NEWSFLASH: Changes in Customs Valuation in the EU

Upcoming update on the EU Guidance Document for Customs Valuation. The European Commission is reviewing and updating the Guidance Document with significant impacts for international trading companies.

Background

On 30 October 2018, the European Commission published the minutes of the latest meeting of the Customs Expert Group (CEG) on Customs Valuation. Amongst others, the Expert Group decided to review and update the Guidance Document on Customs Valuation. The major change decided by the CEG is the removal of all references to so-called “domestic sales” in the chapter on “sale for export”. The removal is due to the fact that the concept of “domestic sales” doesn’t exist in prevailing customs legislation (i.e. the Union Customs Code (UCC)).

The concept of “domestic sales” was introduced to complement and clarify the term “sale for export” as referred to in the UCC. “Sale for export” should be understood as the sale occurring immediately before the introduction of the goods into the EU customs territory. However, based on EU Guidance, a “domestic sale”, i.e. a sale concluded between a buyer and a seller both in the EU, could never qualify as a sale for export to the EU, even if this sale were to happen before the goods crossed EU customs territory borders.

Impact

The impact of this decision is considerable; from the moment the Guidance Document of the European Commission is updated, sales between two persons in the EU may then fall within the scope of the definition “sale for export”, resulting in a potential increase in the customs value to be declared and logically the duty burden. The CEG’s minutes state clearly that practical examples of such scenarios will be added to the updated Guidance Document on Customs Valuation.

Way forward

Economic operators exporting goods to the EU should review the current state of their supply chain and related invoice flows. The removal of the concept of “domestic sale” may have a direct impact on their business as a sale which couldn’t be taken into account as customs value in the past may have to be taken into account in the future, resulting in a higher taxable base and increased duty burden.

Please feel free to contact us should you have any questions on this subject or if you’d like to verify with one of our experts how your supply chain might be impacted. We’re here to help.