Buying agency, simplification authorizations, transfer pricing: Useful clarifications before the implementation of binding value information
The European institutions recently published several important documents relating to customs valuation:
- An update of the Compendium on customs valuation (2024 edition);
- A Guidance for Member States and the private sector on the simplification of customs valuation under Article 73 of the CDU;
- Commission Implementing Regulation (EU) 2024/1071 of 12 April 2024 on binding valuation information; and
- Commission Delegated Regulation (EU) 2024/1072 of 25 January 2024 amending Delegated Regulation (EU) 2015/2446 as regards binding customs valuation information and binding origin information.
The update of the Commission’s Compendium on customs valuation includes useful interpretation of the treatment to be given to commissions received by supply chain intermediaries acting as both buying agent and quality controller. The Commission reminds that the role of buying agent includes finding suppliers and negotiating purchase prices, but does not include quality control, even if all services are provided under the terms of a global agency contract. Thus, while the remuneration received by the intermediary for its work as buying agent is not be reintegrated into the customs value under Article 71 of the UCC, its remuneration for the quality control work cannot be seen as a buying commission and should then be reintegrated into the customs value of the goods imported. Where the agency contract distinguishes remuneration according to the type of services provided, and that it is possible to identify precisely the portion relating to the buying agency services, the transaction value can be used, and the adjustment apportioned based on contract provisions. If not, a secondary valuation method should be used, to determine the adjusted price (purchase price + buying agency apportioned fee). This case, which echoes many business models implemented by international groups, is all the more topical as similar facts, presented by Vietnam, are currently being examined by the WCO’s Technical Committee on Customs Valuation (TCCV), as reported in the minutes of the 58th session of this committee.
The Compendium also contains two new cases, relating to the treatment of payment for the activation of an additional software function of a good after it has been released for free circulation, and the treatment of the valuation of car prototypes and development services carried out by a producer during the mass production of a car model.
At the same time, the Commission presented its guidelines on the use of the simplified customs valuation procedure provided for in Article 73 of the UCC. According to the document, the use of this simplification mechanism is not harmonized across the EU, with some Member States de facto and almost exclusively favoring the (more burdensome) provisional value mechanism provided for in Article 166 of the UCC or the use of a secondary valuation method. The Commission recalls that this simplification procedure is only available for transaction value method and provides clarification on its conditions of use, particularly as regards proof of the impossibility or operational difficulty of providing the documents required to establish the customs value using the transaction value method at the time of import. A not so minor point to note is that the Commission considers that this simplification procedure cannot be used in the case of imports carried out by indirect representation. While such a decision is consistent with the trend initiated since the adoption of the UCC towards additional restrictions on the use of indirect customs representation, it is nonetheless regrettable and could complicate certain established situations. Wehave in mind, for example, dutiable royalties paid on goods owned by a third-party operator in the EU and imported as a call-off stock. In any case, the use of this procedure, which is appreciated in France for simplifying the customs declaration of intangibles such as royalties or intangible assists, as well as transfer price adjustments, is likely to be used at a larger scale. Especially as, if we are to believe the minutes of the 14th meeting of the Commission’s group of value experts, additional specific guidelines on transfer pricing and customs valuation are currently being prepared.
Last, these guidelines on simplification recall what the Commission had already announced a few years ago, namely the possibility of giving European scope (application in several Member States) to a simplification authorization, if the conditions of Article 26 of the CDU are met.
Such a possibility anticipates to some extent the Binding Value Information (BVI), which will be intended to apply to all points of the regulations relating to customs valuation, and whose application throughout the EU will be automatic. In mid-April, details of the RCV were released in Implementing Regulation (EU) 2024/1071 and Delegated Regulation (EU) 2024/1072, with a view to the effective introduction of the BVI in December 2027.
Our team will be happy to provide you with any further information you may require: dscustomsdouane@dsavocats.com.
