On import, the customs value serves, among others, as a basis for calculating:
- customs duties
- anti-dumping, anti-subsidy and retaliatory duties
- import VAT, subject to some adjustments
- the guarantee that must be provided in the case of suspended duties and taxes as part of suspensive customs procedures.
Customs duties generally represent a percentage of the value of the goods declared for import.
Determining the customs value is a special challenge depending on the complexity of the matter. It can involve major risks for operators. They could possibly fail to assert their right to a reduction of the customs value (overvaluation) or declare some items to include in the customs (under-valuation). In fact, to determine the customs value one must take into account many criteria and circumstances relating to the sale, purchase, research, development and distribution of the products.
The customs value is also used to
It is defined by following several methods, and that must be applied in the expected order, i.e.:
1. Transaction value of the imported goods
2. Transaction value of identical imported goods
3. Transaction value of similar imported goods
4. Deductive method
5. Calculated value method
6. Residual method.
As an exception, if requested by the declarer, the calculated value can be used before the deductive method.
Transaction value method
When imported or exported goods are purchased or sold, their customs value is in theory based on the price effectively paid or to be paid (transaction value). The transaction value is supported by the commercial documents (invoices, etc.). It covers approximately 95% of the cases of customs value determinations.
If the goods are invoiced in a foreign currency, an official conversion rate must be used.
To obtain the customs value, certain elements must be added to the transaction value if they are not included in the sale price, in particular:
- fees for insurance, transport, handling and/or loading until the point of entry into or exit from the EU customs territory, including any additional transport fees (fuel costs invoiced separately). The calculation depends on the sale conditions that are often documented by the use of an Incoterm
- all payments effectively made or to be made to the seller that are a condition of the sale of the imported or exported goods, including partial payments and indirect payments to a third party on behalf of a seller
- for imported goods:
- the costs of processing not included in the sale price
- the initial analysis fees when such fees are a condition of the sale
- any assistance in the production of goods in a third country (molds, cutout templates, etc.)
- the royalties and license fees, including any brand royalties if they are a condition of the sale and if they are directly related to the imported goods
- any engineering work and studies executed outside the EU, etc.
The transaction value on import must be reduced by certain elements if they are included in the sale price, in particular:
- the costs of insurance, transport, handling and/or unloading from the point of entry in the EU customs territory, to the place of destination in the EU
- the costs related to construction, installation, assembly, maintenance, or technical assistance work undertaken following the import concerning the imported goods related to the installations, machines, or industrial equipment
- the interest to pay in financing agreement entered into by the purchaser to acquire the imported goods. It does not matter whether the loan is made available to the seller by a bank or any other legal person. The only condition is that the financing agreement is concluded in writing and that the buyer provides the proof of that, when requested by the Customs Administration. As such, the goods must be effectively sold at the price declared as the price effectively paid or to pay, and the interest rate mentioned must not be greater than the interest rate usually applied in such transactions in the country in which the loan was granted on the date in question
- the costs linked to the reproduction rights in the Union on the imported goods
- the buying commissions and any interest for deferred payment, etc.
- the duties on import and other taxes and duties to pay in the Union that are related to the import or the sale of the goods.
In principle, price reductions agreed upon after acceptance of the customs declaration do not give the right to a reduction in customs value.
In case of doubt as to the declared transaction value, the Customs Administration may request additional information. If any doubt remains, it may impose the use of a substitute method.
In some cases, the transactional value method cannot be used, for example, in the following cases:
- the imported goods are not subject to a sale transaction, for example, upon free delivery as part of a guarantee on purchase
- the sale specifies a restriction in the use of the imported goods
- the sale is subject to conditions or services whose value cannot be determined objectively concerning the goods to be evaluated
- the proceeds from any resale, disposal or later use cannot be accurately calculated
- the sale took place between two related companies and it results that the purchase price was therefore influenced.
With regards to goods that are not sold at the time of import (for example: free, rented or loaned goods), there is no transaction value. The customs value is then determined using a substitute method, implemented in the following order:
- the comparative methods take into account the transaction value of other identical or, failing that, very similar goods imported in the same time period and originating from the same country
- the deductive method takes into account the unit price of resale after import, from which are deducted the generally applicable commissions and margins and various fees occurring after import
- the calculated value method takes into account the cost of raw materials and manufacturing operations, profits and general expenses, as well as costs of transport and insurance
- the fall-back method takes into account all reasonable means based on concrete and quantifiable data provided by the importer.
The use of a substitute method generally requires consultation with the local customs authorities or other Member States of the Union.
The customs value of fruits and vegetables
Fruits and vegetables are generally imported without sale, thus without transaction value. In this case, the importer may use:
- either the ordinary substitution methods
- or the unit price method, for some fruits and vegetables, the list of which is defined by European regulations. These unit prices may be viewed in the TARIC database and are valid for 14 days.
In addition, during some periods, certain fruits and vegetables are excluded from the unit price method and ordinary substitution methods by European regulation. In this case they must be declared by using a standard import value.
The unit prices should not be confused with the standard import values that are distributed and updated daily by the European Commission.
D.V.1 - Declaration of value
In practice, a detailed calculation of the customs value using the D.V.1 form must be submitted with the customs declaration.
Unless special authorization exists, a detailed value declaration must theoretically be completed for imported goods when the following conditions are met:
- the customs value is greater than 20,000 euros
- customs duties are due.
The value declaration is made using the eDouane system.
The value declaration is not required in the following cases:
- the customs value cannot be determined using the transactional value method
- the customs value of the goods does not exceed €20,000 per shipment on condition that there are not multiple shipments or separate shipments from the same consignor to the same recipient
- the rate of customs duties for the imported products is nil (zero) due to their tariff classification, the application of a preferential scheme, or if an exemption from customs duties is requested at customs clearance, except for imports for which such benefits are subject to tariff quotas
- the information on the customs value is not required, for example, for a placement under a customs scheme (such as in a customs warehouse)
- the customs value was determined using the unit price method.
The Customs Administration may contest the accuracy of the elements of the customs value declared as part of an a posteriori customs control. For this purpose, the Customs Administration will review the accounting and any correspondence concerning the order and the delivery of the goods. The control may be conducted retroactively for up to three years.
At the end of the control, the Customs Administration may recover customs duties, taxes, and late interest from importers or their representatives. On the other hand, it could also trigger reimbursement of overpaid duties.
PROVISIONAL CUSTOMS VALUE
If some of the information needed to calculate the customs value is not available at the time of import, the importer may declare a provisional customs value. The importer must then adjust the value later. The importer may also use an adjustment procedure allowing to use some information and data from previous years in the final customs declaration.