Methodology selection
Step 1: Assess if pragmatic approach may be applied
VTTI has made a practical arrangement with the Customs Authorities to apply a pragmatic customs valuation methodology in situations where the customs value has no impact on the amount of duties payable. First step in the valuation procedure is to determine whether this pragmatic approach can be applied.
When a product arrives at the terminal and a parcel is registered in ERP, the value of the product is recorded by CS in line with the market value at the time of registration. The market value is usually provided by the customer, or otherwise obtained by CS from publicly available market data sources, such as Platts Market Data from S&P.
When the customer sends a nomination to bring the product into free circulation, CS registers an import service in ERP. The import service requires a value, which is used in the import declaration.
Where the applicable import duty rate is 0%, the goods qualify for preferential treatment upon import, or where a specific duty applies (i.e., duties are not calculated over the value but over another factor such as weight), the customs value declared serves a purely statistical purpose and has no financial impact. In such cases, VTTI has agreed with the customs authorities to apply the “reasonable means” method as an alternative method of customs valuation, in accordance with Article 74(3) of the UCC. More specifically, the market value that was registered at the time the parcel was created is used as the customs value in the import declaration.
If the import duty rate exceeds 0%, no preferential treatment applies and customs duties due are calculated on an ad valorem basis, the regular customs valuation framework of the UCC will be applied to determine the customs value.
This approach can be schematically displayed as follows:
Step 2: Assess applicability of transaction value method
Step 2.1: Identification of a qualifying sales transaction
Once it is clear that the customs value must be determined in line with the regular customs valuation framework of the UCC, next step is to assess whether the transaction value method can be applied, as this is the primary method for customs valuation. A secondary valuation method may only be applied if it's impossible to apply the transaction value method.
The transaction value method can only be applied if the productgoods isare sold for export to the EU. This means that ownership of the productgoods is transferred from athe buyerseller to athe seller,buyer, and that, at the time of the sale, it is clear that the goods are intended for export to the EU.
InThe customer selects the relevant transaction
Any sale concluded prior to the physical entry of the product into the EU may qualify for the application of the transaction value method, including sales concluded on the high seas (i.e. after export from the country of export). The location of the parties is not relevant in this regard; for example, a sale between two non-EU established entities may also qualify.
If the product is transferrednot sold prior to its entry into the EU inbut is, upon arrival, placed under customs supervision (e.g. under the contextcustoms ofwarehousing procedure or inward processing), a sale concluded during that salesstorage transaction.under customs supervision will also qualify as a sale on which the transaction value can be based.
If no sale can be identified on which the transaction value can be based, the value must be determined in line with one of the secondary valuation methods. See step 3.
Step 2.2: Selection of the right sales transaction in case of a series of transactions
If the product is sold multiple times prior to its entryarrival in the EU, the transaction value must be based on the last sale occurringconcluded immediately before the goods are brought intoenter the EU. I.e., the last sale prior to import.
Step 2.3: Assessment whether the transaction value method can be applied
Once the relevant sales transaction has been selected, CS will assess whether that sale is a valid sale for customs valuation purposes. CS will base that assessment on the commercial invoice relating to the relevant transaction (which the customer must always provide). If no commercial invoice is available, the transaction value method cannot be applied and a secondary valuation method must be selected
If the product is sold for export, the customer must always provide CS with the commercial invoice relating to the relevant transaction.
The transaction value method cannot be used in the following situations (article 70(3) UCC):
Restrictions on use or resale
If the buyer is restricted in how they can use or resell the goods, except for standard restrictions (e.g. legal requirements, geographical resale limits, or restrictions that do not affect the value of the goods).Price depends on unclear conditions
If the agreed price is influenced by conditions or arrangements for which no clear value can be determined (for example: bundled deals, unknown future compensations, or non-quantifiable obligations).Proceeds flow back to the seller
If the seller receives (directly or indirectly) part of the proceeds from the buyer’s resale or use of the goods, and this cannot be properly adjusted in the customs value.Relationship influences the price
If the buyer and seller are related and there are indications that this relationship has affected the agreed price.
VTTI has limited visibility into whether these requirements are met and therefore relies on the customer’s judgment in this regard. VTTI does, however, perform a reasonableness check to the extent possible, based on the commercial invoice and other available information. The check consists of a general check whether the invoice gives any indication that any of the above items may be applicable. This check includes, for example, the following elements:
- Whether the invoice contains a clear price;
- Whether there are any indications that the price may be adjusted at a later stage;
- Whether the buyer and the seller are related. Buyer and seller are "related" if they belong to the same group. Article 127 of the UCC Implementing Act provides further guidance on when parties are considered related.
If these checks raise any doubt regarding the acceptability of the invoice price, CS will contact the customer to obtain clarification.
In addition, CS may compare the invoice price with the current market price. If the deviation exceeds 5%, CS will contact the customer to discuss the discrepancy.
CS will only use the commercial invoice and the provided value if the customer is able to provide a reasonable explanation for any findings. CS will archive the findings and relating correspondence with the customer.
If CS can conclude based on the above analysis that the transaction value will apply.
Step 2.4: no commercial invoice is available?