Declaring the correct customs value is essential to ensuring the correct duty is levied. The rules are complex, but there is help to get it right, argues Arne Mielken of Customs Manager Ltd.
In July 2021, the EU Commission published its 2022 Customs Valuation Compendium.
Why customs value matters
Customs duties and value-added tax (VAT) are calculated, usually, as a percentage of the goods’ value. Economic operators and customs authorities need to have clear rules on how to perform these tasks. The World Trade Organisation (WTO) has developed a Customs Valuation Agreement, which provides a commonly agreed and accurate measuring standards for what constitutes value.
This is vital for
economic and commercial policy analysis,
application of commercial policy measures,
proper collection of import duties and taxes, and
import and export statistics.
The value of imported goods is also one of the three 'elements of taxation' that provides the basis for assessment of the customs debt, which is the technical term for the amount of duty that has to be paid, the other ones being the origin of the goods and the customs tariff.
Once the value of the goods is determined, customs duties can be calculated.
WTO Customs Valuation Agreement
The source of customs valuation legislation comes from the WTO Customs Valuation Agreement ("the Agreement"), as a result of its Article VII. The Agreement has been published in English, French and Spanish.
However, the WTO Agreement has to be integrated into the national customs legislation of each of the WTO members. In the case of the EU, this transposition is in the form of the Union Customs Code, Delegated Act and Implementing Act.
Further to the WTO legislative texts, the WCO Technical Committee prepares a range of instruments that offer additional guidance on interpretation and application at the international level. Tools to help in the effective administration of valuation matters by customs administrations are also developed. At Customs Manager Ltd. we use all of these tools to support our clients with the correct application of Customs Valuation rules.
About the Compendium
The Compendium provides customs valuation thoughts and interpretation guidance on the legal provisions and accompanying texts relating to the application of Customs Valuation legislation in the EU. It was last published in consolidated form in 2018.
Since then, a number of developments have intervened, i.e. additional rulings and conclusions have been adopted and changes in certain implementing provisions have taken place. A summary of judgements of the Court of Justice of the European Union is included.
Customs Valuation rules are fixed, but implementation is dynamic
No import is comparable to the other. Neither are the relevant transaction contents for the customs value calculation are therefore not either. For example, the purchase price is not always fixed at the time of import or comparative values for similar goods are missing. Production processes abroad can be tiered and combined with follow-up processes from third parties.
The customs valuation law must therefore remain dynamic. Production, licensing and procurement processes must be carefully considered recorded. Only then is there a proper and correct customs valuation and calculation.
What overall customs methods does this compendium circle around?
There are usually six ways to work out the value of goods for Customs Duty, VAT calculations and trade statistics. They are covered by this guidance in detail.
This is the ‘transaction value’ method. It’s based on the price you pay when you buy the goods before bringing them to your country. You must have evidence of the price you pay with your import entry, for example, a copy of the seller’s invoice.
If they’re not already included in the seller’s price, you must add the costs of:
delivery to the border of your country
commissions (except buying commission)
royalties and licence fees you have paid on the imported goods as a condition of sale
containers and packing
any proceeds of resale the seller will get
goods and services you give to the seller for free or at a reduced cost - for example, parts you use in the imported goods, or development and design work carried out outside your country and needed to produce the imports
If you import goods from a processor – that is, a business that assembles or works on one or more sets of existing products to make your new imported products – work out transaction values by adding the value of any materials or components you gave to the processor, to the processing costs.
Leave out things like:
delivery costs within your country or customs union
any duties or taxes
taxes paid in the country of origin or export
quantity and trade discounts and those relating to cash and early settlement, valid at the time that you value your goods
dividend payments to the seller
marketing activities related to the imports
export quota and licence costs
rights of reproduction
post-importation work, for example, construction or assembly
If you import the goods on consignment, that is, there’s been no sale, or you have supplied them free of charge or on loan try method 2.
Calculate value based on the customs value of identical goods, produced in the same country as your imports. If there are no identical goods try method 3.
Calculate value based on the customs value of similar goods, which must be:
produced in the same country
able to carry out the same tasks
If there are no similar goods, try method 4 or 5.
Calculate value based on the selling price of the goods (or identical or similar goods) in your country or customs union.
Simplified procedure values and standard import values apply specifically to fruit and vegetables. But you can only use one of the two and this will depend on a number of factors including the:
type of produce
method of import
time of the year
If there are no sales of the goods in your country, try method 5.
Calculate value based on the production cost of the goods, including the cost of any materials, manufacturing and any other processing used in production.
If you have not got production cost information, try method 6.
Calculate value based on adapting one of the previous methods to fit unusual circumstances.
2021 EU Customs Valuation Guidance
EU Customs Valuation Guidance Document
2018 Compendium of EU Customs Valuation Texts
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