Price adjustments in customs valuation

15/02/24

The Supreme Administrative Court of Lithuania initiated a preliminary reference procedure at the EU Court of Justice to determine the application of the transaction value method in a situation where the final price is not known at the time of accepting the customs declaration.

What does this mean for your company?

Businesses carefully need to evaluate whether their transfer prices can be used as a basis for determining customs value. Since the ECJ’s decision in the Hamamatsu case the acceptability of year-end adjustments is unclear. The ECJ’s decision in this preliminary reference procedure may provide further guidance based upon which companies may be able to ensure compliance regarding their customs valuation.

Background

Provisional prices and retrospective adjustments in the context of transfer pricing has been a subject of ongoing debate. The CJEU decision in the Hamamatsu case did not provide clarity on this subject. Instead of bringing clarity, it gave rise to more questions. In the Hamamatsu case, the court stated that if transfer prices are subject to retroactive price adjustments not known at the time of the importation, they cannot be used as a basis for determining customs value under the transaction value method.

In this case regarding payment of import VAT, the importer claimed the application of the fallback method based upon a provisional price for calculating the customs value. Subsequently, the provisional price was corrected to both downward and upward adjustments after release, taking into account fluctuations in market prices. For the downward adjustments the importer requested the adjustment of the customs value initially reported, but no corrections have been requested regarding the upwards adjustments. However, customs authorities argued that the importer should have amended the customs declarations in all instances under the application of the transaction value method, considering the final adjusted price. The above circumstances have raised two preliminary questions:

Should the transaction value method be applied when the final price is not known at the time of accepting the customs declaration?
Is it necessary for the declarant to request the customs authorities to adjust the customs value, considering the Hamamatsu judgment?

As such, we are curious to see if the Court of Justice will provide further clarification on this topic.

How can we help?

We can provide assistance and guidance to your company on the use of transfer prices as a basis for their customs valuation. As such, we assess whether and how these transfer prices can provide an acceptable basis for the customs value and assess whether it is advisable or even required to coordinate them with the customs authorities.