Customs value simplification: some thoughts about the TAXUD guidance “valuation simplification under article 73 UCC and article 71 UCC DA”

The customs valuation, together with classification and origin, is one of the three pillars of the customs obligation and its management can be simplified; in this area, of course, the customs value agreement is the main tool to manage in a simplified way this matter. As recalled in the TAXUD guidance VALUATION SIMPLIFICATION UNDER ARTICLE 73 UCC AND ARTICLE 71 UCC DA, the article 73 of the Union customs code, lays down that “…The customs authorities may, upon application, authorise that the following amounts be determined on the basis of specific criteria, where they are not quantifiable on the date on which the customs declaration is accepted: (a) amounts which are to be included in the customs value in accordance with Article 70(2); and (b) the amounts referred to in Articles 71 and 72…”. At its turn, article 71 of the Regulation (EU) 2015/2446 of 28 July 2015 lays down that the simplification “…may be granted where the following conditions are met: (a) the application of the procedure referred to in Article 166 of the Code would, in the circumstances, represent disproportioned administrative costs; (b) the customs value determined, will not significantly differ from that determined in the absence of an authorisation. 2. The grant of the authorisation is conditional to the fulfilment, by the applicant, of the following conditions: (a)he complies with the criterion laid down in Article 39(a) of the Code; (b) he maintains an accounting system which is consistent with the generally accepted accounting principles applied in the Member State where the accounts are held and which will facilitate audit-based customs control. The accounting system shall maintain a historical record of data that provides an audit trail from the moment the data enters the file; (c) he has an administrative organisation which corresponds to the type and size of business and which is suitable for the management of the flow of goods, and have internal controls capable of detecting illegal or irregular transactions…”;

The customs value simplification is based on some horizontal rules which are:

The application should be submitted by means of the customs decisions system and, therefore, the EU trader portal which requires the identification made in the national system;
determine on the basis of specific criteria, not only additions and deductions to the price paid or payable, but also elements of the total payments made or to be made by the buyer.
The valuation simplification is an alternative solution for a simplified customs declaration as referred to in Article 166 of the UCC;
The first category of the conditions refers to the need and effect of the simplification for the goods being valued.

In particular, the first one is “…The use of the simplified procedure as referred to in Article 166 UCC 10 would represent disproportioned administrative costs…”. As indicated by “MEMO/06/425, Measuring administrative costs and reducing administrative burdens in the EU, Brussels, 14th November 2006 (page 2). Administrative costs are “…the costs incurred by enterprises, the voluntary sector, public authorities and citizens in meeting legal obligations to provide information on their activities (or production), either to public authorities or to private parties…”.

Another requirement is “…The resulting customs value would not significantly differ from that determined in the absence of the authorisation…”. The condition is met when – on the basis of objective and quantifiable data provided by the applicant – it may be assumed that the customs value declared with the use of the valuation simplification would not substantially differ from the customs value determined in the absence of the simplification.

The second group of requirements refers to the qualities of the applicant which has to prove “…The absence of any serious infringement or repeated infringements of customs legislation and taxation rules, including no record of serious criminal offences relating to the economic activity…”.

Another point up to the applicant is the obligation to propose a method/formula to be applied to determine a given element of the customs value in accordance with specific criteria, not quantifiable on the date on which the customs declaration is accepted, together with the reasons for the choice in its application for an authorisation for valuation simplification.

In general, it is possible to say that the applicant of the customs value simplification should be the owner of the AEO authorization.

The guidance contains some questions and answers raised in the customs export group-valuation section (CEG-VAL)

Whether the value determined on the basis of the specific criteria authorised under Article 73 UCC is a definitive value (as opposed to the provisional value under Article 166 UCC)?

Correct

It should be kept in mind that the customs value declared with the use of the valuation simplification may be subject of the verification at the time of importation (Article 188 of the UCC) or in the framework of the post-release control (Article 48 of the UCC).

Can the customs authorities modify the declared value on the basis of the specific criteria authorised under Article 73 UCC retroactively if the real value differs from the declared value?

The initially declared customs value with the use of the valuation simplification may be changed retrospectively only if the valuation simplification is annulled in accordance with Article 23(3) or Article 27 of the UCC, or in case where the importer unduly used the simplification.

Can the customs authorities modify the declared value retroactively if the real value “significantly differs from the determined in the absence of an authorisation”?

It may be assumed that the declared customs value with the use of the valuation simplification may significantly differ from the customs value that would be declared in the absence of an authorisation in the following situations (the list may not be exhaustive):

a) the information provided by the applicant was incorrect or incomplete; or
b) the formula used to calculate an amount to be included into/excluded from the customs value was wrongly formulated or used at the time of making the customs declarations; or
c) the holder of the valuation simplification did not inform the competent customs authority about factors arising after the decision was taken, which influenced its correction/content.

To annul the simplification under Article 27 of the UCC, the following three conditions defined in the Article should be fulfilled simultaneously:

– that the decision was taken on the basis of incorrect or incomplete information;

– that the holder of the decision knew or ought reasonable to have known that the information was incorrect or incomplete;

– that the information had been correct and complete, the decision would have been different.

What criteria should be applied to determine whether the customs value determined with the use of an authorisation “will not significantly differ from that determined in the absence of an authorisation”?

Please see information provided in point 4.1 (pages 10 and 11) of the Guidance.

