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Introduction to customs value

What is the customs value?

The customs value is the value assigned to goods for the calculation of customs duties and other taxes. It is based on the price actually paid or payable for the goods when they are sold for export. This value is defined by internationally harmonized rules, primarily by the WTO agreement on the determination of customs value.

Importance of customs value for businesses

For businesses, the accurate determination of the customs value is essential for several reasons:
  • Customs duty calculation: An incorrect value can result in insufficient or excessive customs duties being paid.
  • Regulatory compliance: A correct valuation helps avoid penalties and disputes with customs authorities.
  • Financial planning: An accurate estimate allows for better forecasting of costs related to import or export.
  • Competitiveness: Proper calculation of customs costs contributes to a more competitive pricing strategy in the international market.

Principles of customs value

Transaction value

The transaction value is the primary method for determining the customs value. It corresponds to the price actually paid or payable for the goods, adjusted to include certain additional costs. This method is the most commonly used and applies to approximately 95% of trade in the EU. The adjustments include transport costs, commissions, license fees, and costs of equipment provided for free or at a reduced price.

Other methods of determining the value

When the transaction value cannot be determined or is insufficient, other methods can be used:
  • Transaction value of identical goods: This method uses the price of identical goods imported at the same time.
  • Transaction value of similar goods: Uses the price of similar goods, which are comparable in terms of characteristics and materials.
  • Deductive method: Bases the customs value on the selling price in the EU, after deductions for costs such as transport and insurance.
  • Calculated value: Based on production costs, profit, and overhead costs typically reflected in the sale of similar goods.
  • Fall-back method: Uses the previous methods with reasonable flexibility, relying on values already determined when possible.

Calculation of customs value

Elements included in the customs value

The elements that must be included in the customs value include:
  • Transport and Insurance Costs: Costs incurred to transport the goods to the point of entry into the EU.
  • Royalties and License Fees: Payments made to use intellectual property rights.
  • Commissions: Brokerage fees or sales commissions paid to facilitate the purchase of the goods.
  • Cost of Materials and Equipment: The value of equipment and materials provided for free or at a reduced price by the buyer for the production of the goods.

Methods of determining customs value
Declarations and documentation

Customs declaration

The customs declaration is the legal document by which an individual or company expresses their intention to submit goods to a specific customs regime during their import or export. This declaration allows for the determination of applicable duties and taxes, the compilation of international trade statistics, and the performance of targeted inspections on the goods.

Invoices and transport documents

The commercial invoice is one of the most crucial documents in international transport operations, as it is essential for the customs clearance of goods. Issued by the exporter, it provides essential details about the value of the goods, the description of the products, their quantities, and the terms of sale agreed upon between the involved parties. This document must be complete and accurate before shipment and is reviewed by the customs officers in the importing country to verify the compliance of the goods with the applicable rules and standards. The commercial invoice is used for all modes of transport: maritime, air, rail, and road. The transport documents, on the other hand, are contracts exchanged between the various transport parties and vary depending on the mode of transport used:
  • Maritime transport: The required document is the bill of lading (Bill of Lading or B/L), issued by the carrier. It details the journey of the cargo from its point of origin to its final destination.
  • Air transport: The air waybill is the contract binding the airline to the freight forwarder, guaranteeing the cargo’s handling, insurance coverage, and applicable rates.
  • Land transport: The CMR consignment note is written by the orderer, shipper, or carrier. It must be presented during road checks as well as at loading and unloading points.
  • Rail transport: The international consignment note (CIM) is the contract established by the sender with the railway company, governing the transport of goods by rail.

Methods of determining customs value
Declarations and documentation

Customs control procedures

The customs control procedures aim to ensure the compliance of customs declarations and to guarantee the regularity of commercial operations, whether they involve imports or exports. These procedures allow for checking that the goods comply with the applicable regulations, particularly in terms of customs duties, import/export restrictions, and tax measures.

Sanctions in case of false declaration

According to the Customs Code (CDC), an error in declaring the amount of customs value, whether related to import or export operations, is considered a first-class customs offense. This classification means that any inaccuracy or omission in the declaration can lead to significant sanctions. For export operations, errors are generally penalized by financial fines. This means the consequences are primarily financial, reflecting the often administrative nature of these errors in the context of exports. However, these fines may vary depending on the severity of the error and the amounts involved. Customs authorities may also require corrections and adjustments to the declarations to ensure compliance with current regulations. In contrast, errors in import declarations can lead to more severe sanctions, including potential financial penalties, confiscation of goods, or even legal proceedings in serious cases. These sanctions are implemented to ensure the integrity of the customs process and to prevent fraud or attempts at tax evasion.

Appeal procedures and disputes

In the event of a sanction related to a customs declaration error, economic operators have the right to contest the decision made by the customs authorities. The appeal procedures are governed by the Customs Code (CDC) and generally consist of several stages:
    1. Claim to the customs administration: The declarant or economic operator can first file a claim directly with the relevant customs services. This claim must be submitted within a specified time frame (often 30 days) from the notification of the sanction. It is crucial that the claim is substantiated and accompanied by all the necessary supporting documents to back up the request for a review.
    1. Administrative appeal: If the claim to customs is unsuccessful or rejected, the operator may request a hierarchical appeal. This appeal involves asking a higher level of the customs administration to reexamine the decision. The appeal must be filed within specific time limits, and the response from the administration can confirm, modify, or cancel the initial sanction.
    1. Judicial appeal: As a last resort, if the administrative steps do not result in a favorable outcome, it is possible to initiate a legal action. The dispute is then brought before the competent courts, usually the administrative courts or the courts of appeal. During this phase, the declarant can present their arguments before an independent judge, and the final decision will be made after reviewing the facts and evidence.
It is important to note that during the appeal process, certain sanctions may be suspended, including fines, until the final decision is made. However, additional costs, such as late fees, may continue to accrue if the appeal does not result in favor of the operator. Finally, to optimize the chances of success in these procedures, it is often recommended to seek assistance from a specialized customs lawyer or an international trade expert to ensure an effective defense that complies with legal standards.

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