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Your power to winAppeal against customs value adjustments
The customs value of imported goods is the value used to determine the amount of customs payments and the importer’s value added tax liability. As a rule, the customs value of goods is based on the price actually paid or payable to the seller for those goods.
The customs value of goods moved across the customs border of Ukraine is determined by the declarant and verified by the customs authority.
Under the Customs Code of Ukraine, the primary method of determining the customs value of goods imported into the customs territory of Ukraine under the import customs regime is the transaction value method, i.e. the contract price of the imported goods.
In practice, however, importers are far from always able to complete customs clearance of imported goods at the customs value determined by the primary method, because to confirm the contract price customs officers often demand documents that are simply impossible to provide. For example, it is not unusual for customs officers to demand the manufacturer’s cost calculation for the goods, including even the cost of raw materials. Naturally, such information is a trade secret, and a manufacturer rarely agrees to disclose it.
When the additionally requested documents are not provided, customs officers conclude that the customs value of the goods has been understated and decide to adjust it upwards using the so-called secondary methods of determining customs value: the method based on the price of similar (analogous) goods, and the fallback method. In most cases, however, customs decisions to increase the customs value of goods are groundless and unjustified.
The point is that collecting customs duties is to a considerable extent the very purpose of the customs service, and its performance is assessed by the amount of duties collected. Customs officers therefore often decide to increase the customs value of goods to meet a “plan” for filling the state budget, under which a given customs office must, by any means, secure the receipt of a certain amount of customs payments within a set period. When determining the customs value, customs officers therefore argue without grounds that the price of the imported goods must match the prices of identical goods supplied under other contracts between other suppliers and buyers, or even of goods that are not identical but merely similar. In doing so, customs officers rely on the data of the automated risk analysis and management system, which records the customs value of identical and similar goods imported earlier. However, since for objective reasons the automated risk analysis and management system cannot contain all the information on a particular manufacturer’s production specifics or on the differences in relations between specific suppliers and buyers, its data cannot take precedence over the primary documents on the goods submitted by the declarant.
A customs value adjustment has negative consequences for participants in foreign economic activity, as it increases the amount of customs payments and the value added tax liability.
At this stage the importer faces a choice: - either pay all customs payments based on the increased customs value in order to complete customs clearance sooner and take possession of the goods (in most cases, downtime at the border causes far greater losses than paying increased customs payments), and leave the appeal against the customs value adjustment for later; - or refuse to accept the increased customs value, not pay any additional payments and immediately appeal the customs value decision. In the second case, however, it is almost certain that the importer will not receive the goods until the dispute with customs has been resolved.
In each case, the choice of the means of protection depends on the specific circumstances of the dispute, including the type of goods and whether they can stand idle in a customs warehouse for a long time, the availability of sufficient working capital to pay the increased customs payments, and the risk of having to pay substantial penalties to the final recipient of the goods because the delivery is delayed by the dispute with customs.
The most effective remedy in such cases is to bring a claim before an administrative court to have the customs value adjustment decision declared unlawful and set aside, and to have the card of refusal to accept the customs declaration, to clear or to let goods and vehicles pass across the customs border of Ukraine declared unlawful and set aside.
WinnerLex attorneys’ long and successful practice in resolving customs disputes allows us to effectively appeal customs value adjustments and unlawful decisions of customs authorities.
representation in courts of all instances;
appealing customs authorities’ decisions on the adjustment of the customs value of goods;
appealing cards of refusal to accept a customs declaration, to clear goods for release or to let goods and vehicles pass;
appealing decisions, actions or inaction of a customs authority concerning the classification of goods under the UKT ZED;
appealing decisions, actions or inaction concerning the refund of customs payments paid to the budget by mistake or in excess;
drafting requests, complaints, applications and other legal documents to settle a customs dispute;
legal support during consultations with customs on the determination of customs value;
advice on appealing refusal cards and customs value adjustments.
By law, the burden of proving that the declared customs value is incorrect lies with the customs authority. In practice, however, it is you who will have to prove that the customs value declared in the declaration was correct. Therefore, if a dispute with customs over the customs value of goods arises, gather as much evidence as possible confirming that the declared customs value is correct: the foreign trade contract for the supply of the goods, the invoice, the export customs declaration of the country of dispatch, the international consignment note (CMR), the seller’s price list and other documents confirming the declared customs value of the goods.
The absence of a reference to the contract details in an invoice cannot be a valid ground for the customs authority to conclude that the invoice cannot be matched to the delivery of the goods if such matching can be made on the basis of other documents submitted to confirm the customs value of the goods.
Under settled case law, the manufacturer’s cost calculation for the goods is sufficient and proper evidence confirming the declared customs value of the goods.
Since the Customs Code of Ukraine does not specify the type of evidence that must confirm the cost of transporting goods, such evidence may be any financial and accounting documents containing data on the amount of transport costs. Under existing case law in customs disputes, even a statement of transport costs, together with other documents in the case file, may be admissible evidence of the cost of transporting goods.
If customs officers refuse to accept a customs declaration, they must fill in a card of refusal to accept the customs declaration in the form established by law. Customs officers must provide the declarant with one copy of the refusal card (hand it over in person or send it by post), and send the declarant information on a refusal to accept an electronic customs declaration by electronic message.
If you disagree with a card of refusal to accept a customs declaration, to clear goods for release or to let goods and vehicles pass, you can file a claim with an administrative court to have it set aside.
The main documents confirming the customs value of goods are:
- the customs value declaration;
- the foreign trade agreement (contract) and its annexes, if any (for example, the specification for the delivery of the particular consignment subject to customs clearance);
- the invoice;
- if the goods have already been paid for, the bank payment documents confirming the payment;
- additional payment, accounting and other documents confirming the value of the goods and containing the details needed to identify the imported goods (for example, a quality certificate, the seller’s price list, a cost calculation for the goods);
- transport (shipping) documents (CMR);
- an import licence, if the import of the goods is subject to licensing;
- if the goods were insured, the insurance documents and documents containing information on the cost of insurance.
- a copy of the customs declaration of the country of dispatch.
The customs value of goods is declared by the declarant or a person authorised by the declarant when the goods are declared, and the customs authority checks whether the customs value has been determined correctly during customs control and customs clearance.
Following the check of whether the customs value of goods has been determined correctly, the customs authority either accepts the value declared by the declarant or issues a written decision to adjust it. In practice, the customs value is adjusted upwards, which means additional payments must be made to clear the goods. A customs authority’s decision to adjust the customs value of goods may be appealed both administratively to a higher-level customs authority and in court.