Can the economic operator modify the declared value on the basis of the specific criteria authorised under Article 73 UCC retroactively if the real value differs from the declared value?

The holder of a valuation simplification cannot request for changing the declared customs value retrospectively if the declared customs value differs from the customs value that would be declared in the absence of the simplification. Under the Union horizontal provisions, the holder of the simplification can request for amendment, revocation or suspension of the simplification.

However, the holder of a simplification is obliged to inform the competent customs authority about any factor arising after the decision was taken, which may influence its continuation or content. Then, the competent customs authority may take a decision about an annulment of the valuation simplification (Article 27(3) of the UCC).

Can the customs authorities include in the authorization under Article 73 UCC (as a “specific criteria”) the possibility of the economic operator of modifying the declared value retroactively if the real value differs from the declared value?

The scope of the obligations of the holder of a valuation simplification is defined in Article 23(1) and (2) of the UCC. The competent customs authority cannot introduce any other obligations in addition to the ones introduced by the Union legislator.

What is the meaning of “disproportioned administrative costs” (Article 71 UCC DA)? Are they costs of the customs authorities, of the economic operators or both?

Please see information provided in point 4.1 (pages 9 and 10) of the Guidance.

Given that Article 71 UCC DA establishes as a condition for the authorization referred to in Article 73 UCC that “the application of the procedure referred to in Article 166 of the Code would, in the circumstances, represent disproportioned administrative costs”, should we give preference to Article 166 UCC over Article 73 UCC? In other words, isn’t the Code saying that Article 73 UCC can only be authorized if Article 166 UCC is not suitable given the circumstances, analysing the administrative costs?

Correct.

How to deal with the authorisations under Article 73 UCC referring to fixed amounts or percentages of transport costs, in the context of exceptional increases of these costs?

In accordance with Article 23(2) of the UCC, the holder of the valuation simplification shall inform the competent customs authority about the increases of transportation costs. Considering the new information, the competent customs authority may suspend, revoke or amend the valuation simplification.

Is it possible to use both simplified procedure as referred to in Article 166 UCC (to an extent other than the customs value) and valuation simplification simultaneously?

Yes.

The data requirements necessary for the declaration of the customs value under the transaction value method as defined in Annex B to UCC DA are among other particulars which are necessary for application of the provisions governing the customs procedure for which the goods are declared (Article 162 of the UCC). In accordance with the first paragraph of Article 73 of the UCC “The customs authorities may, upon application, authorise that the following amounts be determined on the basis of specific criteria, where they are not quantifiable on the date on which the customs declaration is accepted (…)”. Since, the provisions do no refer to a specific customs declaration, one may conclude that the valuation simplification may be used in the context of a standard customs declaration and a simplified customs declaration. In cases in which an economic operator uses the valuation authorisation in order to declare the customs value under the transaction value method, the customs value should be considered as final regardless of the type of a customs declaration provided by the economic operator.

Can the simplification also be used in the context other than the determination of the customs value under the transaction value method, given that other methods refer to art. 71 and art. 72 UCC to exclude deductions or add amounts and given that in the fall-back method (art. 144 UCC IA) the transaction value (art. 70 UCC) can be used with reasonable flexibility?

The valuation simplification may be used only in cases in which the customs value is to be declared under the transaction value method. This intention of the Union legislator is underlined by the fact that the provisions concerning the valuation simplification are placed in the UCC directly after the provisions concerning the determination of customs value under the transaction value method (Articles 70-72 of the UCC) and before the provisions concerning the secondary valuation methods (Article 74 of the UCC). The provisions on valuation simplification should not be interpreted broadly.

What happens if the valuation simplification affects different Member States Customs?

As a rule, the valuation simplification issued by the relevant customs authority of one Member State may be applicable across the Union (Article 26 of the UCC). Article 14 (1) of the UCC IA envisages consultation between the customs authorities “where a customs authority competent to take a decision needs to consult a customs authority of another Member State concerned about the fulfilment of the necessary conditions and criteria for taking a favourable decision (…)”. It should be underlined that in the light of the provisions of Article 14 of the UCC IA a decision about launching such consultation depends on the customs authority who is competent to issue the valuation simplification.

What happens if the company does not reach Article 39 a) UCC requirements and thus the customs value cannot be determined neither by Article 73 UCC or 166 UCC because of the lack of data?

There are two questions that should be answered separately. Article 39(a) of the UCC. Complying with the criterion laid down in Article 39(a) of the UCC is among the conditions defined in Article 71 of the UCC DA that are to be met cumulatively by the applicant to grant the valuation simplification. If any of the criteria is not fulfilled by the applicant, the valuation simplification shall not be granted. In practice, a decision refusing the grant of the valuation simplification will be issued. The economic operator has the right to appeal against such decision. Lack of data necessary to determine amounts defining the customs value under the- transaction value method under Article 73 of the UCC or Article 166 of the UCC If there is no information/data to apply the transaction value method, the customs authority should not grant the valuation simplification under Article 73 of the UCC. The customs value should be declared on the basis of one of the secondary valuation methods. The valuation simplification is an alternative solution for the simplified customs declaration as referred to in Article 166 of the UCC. The simplified customs declaration may be used in cases in which the customs value may be determined under the transaction value method, as well as in cases in which the secondary valuation methods are to be applied.