At the end of August 2015 the seventh draft version of the delegated and implementing regulations of the Union Customs Code (UCC) was published. The different versions have been translated into the languages of the various Member States and it is currently expected that the European Commission will adopt these regulations (IR & DR) in late 2015 (October/November). With respect to customs valuation new developments have been identified regarding the transaction value and the ‘sunset clause’.
The latest version of Article 128 IR (transaction value) reads as follows:
- The transaction value of the goods sold for export to the customs territory of the Union shall be determined at the time of acceptance of the customs declaration on the basis of the sale occurring immediately before the goods were brought into that customs territory.
- Where goods are sold for export to the customs territory of the Union while in temporary storage or while placed under a special procedure other than internal transit, end-use or outward processing, the transaction value shall be determined on the basis of that sale.
There are some major concerns with this latest definition of the transaction value. In our view it is very doubtful whether a sale that takes place while the goods are physically already in the EU territory can be considered to be ‘sold for export to the customs territory of the Union’. Furthermore, the latest draft version of Article 128 IR entails the realistic risk that customs authorities will argue that Article 128(2) IR overrules Article 128(1) IR. For example, this would mean that a sale occurring in a bonded warehouse facility within the EU needs to be used for customs valuation purposes even though another transaction is available prior to the introduction of the goods into the territory of the EU. Such an interpretation would seriously hamper the use of special procedures since economic operators may effectively be penalized.
These concerns have been shared with and acknowledged by the European Commission. We therefore expect some last minute changes in the wording of Article 128(2) IR.
Another important customs valuation topic is the introduction of the ‘sunset clause’. To avoid immediate consequences of the abolition of the first sale for export concept, the European Commission introduced a transition rule, the so called sunset clause in Article 341 IR. The sunset clause reads as follows:
- The transaction value of the goods may be determined on the basis of a sale occurring before the sale referred to in Article 128(1) where the declarant is bound by a contract concluded prior to the entry into force of this Regulation.
- This Article shall apply until December 31, 2017.
This sunset clause cannot be regarded as a general waiver for the use of the first sale for export concept until December 31, 2017. There must be an agreement in place and this agreement must be concluded prior to the entry into force of the IR (expected to be in November 2015). The agreement must bind the declarant (defined in Article 170 UCC) and as such we believe that the sunset clause can only be applied in (very) limited circumstances. Consequently, economic operators that continue to use the first sale for export concept after May 1, 2016 without having binding agreements in place by the end of 2015, may face significant retroactive assessments later on.