Transaction value in determining customs value
The primary customs value of import goods is their transaction value, that is, the price that is paid or payable for the goods when sold for export to the customs territory of the EU.
- The trade value of goods is determined at the time of approving the customs declaration, based on the sale of the goods immediately prior to import to the customs territory of the Union.
- If goods are sold to the customs territory of the Union when they are in temporary storage or when they have been placed under temporary storage, inward processing, external transit or temporary admission, their trade value is defined based on the sale. This applies only when the goods are not sold as described in paragraph 1.
When is customs value is calculated based on transaction value?
Transaction value can be applied as the basis for customs value under the following conditions:
- The goods have been brought to the EU based on trade, that is, a payment has been made for the right to own the goods. If the goods have been, for example, donated, lent, rented or brought to a consignment stock, this condition is not fulfilled.
- The purpose of trade is to deliver the goods to the EU market.
- The trade applies to the import goods as they are presented to Customs. If the goods have been modified or processed after the trade, but before being released for free circulation so that their value or commodity code has changed, the transaction value cannot be used as the customs value.
- The trade must be legally binding at the time when the goods are declared for free circulation.
- The buyer’s right to release or use the goods is not limited in any way other than by
- restrictions imposed through EU legislation or national legislation, or through officially prescribed regulations;
- limitations of the geographical area in which the goods may be resold;
- restrictions that do not essentially affect the value of the goods.
- The sale or price does not involve conditions or services that would affect the transaction value, but the value of which cannot nonetheless be determined. In other words, the goods must be given a price that excludes the effect of such conditions and performances. If the conditions are associated with the manufacture or marketing of the imported goods, the transaction value can, however, be used as the basis of the customs value.
- The items to be added to the transaction price can be calculated reliably and with sufficient precision.
- The shared benefit between the buyer and the seller has not affected the transaction value.
Items to be added to the transaction value
When defining the transaction value, the following items are added to the transaction price if they are not already included in the price:
- The provision or commission that is paid by the buyer to the sales agent or another broker for the sale of the imported goods. The purchase provision is, however, not added to the transaction price.
- The cover and packaging costs charged from the buyer. The costs of the covers are added if the covers are part of the goods and not separate goods.
- The value of products and services that the buyer delivers to the importer for the production of goods free of charge or for a reduced price. Products and services can be delivered either directly or indirectly. (Such products include materials, parts, tools, matrices, moulds and other supplies and items used in the production of goods. Services include technical design, development, artistic work and model design that takes place outside the EU.)
- The royalties and licencing fees associated that the buyer has to pay directly or indirectly according to the selling conditions.
- The part of the profit left with the seller either directly or indirectly from reselling, releasing or using the imported goods.
- The transport and insurance costs, and the loading and handling costs on the imported goods, up to the place where the goods are delivered to the EU customs territory.
Points to consider
The reduction must concern imported goods, and the right to a reduction must exist at the time of calculating the customs value.
A reduction can be granted in three kinds of situations:
- The buyer is entitled to a reduction and, at the time when the customs value is calculated, has made a payment where the reduction is included (reduction in the invoicing price).
- The buyer is entitled to a reduction but, at the time when the customs value is calculated, has not made a payment where the reduction is included.
- A reduction is not available at the time when the customs value is calculated (retroactive offer by the seller).
If a reduction has already been applied to the payment or to the payable price at the time when the customs value is calculated, the price will be conclusive in determining the customs value.
- The reduction that is already applied at the time of determining the customs value according to the reason or extent laid out in the trade agreement will be approved if it has been itemised in the documents presented to Customs in connection with importing the goods.
- The reduction does not necessarily have to be included in the trade invoice concerning the goods, although this is common practice.
If the right to a reduction based on the agreement exists at the time of calculating the customs value, a reduction can be accepted even when the actual amount of reduction is indicated in the price only later.
If the price of the imported goods remains unpaid at the time of determining the customs value, the reduction and the final price can only be defined based on the available information. In such situations, use of the transaction price as basis for the customs value depends on whether a price reduction is granted and defined at the time when the customs value is determined.
- If the reduction is retroactive, for example a bulk discount at the end of the year, it can be taken into account in determining the customs value if it is proven that the right to the reduction existed at the time when the customs value was determined.
It is not necessary to determine whether the granted reduction is normal commercial practice or if it is granted also to other buyers.
As a rule, the price that would be payable for the goods if the payment was to be made at the time of calculating the customs value must be used as the basis for the value. A reduction granted after the date of customs value calculation, for example at the end of the year, is not taken into account. The right to a reduction must exist at the time of determining the customs value.
Generally approved reductions:
- cash reduction, i.e. reduction scaled according to the date of payment
- bulk discount to the extent that it concerns the goods on which customs value is defined
- re-sale discount
- regular customer discount
- introductory offer
- model and sample discount
- fair and exhibition offer.
If a hidden defect is observed in the goods after the customs declaration is approved, the reduction in the transaction price can be taken into account retrospectively.
The conditions are as follows:
- Customs is presented with proof of the goods having been defective when the customs declaration was approved.
- The seller changes the price of the goods for the benefit of the buyer in accordance with the terms of guarantee in the import trade agreement. The terms will have been agreed upon prior the release of the goods for free circulation.
- The defect in the goods was not taken into account in the import trade agreement in question.
- The seller has changed the price within 12 months of the approval of the customs declaration concerning the release of goods into free circulation.
Reimbursement based on defects in goods
Reimbursement can take place when
- the buyer purchases the goods from the seller at the price accordant with the trade agreement
- defects that could not be observed at the time of import are detected in the goods after import
- the defects cause repair costs to distributors working under the buyer, and the distributors charge the buyer for the repair costs
- the buyer can prove that the goods were defective already at the time of import.
Based on the guarantee by the seller, the transaction price is reduced within one year of the approval of the customs declaration with an amount corresponding to the repair costs, and the customs value is revised according to the same amount.
The buyer can be regarded as being bound by a guarantee obligation due to any defects.
- Invoice date: 1 October 2015
- Terms of payment: 14 days –4 % (15 October 2015)
- 30 days –2 % (1 November 2015)
- Customs declaration lodged on 20 October 2015
A cash discount can be taken into account in the following way in the calculation of customs value:
- If the invoice is paid prior to 15 October 2015, 4 % will be deducted from the total sum.
- If the invoice is paid during 16–20 October 2015, 2 % will be deducted from the total sum.
- If the invoice has not been paid before the customs declaration is lodged, 2 % will be deducted from the total sum.
- If 2 % is deducted from the total invoice sum when defining the customs value, but the buyer does not however pay the invoice within 30 days, i.e. prior to 1 November 2015, the buyer must notify the customs authorities about this. Customs will assess if the taxation is to be revised.
Conditions for reductions:
- The quality of the goods is not what was agreed upon
- After the goods are released for free circulation, the buyer notices that the quality of the goods is not what was agreed upon.
- The buyer files a complaint with the seller and the two parties agree on a reduction. The buyer then presents Customs with the correspondence relating to the complaint, as well as receipts on money transfers.
- The seller provides a credit note for the goods, and the transaction price is reduced within one year of the date of when the customs declaration was approved. Customs revises the customs value based on the credit note amount.