management of this situation

Our Political Constitution establishes that the different entities of the State must act in a coordinated and harmonious manner for the fulfillment of the State's goals [16]. It is therefore logical that if the Government, through its Ministries of Finance and Commerce, considers that the rules under attack are unconstitutional, it proceeds to regulate their application through decrees and resolutions.

There exists in our legal system the so-called "exception of unconstitutionality" which is based on Article 4 of the Political Constitution. According to this exception, when a norm is contrary to the Constitution, it must [17] be inapplied by the legal operator (diffuse control of constitutionality). In this sense, since there is an evident contradiction between the attacked norms of the PND and the Political Constitution, while the constitutionality of the same is defined by the Constitutional Court, they will have to be inapplied if the addressee of the same so requests.

[1] The Centro de Estudios Empresariales Ignacio Sanín Bernal (CEEISB) is an independent laboratory of business ideas or "think tank" whose purpose is to contribute to the design, monitoring and improvement of public policies adopted in the Colombian business environment.

Complaint filed on April 28, 2019 by Juan Esteban Sanín Gómez and María del Mar Arciniegas Perea.

[2]ARTICLE 274°, TARIFF ON IMPORTS. A tariff of thirty seven point nine percent (37.9%) shall be established on imports of products classified in chapters 61 and 62 of the National Customs Tariff, when the declared FOB price is less than or equal to 20 United States dollars per gross kilo.

[ARTICLE 275. NATIONAL CUSTOMS TARIFF: A 10% ad valorem tariff shall be established, plus three United States dollars per gross kilogram, for prices per kilogram over 20 US dollars, in chapters 61 and 62 of the National Customs Tariff.

[4] Law through which the National Development Plan 2018-2022 "Pact for Colombia, Pact for Equity" is issued.

[5] https://www.wradio.com.co/noticias/actualidad/minhacienda-demandara-ante-la-corte-articulo-del-pnd-que-subio-aranceles-a-textiles/20190503/nota/3898275.aspx

[6] https://www.larepublica.co/economia/mincomercio-advierte-sobre-la-inconstitucionalidad-de-los-aranceles-a-la-industria-textil-2858081

[7] Law 1609 of 2013.

[8] Such exception indicates that the term for the measure to enter into force (which shall not be less than 15 nor more than 90 common days after publication in the official gazette) may be waived "for special circumstances [where] the immediate effectiveness of the Decree or Resolution is required, in which case the corresponding authority must state the reasons for its decision."

[9] See communication sent by the vice-president of Fenalco to the Triple A Committee, dated May 31, 2019.

[10] Ibid.

[11] Ibid.

[12] Committee on Customs, Tariff and Foreign Trade Affairs.

[13] https://www.larepublica.co/economia/mincomercio-advierte-sobre-la-inconstitucionalidad-de-los-aranceles-a-la-industria-textil-2858081

[14] https://www.elespectador.com/economia/los-aranceles-textiles-y-sus-efectos-en-el-bolsillo-de-los-colombianos-articulo-860299

[15] https://www.elespectador.com/economia/los-aranceles-textiles-y-sus-efectos-en-el-bolsillo-de-los-colombianos-articulo-860299

[16] Constitution, Art. 113 and Art. 3 n. 10 of Law 1437 of 2011.

[17] This is not a power, but an obligation.